EU-wide trading without tax stress? Here's how!
EU-wide trade without tax stress? Here’s how it works!
In Germany, the VAT rate is 19%. The exception: everyday goods, such as food. Then it’s only 7%. Most sellers in Germany have had these tax rates down for ages. But watch out! As soon as you sell goods abroad, accounting gets much more complicated. Good thing you don’t have to get through that alone. There are tools that make your work easier and check these processes for you.
One of these providers is Taxdoo. To find out more about it and identify the tax law pitfalls in EU-wide trade, our podcast hosts Isabell and Lisa brought along some backup: Jonny Hofberger, Director of Sales at Taxdoo, joined in from northern Hesse and answers the two of them in this episode. As a specialist in complex e-commerce processes, he knows your daily tax challenges inside out.
We hope you enjoy listening and good luck explaining taxes!
**Important links**
- Taxdoo
- Taxdoo blog with current information on all things taxes
- Information on Taxdoo’s OSS report
- Information for tax advisors on working with Taxdoo
- eBay Community
- eBay for Business on Facebook
- More info on the eBay podcast “Alles top. Gerne wieder!” and our podcast hosts
**Mentioned podcast episodes**
** Chapter markers **
- 00:00:00 to 00:02:26: Intro
- 00:02:26 to 00:07:00: Getting started in e-commerce: setting things up correctly from the beginning for tax purposes.
- 00:07:00 to 00:13:59 Taxdoo: the invoicing tool can help you here.
- 00:13:59 to 00:31:53 EU-wide trade: what to watch out for from a tax perspective.
Lisa: In Germany, the VAT rate is 19%. The exception: everyday goods, such as food. Then it’s only seven percent. Most people in Germany have had these tax rates down for ages. But watch out! As soon as you sell goods abroad, accounting gets much more complicated. Good thing you don’t have to get through that alone. There are tools that make your work easier and check these processes for you. How all this works and how you can trade EU-wide without invoice problems, you’ll hear now!
Jonny: There’s a statistic somewhere that says that just under 60 percent of online sellers report their VAT incorrectly, and that’s already quite a lot. And of course the tax advisor always believes what you tell them, what you put on the invoice. And very few really check it or compare it individually again. That’s basically impossible when… let’s say you do 5,000 transactions a month. Who’s supposed to check that?
Lisa: Welcome to “Alles top. Gerne wieder!” - the eBay podcast about trade and e-commerce. I’m Lisa Haak and today we’re not in the studio together, but recording remotely. The terms accounting, taxes and invoicing give many of us headaches. Rightly so, because there are lots of pitfalls here. Especially if you don’t just want to sell in Germany, but EU-wide too. But we want to take that fear away from you today, because the good news is you don’t have to create Excel spreadsheets or fight your way through long payment reports.
Isabell: Yes, it’s all much easier these days, because tools can now support you. For example, tools can send data directly to your tax advisor and even check it for accuracy. One such tool is Taxdoo. Taxdoo is one of many partners at eBay and can help you simplify things. And today we’ve invited a guest from Taxdoo as well. Director of Sales, Jonny Hofberger. Jonny is a specialist in complicated e-commerce processes and is therefore familiar with your daily challenges too. His goal is to make e-commerce easier, faster and clearer in accounting too. And how all of that works, that’s what we’re talking about with him today. Hey and welcome, Jonny, and best regards to northern Hesse!
Jonny: Thank you very much and best regards back to Berlin.
Isabell: Yes, thanks! Before we dive even deeper into the topics, I’d like to know a bit more about you: why does the rather dry topic of taxes matter so much to you?
Jonny: Well, I’ve been in e-commerce for quite a while and before working at Taxdoo I was also at one of the leading e-commerce ERPs and accompanied many, many online sellers when they were getting started in e-commerce or setting up their systems differently. And from the outset, one thing is actually clear: if accounting doesn’t know how to book things properly in the end and how to handle taxes correctly, then problems often arise down the line. For me, the lesson was always that it’s best to talk to accounting at the beginning and explain what the e-commerce team actually has planned, and once that’s sorted out, you can basically implement anything in e-commerce with marketplaces.
Isabell: You just said you’ve already accompanied many sellers when they were getting started in e-commerce. So you know that taxes and accounting in general are complicated topics, especially at the beginning. Do you have a few concrete tips you could share with us, especially for the start in e-commerce?
Jonny: Well, especially when you’re starting out, it’s of course important that you have, for example, a tax advisor who knows e-commerce. That’s an important message too. Look for a tax advisor who knows e-commerce. And then, of course, it’s about how do I create my invoice? What tool do I use to write my invoices? That’s always an important topic too, and alongside many other things, of course, everything about what content looks like, how warehouse processes are handled, and so on and so forth. That’s important too. But in the beginning, you should also be clear about how you’re structuring the finances.
Lisa: And Jonny, when you talk about e-commerce, marketplaces are an important part of the e-commerce strategy you build. What do you think? What should our listeners pay special attention to when it comes to taxes and marketplaces like eBay?
Jonny: There are two things to pay particular attention to. And from today’s perspective and in my current role, on the one hand there’s accounting, meaning that all accounting processes are automated and generate as little manual effort as possible. And the other is the tax topic. So above all, VAT. And that’s where it’s naturally important, and we’ll talk about this a bit later today too, what do I actually need to do and watch out for when I sell abroad? So, as you just said at the beginning, in Germany the VAT side of things is actually clear to all of us, how it works, with 19 and seven percent. But once you go beyond that, it gets interesting.
Isabell: What do I need to watch out for accounting-wise if I’m now getting started in e-commerce?
Jonny: Accounting-wise, it’s like this: for every transaction a seller makes, so for every invoice issued, for every parcel I send via eBay, I create an invoice and, so to speak, have a payment incoming for it. But the thing is, with that invoice I don’t get the money back into my account one-to-one, because things are deducted like fees in the respective category, marketing costs, etc. And if you use fulfillment, for example, fulfillment costs too. And I now have to book those against each individual parcel, and that has to be automated, because otherwise the tax advisor will eventually say, with 5,000 transactions a month, who’s supposed to book that manually? And then it’s not just these 5,000, that would be the invoice you’d log, but then you’d have to book another 5,000 in fees against it and so on and so forth. And you can’t just print out a total at the end of the month and say we made so and so much revenue, and the costs were so and so high, and I’ll just book that against it. It has to be booked plausibly. And that keyword plausibility is the highest law for every tax advisor, because that’s how you have to explain it to the tax authorities so that every auditor can understand where the money actually went. And why does the online seller now have less money in their account than they actually invoiced?
Lisa: Okay, and does a tool like Taxdoo handle all of that for me too?
Jonny: Yes, not quite. So the thing is, I need a tool that creates invoices for me. And Taxdoo actually doesn’t do that. And such a tool can be, to name a few of your partners, something like “BILLBEE”, “easybill”, a so-called e-commerce ERP, like “plentymarkets”, “JTL”, “Xentral”, and many, many others too. And this tool creates invoices, while Taxdoo grabs all transactions and the eBay settlement report and checks whether everything is correct, and then transmits that bundled up and already offset, basically to the tax advisor, so they no longer have any work to do.
Lisa: And that means you’re also connected individually to the partners you just mentioned so that you can see the invoice as well or know which functionalities are handled by which tool and where you come into play.
Jonny: Correct, we’re connected to those tools too. But we also often exclude transaction chains where we have a direct connection, and then you can “match” that against it. Has my tool actually issued the correct invoice? And what’s in Taxdoo? Because Taxdoo always prefers to take the original data from the sources.
Lisa: Okay, so that means we’ve already touched on it. Taxdoo is a tool that, for example, bundles data for accounting and checks each individual transaction for revenue and tax relevance. Can that be said?
Jonny: Yes, absolutely, but it goes a bit further than that, because it also offsets the costs. So on the one hand, of course, the correct VAT rates are checked and not just nationally but EU-wide, and on the other hand, the respective marketplace costs and eBay costs are also booked.
Isabell: And what if I make a mistake in the booking? Can you help with that too?
Jonny: A booking error actually means what? That an invoice was issued incorrectly, that the wrong VAT rate was on it. What kind of error do you mean?
Isabell: Exactly, so that could happen, for example. That would be like this: if I gave my data to the tax advisor with the wrong VAT rate, then that wouldn’t necessarily be corrected either, if I’m unlucky. Can a tool like Taxdoo step in there?
Jonny: Yes, so that is actually a super common case. There’s a statistic somewhere that says that just under 60 percent of online sellers report their VAT incorrectly, and that’s quite a lot, and of course the tax advisor always believes what you tell them, what you wrote on the invoice, and very few really check it or compare it individually again. That’s basically impossible. Let’s say you do 5,000 transactions a month. Who’s supposed to check that? And that’s exactly what Taxdoo is for, and Taxdoo would immediately recognize that a wrong VAT rate has been entered for a transaction somewhere, and then you can use that to find the invoice and correct it if necessary.
Isabell: That definitely sounds very practical if I have a large number of transactions. Now, though, very few people start out with a large number of transactions right away. When does it make sense to think about using such a tool? Do I need to know from the start? Okay, I’m going to have lots of transactions at some point, I’ll need a tool eventually, or can I start out with my own system and then switch to using a tool later?
Jonny: Of course both are possible! I would also, quite understandably, recommend doing it from the start and setting up the right tooling straight away for a proper e-commerce approach. So think ahead about where things are heading. If you have 20 transactions in the first month, then any tax advisor can book that manually too. That’s not the issue. But if you set up your tax advisor and the whole process to the tax advisor properly from the very beginning, you’ll never end up in a situation where the tax advisor says, I can’t be bothered anymore, now you’re over 3,000 transactions a month. I neither have the manpower to book this manually in-house, nor would you, as an online seller, want to pay for that in the end, because it also gets expensive, of course, if the tax advisor charges you 50 cents per booking or something, then it all adds up at some point, and then you have to say that it’s best to set yourself up with proper tooling right from the start. The second thing is, we also do this all the time. We basically pull the kid out of the well. That means we correct things retroactively. A seller comes to us and says, I’ve now switched tax advisors for the third time. They don’t have a clue at all. And in the end it turns out that it’s usually a process problem, actually, that the process with the tax advisor wasn’t set up properly, and then of course we’re happy to help there too.
Isabell: You just said that you’re also compatible with other invoicing tools or could be connected to them as well. So how exactly does the integration with eBay work, that is, the integration with the marketplaces themselves?
Jonny: Well, it’s a matter of four clicks in the end. We’re a SAAS tool, meaning Software as a Service, you need a Chrome browser, and then you can use Taxdoo, and you have a dashboard where you can see your monthly sales very nicely, and connecting a marketplace like eBay goes through the settings, and you click on connect eBay, then it throws you into the, what do you call it?
Isabell: Into Seller Cockpit Pro.
Jonny: Ah, Seller Cockpit Pro, and there you’ll be prompted once to allow Taxdoo to pull data, you tick the box and click confirm, and then it sends you back to the dashboard, and then overnight, as if by magic, the data is in Taxdoo, up to two years retrospectively for eBay.
Lisa: That really does sound very, very, very simple and should already be standard practice for all those sellers who also work with other partners we have here, when it comes to adding partners to their setup. But four clicks, that’s a promise, Jonny.
Isabell: Let me draw a short interim conclusion. You just said then everything happens overnight as if by magic. Sadly, taxes and accounting aren’t quite that simple in the end, especially when I’m selling on different marketplaces. In case of doubt, if I don’t use a tool and just give my information to the tax advisor, then incorrect information will also be processed if I provide it that way and if it contains errors. But I don’t necessarily have to become an expert myself. I can choose to use a tool that can then also simplify my accounting, check it for correctness, and be integrated directly with the marketplaces I operate on.
Lisa : And in a moment we’ll hear from Jonny what you need to watch out for when trading EU-wide. But now we’d like to know from you out there: how have you dealt with taxes and accounting so far? Are you already using tools like this, or maybe even Taxdoo?
Isabell: Yes, and if you’re listening to us in the Spotify app right now, you’re very welcome to let us know directly via the Q&A function. Just drag the slider from the bottom of the app upward, and off you go!
Lisa: And if not, no problem at all, feel free to write to us in our eBay Community or on our Facebook page for eBay for Business Germany. There you can not only leave feedback, but also let us know which topics you’d like to hear about.
Isabell: Of course, we’d also be very happy if you leave us a like or subscribe wherever you’re listening to us right now.
Lisa: Now it’s getting interesting for those of you who already sell abroad or are firmly planning to do so in the future, because we’re once again taking a look beyond our own backyard. By the way, if after this episode you want to know more about international selling on eBay, then take a look at the show notes. We’ve linked an episode there with all the tips and tricks you need to trade internationally successfully. Jonny, can you explain where the tax differences in accounting lie between domestic and EU-wide trade? Because I have to admit, I’ve internalized the tax rates for Germany, and I wasn’t really aware that there are different tax rates before I even started looking into international selling.
Jonny: Yes, that is. Somehow it stands to reason that other countries might have slightly different rates too. But how exactly that works and what you actually have to put on the invoice, that’s not entirely clear to many people. We have to say there was a reform in 2021 when it comes to VAT, and Taxdoo had already been founded before that reform. That means that before this reform there were delivery thresholds, so-called delivery thresholds within the EU. That meant you could sell to Austria, for example, for over €130,000, and France had a different threshold, and you actually had to track and accumulate every sale. When exactly did I go over my threshold, and once you crossed that threshold, you had to be registered in the respective country. That means you needed a French tax advisor, a Spanish tax advisor, who would then declare VAT there every month with your own VAT ID. So far, so complicated. Taxdoo came about back then because Jose and Christian, and Jose used to be a special VAT auditor, um, who then thought, this isn’t really that great. We’ll build a tool for that. It was a threshold-monitoring tool, meaning you had a European map and could then see in Taxdoo where exactly you were hitting which threshold and when you needed a tax advisor there, and we still do part of that today. That was simplified in 2021 by the OSS. What is the OSS? I’ll give it away straight away: the One Stop Shop reporting procedure. We’ll go into that a bit more precisely now, and that has simplified everything, and the delivery thresholds I just talked about now only exist once, and the delivery threshold is €10,000, no matter which country you sell to.
Lisa: And you talked about the reform. Is that a European reform or is this “One Stop Shop OSS” something that works globally?
Jonny: No, that was a European reform that only applies to countries within the EU, so not to Great Britain either anymore. They’ve since been out of it again. That means that in Great Britain you actually have to report your taxes locally, for example if you ship there.
Lisa: Okay, and my first association with One Stop was that the OSS would only help me if I sell to one country, but that’s not the case, hopefully, right?
Jonny: No, that is definitely not the case. If you ship a €4,999 cart to France and a €5,000 cart to Poland, then you can simply put German VAT on your invoice. If you go €2 over, so from €10,000 onwards, then you would actually have to pay tax in those countries and also put their VAT rates on your invoice. Putting their VAT rates on your invoice is the case. But you no longer need a representative in those countries; instead, you report it to the Federal Central Tax Office. In a quarterly report, so every three months, you report what you shipped to which of these two countries, and then you also have a tax liability to pay there, and the OSS ensures that those countries also get their tax. That means the countries still get the tax. It’s not like the whole thing now goes to the German federal government and they’re delighted; the OSS distributes it, so to speak. And because your business is in Germany, you do that through the German OSS.
Lisa: That sounds like an incredible relief.
Jonny: It is, it’s a huge relief, and it saves you all that calculating around, and lots of people say, yes, great, I’m now thinking of selling abroad too, and I’ll register straight away with the OSS and then start translating their product texts and things like that, and then that takes quite a while, and then they forget to file with the OSS, even if they haven’t generated any revenue at all. And that then leads to a case we unfortunately see relatively often, where they get kicked out of the OSS. So the OSS is a privilege, that’s what I mean. The OSS is not a given; rather, it’s a privilege you can use, but don’t have to, because you can still declare your taxes yourself in the countries.
Isabell: Does it cost me anything if I register for the OSS?
Jonny: No, it’s a free registration. You do it through the Federal Central Tax Office, and you can simply register there.
Lisa: Jonny, you just mentioned the quarterly report I have to submit there. Where do I get it, and where do I send it?
Jonny: So, you don’t get this quarterly report; you have to create it yourself with the Federal Central Tax Office, and either you do that or your tax advisor does it, and you should have clarified which of you will do it. Because that is actually one of the most common misunderstandings we see in everyday life: when customers get kicked out of the OSS, and the OSS kicks you out pretty hard if you fail to report for three quarters or report too late, then you get a letter from them saying your number has been deleted. Please also stop making any payments to us. You will be blocked for eight quarters and excluded from the OSS. That is really hardcore. That means that for two years you either won’t be selling abroad from Germany anymore, or you’ll have to find a local tax advisor who will then also report your taxes locally. By the way, that’s one of Taxdoo’s services, of course with a large network of tax advisors within the EU, to report your taxes locally too, in the local language and so on and so forth.
Lisa: Okay, maybe before we scare everyone too much here, could we say one more time very clearly: what absolutely do I need to pay attention to with my OSS listing?
Jonny: All OSS-relevant payments must be reported quarterly to the OSS, and that means that in the fourth month, for example in April, you have until the end of April to make this report to the Federal Central Tax Office and upload a file there, and then that’s done. Then you’ll get a payment request and can pay it. If you don’t do that and mess it up once, you can also correct it retroactively. That’s not the problem. OSS reports can also be corrected. You just shouldn’t have to correct them too often or forget to do it. Then you have a problem. But actually it’s totally easy, because you just have to keep an eye on what I shipped abroad, and from which country what was shipped abroad? Of course. I’ll throw in a trick question about that in a moment. But the important information is: OSS makes it easier. It’s best to register for OSS once you know that you’ll exceed these €10,000 in this quarter. Even if you’ve somehow exceeded the €10,000 yesterday, you can still register for the OSS immediately and say, from now on we want to report this. That’s no problem either. As I said, you just have to do it. It’s like filing your regular VAT return in Germany, monthly, and saying what you reported in Germany, just internationally, only every three months.
Isabell: And if I were to use a tool like Taxdoo, would you then do these quarterly reports for me?
Jonny: Exactly, Taxdoo could create the OSS export for you, then you’ll get it every three months, and then you just have a file that you can upload to the Federal Central Tax Office. So, super easy peasy, and many tax advisors also say use Taxdoo for that, because we don’t want to generate or create that separately for you. But the tax advisor can also do it, create this file, and what’s important for that is, of course, that all e-commerce channels that are OSS-relevant are included too. So, there are also marketplaces that only sell in Germany, and those are of course not OSS-relevant. But if there are marketplaces like eBay, through which I can also sell outside Germany, then that’s an OSS-relevant channel. And if you have a shop system that also allows people from France to order there, and you ship goods abroad, then a shop system like Shopify, for example, would also need to run those transactions through Taxdoo so that the OSS report is correct. So that’s important to note. All B2C sales channels must run through the OSS too. No B2B, B2B is not handled through the OSS. All B2C sales channels must run through the OSS, through the system, and then you can use that export.
Isabell: Okay, so I have to process all sales channels through Taxdoo, prepare them for my OSS procedure, and we’ve already talked about the worst-case scenario if I’m excluded from the OSS procedure for two years. But there are definitely more pitfalls you’ve come across over time, right?
Jonny: Yes, definitely, and that’s also something where we notice that many people don’t use the OSS procedure correctly. Because it’s always about considering, and we also do this in the individual transaction assessment, you always have to check from where to where the goods were shipped and where the goods were stored. And now there are also many sellers who say, I don’t store my goods only in Germany, but for example in Poland, and then I ship an eBay order from Poland to Germany. Where do I now report my VAT? Do I report it in Poland because that’s where my goods are stored? Then I’d need a Polish VAT ID anyway and would also need a tax advisor there to declare the taxes, or in Germany, where I already have a company headquarters anyway?
Isabell: I would have said, I need to report here in Germany.
Jonny: Lisa?
Isabell: Because I’m selling to Germany and the customer is basically sitting there? #00:26:01-1# Lisa: I would have said that too.
Jonny: It’s a cross-border sale that must be reported via the OSS procedure, correctly speaking, even though you’re based in Germany, and even if the goods go from Poland to France to an eBay customer, that sale must also be reported via the German OSS procedure, of course then with French VAT on the invoice. So always look at where the goods are being shipped from and to, and that’s where a lot of misunderstandings and also many incorrect reports come from. And yes, that’s an interesting case we see all the time.
Lisa : So it’s not just about where the purchase was made and for whom, but about the flow of goods behind it.
Jonny: Exactly, that’s right! It’s about where the goods are located and from where to where they are being shipped. And of course that also applies when you say, I have some kind of warehouse system or fulfillment system behind it that also stores stock for faster delivery times, for example in France, in Spain and so on and so forth, then you also have to register VAT in those countries, we of course do that at Taxdoo too, and then also report VAT filings and transfers, and then you’d go crazy if you had to document the whole thing to the tax offices too, of course. You have to tell the tax office in Germany that the goods left the country on their way to France and were not sold, that it’s still your goods, and the French tax office has to know that goods arrived there that are not yet sold, for which they don’t get any VAT, so-called transfer notification, and you also have to document the whole thing in Germany in an audit-proof manner with a so-called pro forma invoice. That means if some Jose Godmann shows up at your place and says, right, let’s drop everything again, it’s better if you can also show such a pro forma invoice so you can say: here is where my goods are, and these are the countries where I distributed my goods.
Isabell: Okay, but to fulfill all of that, Taxdoo could help me. But my tax advisor could help me too, right? This already sounds like a lot of paperwork and a lot of bureaucracy in complicated topics.
Jonny: Yes, great question. Because that’s exactly the problem. Many tax firms don’t really know enough about it either, and don’t have people who actually specialize in it. And that’s why you’d be best advised to turn to experts like Taxdoo, who do this every day. This is just our daily doing. And that’s why we naturally also cooperate with all the tax offices, because your tax advisor in Germany, when it comes to reporting French VAT, will say: “Not with me, I don’t speak French and I’m not going to get a French license!” So you need some provider who handles that for you and knows what they’re doing, and who importantly evaluates every single transaction, from where to where, and then reports it correctly too.
Lisa: So, what I’ve taken away from today is that if I, as a seller, don’t know much about taxes myself, then I should definitely have a good tax advisor at hand, a tool that supports me, such as Taxdoo, and that I definitely see the OSS procedure as a privilege and make an effort to do the right work there once a quarter.
Jonny: Exactly, that’s right.
Isabell: We also keep hearing the question of whether eBay adjusts tax rates for international transactions, whether we set anything there, whether we already give “guidance” when creating listings. And that’s a bit of a blessing and a curse, because the seller is fully responsible for what is stated in their listing. So we don’t specify tax rates. There are a few exceptions, such as when eBay is responsible for remitting VAT, as is the case for transactions to the UK up to a certain order value. But maybe we can talk about that again in a separate episode. I think it would blow up the scope now. Exactly, I just wanted to mention it again because we read this often in the community too: “eBay doesn’t adjust my tax rates at all!”, or “oh help, I’ve just sold passively to France, but my listing shows 19 percent, and now I need a completely different tax rate. What do I do now?” So it’s great that you now offer solutions with Taxdoo. But just once more at this point: we don’t specify tax rates, because when creating the listing we also don’t yet know in which country the purchase will ultimately be processed.
Jonny: Yes, and you’d kind of be opening Pandora’s box if you did that. So, it’s a lot about tariff numbers. What products do I have? If they have VAT rate A in Germany, e.g. 19%, that does not automatically mean they have VAT rate A in France. For example, children’s clothes have a reduced tax rate in France and not in Germany. And an invoicing tool can solve that. And the seller should really make sure they choose a tool that is preferably certified, has a GoBD certification, or where it’s proven that this tool can also handle customs tariff numbers. Otherwise, as we notice later during our checks at Taxdoo, because we naturally take all the audit numbers and match them against it, we find errors and then the invoicing tool has to correct them. So that happens too, but I understand that eBay doesn’t make it its job to want to control that as well.
Lisa: I think that covers a lot, and above all the important topics around taxes and EU-wide trade. Jonny, you already mentioned it: if you want to sell beyond the European borders, there’s a lot more to it: customs duties and different tax law requirements. That would stretch today’s episode a bit too far. But if you’re interested in that topic, feel free to write to us in our eBay Community or on our Facebook page “eBay for Business Germany”.
Isabell: Yes, Jonny, and if you’ve listened to our podcast before, you know what’s coming at the end now. Namely the question: What did you last buy on eBay?
Jonny: Great question! I, I expected this question and I even checked what was the last thing I bought on eBay? And it was actually a rear axle suspension for my electric car. And it wasn’t a particularly cheap purchase.
Isabell: Did you use our vehicle parts finder for that?
Jonny: Actually, yes, of course.
Isabell: Very nice! Thank you so, so much for all the interesting insights. I think we were able to make this complicated and rather dry topic a little more understandable and accessible for many. Thanks for being here!
Lisa: Thank you, Jonny.
Jonny: Thank you for having me here!
Jonny: There’s a statistic somewhere that says that just under 60 percent of online sellers report their VAT incorrectly, and that’s already quite a lot. And of course the tax advisor always believes what you tell them, what you put on the invoice. And very few really check it or compare it individually again. That’s basically impossible when… let’s say you do 5,000 transactions a month. Who’s supposed to check that?
Lisa: Welcome to “Alles top. Gerne wieder!” - the eBay podcast about trade and e-commerce. I’m Lisa Haak and today we’re not in the studio together, but recording remotely. The terms accounting, taxes and invoicing give many of us headaches. Rightly so, because there are lots of pitfalls here. Especially if you don’t just want to sell in Germany, but EU-wide too. But we want to take that fear away from you today, because the good news is you don’t have to create Excel spreadsheets or fight your way through long payment reports.
Isabell: Yes, it’s all much easier these days, because tools can now support you. For example, tools can send data directly to your tax advisor and even check it for accuracy. One such tool is Taxdoo. Taxdoo is one of many partners at eBay and can help you simplify things. And today we’ve invited a guest from Taxdoo as well. Director of Sales, Jonny Hofberger. Jonny is a specialist in complicated e-commerce processes and is therefore familiar with your daily challenges too. His goal is to make e-commerce easier, faster and clearer in accounting too. And how all of that works, that’s what we’re talking about with him today. Hey and welcome, Jonny, and best regards to northern Hesse!
Jonny: Thank you very much and best regards back to Berlin.
Isabell: Yes, thanks! Before we dive even deeper into the topics, I’d like to know a bit more about you: why does the rather dry topic of taxes matter so much to you?
Jonny: Well, I’ve been in e-commerce for quite a while and before working at Taxdoo I was also at one of the leading e-commerce ERPs and accompanied many, many online sellers when they were getting started in e-commerce or setting up their systems differently. And from the outset, one thing is actually clear: if accounting doesn’t know how to book things properly in the end and how to handle taxes correctly, then problems often arise down the line. For me, the lesson was always that it’s best to talk to accounting at the beginning and explain what the e-commerce team actually has planned, and once that’s sorted out, you can basically implement anything in e-commerce with marketplaces.
Isabell: You just said you’ve already accompanied many sellers when they were getting started in e-commerce. So you know that taxes and accounting in general are complicated topics, especially at the beginning. Do you have a few concrete tips you could share with us, especially for the start in e-commerce?
Jonny: Well, especially when you’re starting out, it’s of course important that you have, for example, a tax advisor who knows e-commerce. That’s an important message too. Look for a tax advisor who knows e-commerce. And then, of course, it’s about how do I create my invoice? What tool do I use to write my invoices? That’s always an important topic too, and alongside many other things, of course, everything about what content looks like, how warehouse processes are handled, and so on and so forth. That’s important too. But in the beginning, you should also be clear about how you’re structuring the finances.
Lisa: And Jonny, when you talk about e-commerce, marketplaces are an important part of the e-commerce strategy you build. What do you think? What should our listeners pay special attention to when it comes to taxes and marketplaces like eBay?
Jonny: There are two things to pay particular attention to. And from today’s perspective and in my current role, on the one hand there’s accounting, meaning that all accounting processes are automated and generate as little manual effort as possible. And the other is the tax topic. So above all, VAT. And that’s where it’s naturally important, and we’ll talk about this a bit later today too, what do I actually need to do and watch out for when I sell abroad? So, as you just said at the beginning, in Germany the VAT side of things is actually clear to all of us, how it works, with 19 and seven percent. But once you go beyond that, it gets interesting.
Isabell: What do I need to watch out for accounting-wise if I’m now getting started in e-commerce?
Jonny: Accounting-wise, it’s like this: for every transaction a seller makes, so for every invoice issued, for every parcel I send via eBay, I create an invoice and, so to speak, have a payment incoming for it. But the thing is, with that invoice I don’t get the money back into my account one-to-one, because things are deducted like fees in the respective category, marketing costs, etc. And if you use fulfillment, for example, fulfillment costs too. And I now have to book those against each individual parcel, and that has to be automated, because otherwise the tax advisor will eventually say, with 5,000 transactions a month, who’s supposed to book that manually? And then it’s not just these 5,000, that would be the invoice you’d log, but then you’d have to book another 5,000 in fees against it and so on and so forth. And you can’t just print out a total at the end of the month and say we made so and so much revenue, and the costs were so and so high, and I’ll just book that against it. It has to be booked plausibly. And that keyword plausibility is the highest law for every tax advisor, because that’s how you have to explain it to the tax authorities so that every auditor can understand where the money actually went. And why does the online seller now have less money in their account than they actually invoiced?
Lisa: Okay, and does a tool like Taxdoo handle all of that for me too?
Jonny: Yes, not quite. So the thing is, I need a tool that creates invoices for me. And Taxdoo actually doesn’t do that. And such a tool can be, to name a few of your partners, something like “BILLBEE”, “easybill”, a so-called e-commerce ERP, like “plentymarkets”, “JTL”, “Xentral”, and many, many others too. And this tool creates invoices, while Taxdoo grabs all transactions and the eBay settlement report and checks whether everything is correct, and then transmits that bundled up and already offset, basically to the tax advisor, so they no longer have any work to do.
Lisa: And that means you’re also connected individually to the partners you just mentioned so that you can see the invoice as well or know which functionalities are handled by which tool and where you come into play.
Jonny: Correct, we’re connected to those tools too. But we also often exclude transaction chains where we have a direct connection, and then you can “match” that against it. Has my tool actually issued the correct invoice? And what’s in Taxdoo? Because Taxdoo always prefers to take the original data from the sources.
Lisa: Okay, so that means we’ve already touched on it. Taxdoo is a tool that, for example, bundles data for accounting and checks each individual transaction for revenue and tax relevance. Can that be said?
Jonny: Yes, absolutely, but it goes a bit further than that, because it also offsets the costs. So on the one hand, of course, the correct VAT rates are checked and not just nationally but EU-wide, and on the other hand, the respective marketplace costs and eBay costs are also booked.
Isabell: And what if I make a mistake in the booking? Can you help with that too?
Jonny: A booking error actually means what? That an invoice was issued incorrectly, that the wrong VAT rate was on it. What kind of error do you mean?
Isabell: Exactly, so that could happen, for example. That would be like this: if I gave my data to the tax advisor with the wrong VAT rate, then that wouldn’t necessarily be corrected either, if I’m unlucky. Can a tool like Taxdoo step in there?
Jonny: Yes, so that is actually a super common case. There’s a statistic somewhere that says that just under 60 percent of online sellers report their VAT incorrectly, and that’s quite a lot, and of course the tax advisor always believes what you tell them, what you wrote on the invoice, and very few really check it or compare it individually again. That’s basically impossible. Let’s say you do 5,000 transactions a month. Who’s supposed to check that? And that’s exactly what Taxdoo is for, and Taxdoo would immediately recognize that a wrong VAT rate has been entered for a transaction somewhere, and then you can use that to find the invoice and correct it if necessary.
Isabell: That definitely sounds very practical if I have a large number of transactions. Now, though, very few people start out with a large number of transactions right away. When does it make sense to think about using such a tool? Do I need to know from the start? Okay, I’m going to have lots of transactions at some point, I’ll need a tool eventually, or can I start out with my own system and then switch to using a tool later?
Jonny: Of course both are possible! I would also, quite understandably, recommend doing it from the start and setting up the right tooling straight away for a proper e-commerce approach. So think ahead about where things are heading. If you have 20 transactions in the first month, then any tax advisor can book that manually too. That’s not the issue. But if you set up your tax advisor and the whole process to the tax advisor properly from the very beginning, you’ll never end up in a situation where the tax advisor says, I can’t be bothered anymore, now you’re over 3,000 transactions a month. I neither have the manpower to book this manually in-house, nor would you, as an online seller, want to pay for that in the end, because it also gets expensive, of course, if the tax advisor charges you 50 cents per booking or something, then it all adds up at some point, and then you have to say that it’s best to set yourself up with proper tooling right from the start. The second thing is, we also do this all the time. We basically pull the kid out of the well. That means we correct things retroactively. A seller comes to us and says, I’ve now switched tax advisors for the third time. They don’t have a clue at all. And in the end it turns out that it’s usually a process problem, actually, that the process with the tax advisor wasn’t set up properly, and then of course we’re happy to help there too.
Isabell: You just said that you’re also compatible with other invoicing tools or could be connected to them as well. So how exactly does the integration with eBay work, that is, the integration with the marketplaces themselves?
Jonny: Well, it’s a matter of four clicks in the end. We’re a SAAS tool, meaning Software as a Service, you need a Chrome browser, and then you can use Taxdoo, and you have a dashboard where you can see your monthly sales very nicely, and connecting a marketplace like eBay goes through the settings, and you click on connect eBay, then it throws you into the, what do you call it?
Isabell: Into Seller Cockpit Pro.
Jonny: Ah, Seller Cockpit Pro, and there you’ll be prompted once to allow Taxdoo to pull data, you tick the box and click confirm, and then it sends you back to the dashboard, and then overnight, as if by magic, the data is in Taxdoo, up to two years retrospectively for eBay.
Lisa: That really does sound very, very, very simple and should already be standard practice for all those sellers who also work with other partners we have here, when it comes to adding partners to their setup. But four clicks, that’s a promise, Jonny.
Isabell: Let me draw a short interim conclusion. You just said then everything happens overnight as if by magic. Sadly, taxes and accounting aren’t quite that simple in the end, especially when I’m selling on different marketplaces. In case of doubt, if I don’t use a tool and just give my information to the tax advisor, then incorrect information will also be processed if I provide it that way and if it contains errors. But I don’t necessarily have to become an expert myself. I can choose to use a tool that can then also simplify my accounting, check it for correctness, and be integrated directly with the marketplaces I operate on.
Lisa : And in a moment we’ll hear from Jonny what you need to watch out for when trading EU-wide. But now we’d like to know from you out there: how have you dealt with taxes and accounting so far? Are you already using tools like this, or maybe even Taxdoo?
Isabell: Yes, and if you’re listening to us in the Spotify app right now, you’re very welcome to let us know directly via the Q&A function. Just drag the slider from the bottom of the app upward, and off you go!
Lisa: And if not, no problem at all, feel free to write to us in our eBay Community or on our Facebook page for eBay for Business Germany. There you can not only leave feedback, but also let us know which topics you’d like to hear about.
Isabell: Of course, we’d also be very happy if you leave us a like or subscribe wherever you’re listening to us right now.
Lisa: Now it’s getting interesting for those of you who already sell abroad or are firmly planning to do so in the future, because we’re once again taking a look beyond our own backyard. By the way, if after this episode you want to know more about international selling on eBay, then take a look at the show notes. We’ve linked an episode there with all the tips and tricks you need to trade internationally successfully. Jonny, can you explain where the tax differences in accounting lie between domestic and EU-wide trade? Because I have to admit, I’ve internalized the tax rates for Germany, and I wasn’t really aware that there are different tax rates before I even started looking into international selling.
Jonny: Yes, that is. Somehow it stands to reason that other countries might have slightly different rates too. But how exactly that works and what you actually have to put on the invoice, that’s not entirely clear to many people. We have to say there was a reform in 2021 when it comes to VAT, and Taxdoo had already been founded before that reform. That means that before this reform there were delivery thresholds, so-called delivery thresholds within the EU. That meant you could sell to Austria, for example, for over €130,000, and France had a different threshold, and you actually had to track and accumulate every sale. When exactly did I go over my threshold, and once you crossed that threshold, you had to be registered in the respective country. That means you needed a French tax advisor, a Spanish tax advisor, who would then declare VAT there every month with your own VAT ID. So far, so complicated. Taxdoo came about back then because Jose and Christian, and Jose used to be a special VAT auditor, um, who then thought, this isn’t really that great. We’ll build a tool for that. It was a threshold-monitoring tool, meaning you had a European map and could then see in Taxdoo where exactly you were hitting which threshold and when you needed a tax advisor there, and we still do part of that today. That was simplified in 2021 by the OSS. What is the OSS? I’ll give it away straight away: the One Stop Shop reporting procedure. We’ll go into that a bit more precisely now, and that has simplified everything, and the delivery thresholds I just talked about now only exist once, and the delivery threshold is €10,000, no matter which country you sell to.
Lisa: And you talked about the reform. Is that a European reform or is this “One Stop Shop OSS” something that works globally?
Jonny: No, that was a European reform that only applies to countries within the EU, so not to Great Britain either anymore. They’ve since been out of it again. That means that in Great Britain you actually have to report your taxes locally, for example if you ship there.
Lisa: Okay, and my first association with One Stop was that the OSS would only help me if I sell to one country, but that’s not the case, hopefully, right?
Jonny: No, that is definitely not the case. If you ship a €4,999 cart to France and a €5,000 cart to Poland, then you can simply put German VAT on your invoice. If you go €2 over, so from €10,000 onwards, then you would actually have to pay tax in those countries and also put their VAT rates on your invoice. Putting their VAT rates on your invoice is the case. But you no longer need a representative in those countries; instead, you report it to the Federal Central Tax Office. In a quarterly report, so every three months, you report what you shipped to which of these two countries, and then you also have a tax liability to pay there, and the OSS ensures that those countries also get their tax. That means the countries still get the tax. It’s not like the whole thing now goes to the German federal government and they’re delighted; the OSS distributes it, so to speak. And because your business is in Germany, you do that through the German OSS.
Lisa: That sounds like an incredible relief.
Jonny: It is, it’s a huge relief, and it saves you all that calculating around, and lots of people say, yes, great, I’m now thinking of selling abroad too, and I’ll register straight away with the OSS and then start translating their product texts and things like that, and then that takes quite a while, and then they forget to file with the OSS, even if they haven’t generated any revenue at all. And that then leads to a case we unfortunately see relatively often, where they get kicked out of the OSS. So the OSS is a privilege, that’s what I mean. The OSS is not a given; rather, it’s a privilege you can use, but don’t have to, because you can still declare your taxes yourself in the countries.
Isabell: Does it cost me anything if I register for the OSS?
Jonny: No, it’s a free registration. You do it through the Federal Central Tax Office, and you can simply register there.
Lisa: Jonny, you just mentioned the quarterly report I have to submit there. Where do I get it, and where do I send it?
Jonny: So, you don’t get this quarterly report; you have to create it yourself with the Federal Central Tax Office, and either you do that or your tax advisor does it, and you should have clarified which of you will do it. Because that is actually one of the most common misunderstandings we see in everyday life: when customers get kicked out of the OSS, and the OSS kicks you out pretty hard if you fail to report for three quarters or report too late, then you get a letter from them saying your number has been deleted. Please also stop making any payments to us. You will be blocked for eight quarters and excluded from the OSS. That is really hardcore. That means that for two years you either won’t be selling abroad from Germany anymore, or you’ll have to find a local tax advisor who will then also report your taxes locally. By the way, that’s one of Taxdoo’s services, of course with a large network of tax advisors within the EU, to report your taxes locally too, in the local language and so on and so forth.
Lisa: Okay, maybe before we scare everyone too much here, could we say one more time very clearly: what absolutely do I need to pay attention to with my OSS listing?
Jonny: All OSS-relevant payments must be reported quarterly to the OSS, and that means that in the fourth month, for example in April, you have until the end of April to make this report to the Federal Central Tax Office and upload a file there, and then that’s done. Then you’ll get a payment request and can pay it. If you don’t do that and mess it up once, you can also correct it retroactively. That’s not the problem. OSS reports can also be corrected. You just shouldn’t have to correct them too often or forget to do it. Then you have a problem. But actually it’s totally easy, because you just have to keep an eye on what I shipped abroad, and from which country what was shipped abroad? Of course. I’ll throw in a trick question about that in a moment. But the important information is: OSS makes it easier. It’s best to register for OSS once you know that you’ll exceed these €10,000 in this quarter. Even if you’ve somehow exceeded the €10,000 yesterday, you can still register for the OSS immediately and say, from now on we want to report this. That’s no problem either. As I said, you just have to do it. It’s like filing your regular VAT return in Germany, monthly, and saying what you reported in Germany, just internationally, only every three months.
Isabell: And if I were to use a tool like Taxdoo, would you then do these quarterly reports for me?
Jonny: Exactly, Taxdoo could create the OSS export for you, then you’ll get it every three months, and then you just have a file that you can upload to the Federal Central Tax Office. So, super easy peasy, and many tax advisors also say use Taxdoo for that, because we don’t want to generate or create that separately for you. But the tax advisor can also do it, create this file, and what’s important for that is, of course, that all e-commerce channels that are OSS-relevant are included too. So, there are also marketplaces that only sell in Germany, and those are of course not OSS-relevant. But if there are marketplaces like eBay, through which I can also sell outside Germany, then that’s an OSS-relevant channel. And if you have a shop system that also allows people from France to order there, and you ship goods abroad, then a shop system like Shopify, for example, would also need to run those transactions through Taxdoo so that the OSS report is correct. So that’s important to note. All B2C sales channels must run through the OSS too. No B2B, B2B is not handled through the OSS. All B2C sales channels must run through the OSS, through the system, and then you can use that export.
Isabell: Okay, so I have to process all sales channels through Taxdoo, prepare them for my OSS procedure, and we’ve already talked about the worst-case scenario if I’m excluded from the OSS procedure for two years. But there are definitely more pitfalls you’ve come across over time, right?
Jonny: Yes, definitely, and that’s also something where we notice that many people don’t use the OSS procedure correctly. Because it’s always about considering, and we also do this in the individual transaction assessment, you always have to check from where to where the goods were shipped and where the goods were stored. And now there are also many sellers who say, I don’t store my goods only in Germany, but for example in Poland, and then I ship an eBay order from Poland to Germany. Where do I now report my VAT? Do I report it in Poland because that’s where my goods are stored? Then I’d need a Polish VAT ID anyway and would also need a tax advisor there to declare the taxes, or in Germany, where I already have a company headquarters anyway?
Isabell: I would have said, I need to report here in Germany.
Jonny: Lisa?
Isabell: Because I’m selling to Germany and the customer is basically sitting there? #00:26:01-1# Lisa: I would have said that too.
Jonny: It’s a cross-border sale that must be reported via the OSS procedure, correctly speaking, even though you’re based in Germany, and even if the goods go from Poland to France to an eBay customer, that sale must also be reported via the German OSS procedure, of course then with French VAT on the invoice. So always look at where the goods are being shipped from and to, and that’s where a lot of misunderstandings and also many incorrect reports come from. And yes, that’s an interesting case we see all the time.
Lisa : So it’s not just about where the purchase was made and for whom, but about the flow of goods behind it.
Jonny: Exactly, that’s right! It’s about where the goods are located and from where to where they are being shipped. And of course that also applies when you say, I have some kind of warehouse system or fulfillment system behind it that also stores stock for faster delivery times, for example in France, in Spain and so on and so forth, then you also have to register VAT in those countries, we of course do that at Taxdoo too, and then also report VAT filings and transfers, and then you’d go crazy if you had to document the whole thing to the tax offices too, of course. You have to tell the tax office in Germany that the goods left the country on their way to France and were not sold, that it’s still your goods, and the French tax office has to know that goods arrived there that are not yet sold, for which they don’t get any VAT, so-called transfer notification, and you also have to document the whole thing in Germany in an audit-proof manner with a so-called pro forma invoice. That means if some Jose Godmann shows up at your place and says, right, let’s drop everything again, it’s better if you can also show such a pro forma invoice so you can say: here is where my goods are, and these are the countries where I distributed my goods.
Isabell: Okay, but to fulfill all of that, Taxdoo could help me. But my tax advisor could help me too, right? This already sounds like a lot of paperwork and a lot of bureaucracy in complicated topics.
Jonny: Yes, great question. Because that’s exactly the problem. Many tax firms don’t really know enough about it either, and don’t have people who actually specialize in it. And that’s why you’d be best advised to turn to experts like Taxdoo, who do this every day. This is just our daily doing. And that’s why we naturally also cooperate with all the tax offices, because your tax advisor in Germany, when it comes to reporting French VAT, will say: “Not with me, I don’t speak French and I’m not going to get a French license!” So you need some provider who handles that for you and knows what they’re doing, and who importantly evaluates every single transaction, from where to where, and then reports it correctly too.
Lisa: So, what I’ve taken away from today is that if I, as a seller, don’t know much about taxes myself, then I should definitely have a good tax advisor at hand, a tool that supports me, such as Taxdoo, and that I definitely see the OSS procedure as a privilege and make an effort to do the right work there once a quarter.
Jonny: Exactly, that’s right.
Isabell: We also keep hearing the question of whether eBay adjusts tax rates for international transactions, whether we set anything there, whether we already give “guidance” when creating listings. And that’s a bit of a blessing and a curse, because the seller is fully responsible for what is stated in their listing. So we don’t specify tax rates. There are a few exceptions, such as when eBay is responsible for remitting VAT, as is the case for transactions to the UK up to a certain order value. But maybe we can talk about that again in a separate episode. I think it would blow up the scope now. Exactly, I just wanted to mention it again because we read this often in the community too: “eBay doesn’t adjust my tax rates at all!”, or “oh help, I’ve just sold passively to France, but my listing shows 19 percent, and now I need a completely different tax rate. What do I do now?” So it’s great that you now offer solutions with Taxdoo. But just once more at this point: we don’t specify tax rates, because when creating the listing we also don’t yet know in which country the purchase will ultimately be processed.
Jonny: Yes, and you’d kind of be opening Pandora’s box if you did that. So, it’s a lot about tariff numbers. What products do I have? If they have VAT rate A in Germany, e.g. 19%, that does not automatically mean they have VAT rate A in France. For example, children’s clothes have a reduced tax rate in France and not in Germany. And an invoicing tool can solve that. And the seller should really make sure they choose a tool that is preferably certified, has a GoBD certification, or where it’s proven that this tool can also handle customs tariff numbers. Otherwise, as we notice later during our checks at Taxdoo, because we naturally take all the audit numbers and match them against it, we find errors and then the invoicing tool has to correct them. So that happens too, but I understand that eBay doesn’t make it its job to want to control that as well.
Lisa: I think that covers a lot, and above all the important topics around taxes and EU-wide trade. Jonny, you already mentioned it: if you want to sell beyond the European borders, there’s a lot more to it: customs duties and different tax law requirements. That would stretch today’s episode a bit too far. But if you’re interested in that topic, feel free to write to us in our eBay Community or on our Facebook page “eBay for Business Germany”.
Isabell: Yes, Jonny, and if you’ve listened to our podcast before, you know what’s coming at the end now. Namely the question: What did you last buy on eBay?
Jonny: Great question! I, I expected this question and I even checked what was the last thing I bought on eBay? And it was actually a rear axle suspension for my electric car. And it wasn’t a particularly cheap purchase.
Isabell: Did you use our vehicle parts finder for that?
Jonny: Actually, yes, of course.
Isabell: Very nice! Thank you so, so much for all the interesting insights. I think we were able to make this complicated and rather dry topic a little more understandable and accessible for many. Thanks for being here!
Lisa: Thank you, Jonny.
Jonny: Thank you for having me here!
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