Thread: Hostgator to charge VAT for EU business customers

VAT is Value Added Tax

This will add 20% to hosting charges from now on for UK business customers (not sure what rates apply to other EU countries). I'm surprised that it took them so long to do this.

I guess that I should look for a new host now outside of the EU/USA?

My understanding is that a business customer is anyone earning any income from online business where their web site plays a part e.g. Adsense, or advertising a product/service.

I'm not sure if this charge is fair since the hosting is on servers in the USA and no product is imported to the EU.

If I (EU resident business) buy a gift for a friend in the USA from Amazon.com, do I have to pay VAT?

Consumption taxes in the USA are controlled by individual state laws. The rough equivalent of the European VAT tax is our sales tax, but the rates and how they are applied varies based upon the state where the merchant is located.

When I lived in Minnesota, sales tax was charged based upon the billing location of the purchaser and applied to all purchased made by Minnesota buyers.

In Arizona, it is based upon the location of the facility where the product is shipped and only charged for products shipped to Arizona addresses. Our sales tax varies by city and county.

We also have nexus laws, which means if I have a location in Iowa, but I ship from Arizona, I may also have to charge Iowa sales tax for items shipped to Iowa. Nexus also applies to a sales office.

I don't think a USA company can be forced to charge a VAT tax, because they have no responsibility to collect taxes for another country. The EU could impose the tax on the purchaser, but you would have to pay that separate from the Hostgator invoice. We are seeing states violate long-established tax laws in order to collect sales taxes, so it would not surprise me if Hostgator cut a special deal with the EU.

It seems unusual that the UK is only imposing the tax on businesses and not non-business users, because I have never seen a VAT applied in that manner.

It could be a mistake to look for a host outside of the EU/USA if those are your primary markets, because the IP address of the server is used to determine the country in which your Google rankings will have an advantage. In other words, if you move to a hosting company in Canada, you will lose your ranking advantage in other countries. I evaluated a few sites over the years that never showed up in search results in the USA. I found one to be hosted in Canada and another in France. The site owners had no idea that the hosting company they were dealing with was outside of the USA. After moving the sites to USA hosting companies the sites began to rank well, but it took about six months before Google recognized the move.