The Michigan Court of Claims recently held in a summary disposition that remotely accessed software is not subject to Michigan sales and use tax. The court held that software accessed remotely was neither tangible personal property nor ‘used’ by the taxpayer as defined under Michigan statutes. Further, any prewritten computer software provided to the customer was only an incidental component of the various services purchased and did not subject the charges to tax. [Auto-Owners Insurance Company v. Department of Treasury, State of Michigan Court of Claims, No. 12-000082-MT (March 20, 2014)]
On 4 April, the European Commission has published Explanatory Notes to prepare businesses for the new VAT rules for telecom, broadcasting and electronic services, which will enter into force on 1 January 2015.
The aim is to help businesses to be fully prepared on time for the change-over, whereby VAT on telecom, broadcasting and electronic services will be charged where the customer is based, rather than where the seller is.
The Explanatory Notes are available on the EU Commission’s website in English (click link). (It will later be translated in all EU languages, as well as in Chinese and Japanese.)
We will discuss the key provisions and critical issues of the EU Commission’s Explanatory Notes with businesses, delegates of the Member States and the Commission during our next B2C 2015 Working Group meeting in Brussels, on 23 April 2014.
On 28 March the South African National Treasury published its “Electronic Services Regulations” in the Government Gazette and released a media statement, announcing a postponement of the effective date till June 1st, 2014.
The changes will make it compulsory for foreign e-commerce suppliers of electronic books, music and other digital services to register for VAT in South Africa.
Canada joins those countries that make efforts to tax supplies provided by non-established businesses via the Internet to Canadian residents. As recently reported in PwC’s GlobalVATOnline the Canadian government launched a public consultation as part of a 2014 Budget proposal to ensure tax fairness and invites the public to give their opinion on what actions should be taken in order to effectively collect sales taxes on e-commerce sales to residents of Canada by foreign-based vendors.
As previously reported here, South Africa intends to impose VAT on electronic / digital services (“eservices”) supplied by non-established businesses to recipients in South Africa with effect from 1 April 2014.
At PwC’s upcoming Webcast Gerard Soverall (Partner, PwC South Africa), specialized in e-commerce and cross-boarder Indirect Taxation will provide an update on the latest developments. This session is designed to inform the participants of the content of the regulations and to discuss the administrative and enforcement challenges that may arise.
In line with the new VAT legislation, set to take effect on 1 April 2014, electronic/digital services (“eservices”) supplied by a business outside South Africa to a recipient in South Africa will require the supplier to register for Value-Added Tax in South Africa.
The recipient is deemed to be located in South Africa if:
- that recipient is a resident of South Africa or
- where payment originates from a bank registered or authorized in terms of South African law.
It is important to realize that this definition applies supplies made both to B2B (Business – to – Business) and B2C (Business – to – Consumer).
The introduction of VAT taxation of eservices provided by non-resident providers to residents of South Africa (both B2B and B2C) or paid for from a South Africa’s bank account has been postponed from the originally planned 1 January to 1 April 2014.
For more information refer to GVO.
Not long ago we have updated you about the EU Commission’s infringement procedure against France related to their application of the super reduced VAT rates for ebooks. France and Luxembourg share the opinion that ebooks should be taxed as their physical contra-parts (as books), whereas the EU Commission has the opinion that under the current VAT Directive rules ebooks should be regarded as all other eservices and therefore taxed with the standard VAT rate.
Following the published case against France two weeks ago, the Court of Justice of the European Union (“ECJ”) has also published the EU Commission’s infringement procedure against Luxembourg. Some more information are available at GlobalVATonline.
We have been discussing the developments about the EU Commission’s infringement procedure against Luxemburg and France related to their application of the super reduced VAT rates for ebooks several times in the past (last time here). The EU Commission is of the view that under the current VAT Directive rules ebooks should be regarded as all other eservices and taxed with the standard VAT rate. Luxemburg and France are of the opinion that ebooks should be taxed as their physical contra-parts – i.e. as books.
As reported on PwC’s GlobalVATonline, the Court of Justice of the European Union (“ECJ”) has recently published the EU Commission’s infringement procedure case against France. There is no official news about the infringement procedure case against Luxembourg available at this moment.
On October 18, 2013, in a 6-1 decision, the Illinois Supreme Court ruled that the state’s click-through nexus law is pre-empted by the federal Internet Tax Freedom Act’s ban against ‘discriminatory taxes on electronic commerce.’ The court did not reach the issue regarding whether the click-through nexus provision violated the US Commerce Clause. [Performance Marketing Association, Inc. v. Hamer, Ill. Sup. Ct., #114496 (10/18/13)]