VAT on digital products starts with where the customer lives

A customer in France buys your video course from their phone while travelling in Spain. Your checkout records a billing address in France, the card was issued elsewhere and the payment arrives in your Stripe account in your home country. Which VAT rate belongs on the sale? For digital products, the first question is usually not where you live. It is where the customer is treated as living for tax purposes.

Start with the product, not the percentage

Before you look up a VAT rate, identify what you are selling and how the customer receives it. A PDF delivered after payment, a course made available through a platform, a recurring membership and a one-to-one coaching call can fall under different tax definitions. The distinction is often between an electronically supplied service and a service that depends substantially on your live involvement.

That classification affects the rest of the exercise: whether the customer’s location matters in a particular way, whether a special rule applies, and what evidence you need. If you sell a template, ebook or recorded course through a storefront such as store.fan’s digital downloads, describe the delivery accurately in your records. Do not label every online offer a digital service simply because payment happens online.

Why customer location changes the calculation

VAT systems commonly distinguish between business customers and consumers. For a business customer, a valid tax number and the applicable reverse-charge rule may change who accounts for the tax. For a consumer, the place-of-supply rules may point to the customer’s country rather than your own.

The exact rule depends on the countries involved, the customer’s status and the product. In the European Union, for example, many business-to-consumer electronically supplied services are taxed according to the consumer’s member state, with mechanisms available for reporting eligible cross-border sales. That does not tell you the answer for every customer or every offer. Your local tax authority and the customer’s jurisdiction remain the places to check.

Treat location evidence as a matching exercise

A customer can travel, use a work card or enter an address incorrectly. That is why one data point is a weak foundation. Build a reasonable picture from the information available at checkout: billing address, payment country, IP address or other location data, and any customer-provided business details. The requirement is not to become a detective. It is to avoid choosing a country from a single convenient field when the other evidence points elsewhere.

1. 1Ask for the customer’s billing country and make the field part of the checkout record.
2. 2Check whether the payment information and other available signals support that country.
3. 3Pause or review orders where the evidence conflicts materially, especially for higher-value sales or unusual patterns.
4. 4Store the evidence alongside the order rather than in a separate spreadsheet with no clear link to the transaction.
5. 5Document the rule you used, including why you treated the buyer as a consumer or business customer.

Keep the process proportionate. If a small sale contains consistent information, you do not need to ask the customer for a passport. If the evidence conflicts, ask for the minimum clarification your tax adviser or local authority recommends. Your aim is a defensible record, not an intrusive checkout.

Rates are the second step

Once you have identified the relevant country and tax treatment, look up the rate that applies to the exact product. Do not assume that the standard rate applies everywhere, or that a printed book and an ebook receive identical treatment. Reduced rates, exemptions and local registration thresholds can depend on the product’s legal description and the customer’s circumstances.

Decide whether your displayed price includes VAT or adds it at checkout. The arithmetic is different. If a customer pays £120 including 20% VAT, the VAT element is £120 × 20 ÷ 120, which is £20, leaving £100 before VAT. If £120 is the price before VAT, the total at that rate is £120 × 1.20, or £144. Make the convention clear before the buyer pays.

Keep a record that explains each sale

A useful record lets you reconstruct the transaction months later. Keep the order date, product, customer details, buyer status, country evidence, currency, gross amount, tax rate, tax amount, net amount, refunds and any adjustment. Keep the version of your product description and pricing logic when those details affect classification or calculation.

Your payment trail matters too. With store.fan, money goes directly to your own Stripe account, and Stripe’s own processing fee still applies. Reconcile the gross sale, VAT liability, refunds and processing fees separately rather than treating the bank payout as revenue. The payout is a cash movement; it is not automatically the taxable sales figure.

If you sell through store.fan, review the payment and order information you can access before promising customers that tax is handled automatically. The payments feature can be part of your sales setup, while your accountant or tax authority should confirm the reporting workflow. An iOS app can send instant sale alerts, but an alert is not a tax record by itself.

Make the workflow repeatable

Write a short internal rule for each product: what it is, who usually buys it, how delivery works, which customer-location evidence you collect, and where you check rates. Review the rule when you add a country, change a product from live to recorded, introduce a membership or alter your checkout.

For a solo creator, this may be a one-page checklist and a monthly reconciliation. For a larger catalogue, use consistent product names and tax categories so a refund or annual report does not require guesswork. If your sales span several jurisdictions, ask a tax professional about registration thresholds, evidence retention, invoicing and marketplace rules before volume makes the records difficult to repair.