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All Good Things . . .

. . . must be taxed. Europe has busted through the Internet taxation barrier.

This story appears in the January 2003 issue of Entrepreneur. Subscribe »

You knew it was coming. Internet taxation can't be avoidedforever. The European Union (EU) is putting into effect a law thatrequires collecting taxes on the exchange of digital goods likesoftware and music downloads. If you own a U.S. business in thisfield and sell abroad, you will have to collect the Value Added Tax(VAT) based on where the buyer is physically located. And you haveuntil July 2003 to get ready.

The VAT varies by country, topping out at 25 percent in Swedenand Denmark. Collecting those taxes means registering with a memberstate of the EU and upgrading your e-commerce system to handle thenew demands. Another option is to simply get out of the Europeanmarket. Keep in mind, though, that the new policy only applies tobusinesses with at least 100,000 Euros in annual sales.

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