VAT on digital services: SaaS, B2B and B2C sales and pricing through a US LLC

Price and invoice digital services through a US LLC: B2B, B2C, non-Union OSS and platforms, with a worked example covering VAT, fees and a refund.

Your website shows one subscription price, but a French company and a German consumer may need different invoices. Before choosing how to collect payment, you need to know how much of that price belongs to the business and how much is VAT. This guide works through that decision for SaaS, downloads, online education and professional services sold through a US LLC.

The LLC and VAT answer different questions. The company holds the contracts, bank accounts and commercial relationships; VAT is a tax on particular supplies. You can keep the LLC at the centre of the business while choosing the appropriate VAT treatment for each sales channel. The practical starting points are the supplier, the service, the customer's business or consumer status, and the place of supply.

Start with the nature of the service

An online delivery is not automatically an electronically supplied service for VAT. Automated SaaS access, digital downloads, on-demand content and self-service subscriptions generally fit that category. Bespoke consulting, a live session or work delivered mainly through human expertise may follow a different place-of-supply rule even when the entire customer journey happens online.

The commercial model should distinguish:

• Automated digital service: technology delivers the essential value with minimal human involvement.
• Professional service: judgement, analysis or individual work is the core of the supply.
• Mixed product: software, content and human support may need to be assessed as separate or composite elements.
• Platform sale: the contract must show whether the platform merely processes payment or actually sells to the end customer.

This first classification prevents a consulting engagement from being treated like SaaS and prevents an ordinary payment processor from being mistaken for a Merchant of Record.

Article 7 of Regulation 282/2011 makes automation and human involvement central to the test. Teaching delivered by a tutor does not become an electronic service simply because it uses a video call. However, virtual educational activities supplied to consumers may still be located in the customer's country under Article 54. Human delivery is a classification point, not an automatic exemption from destination VAT.

B2B sales: when the customer buys as a business

For services covered by the general B2B rule, the place of supply is the customer's business establishment or the fixed establishment receiving the service. An LLC genuinely established outside the EU, with no establishment intervening in the supply in the customer's country, invoices these services without charging EU VAT; the customer accounts for it under reverse charge. This follows Articles 44 and 196, rather than an exemption attached to the LLC itself. The Commission also explains the special place-of-supply rules, including property-related services and virtual activities.

The word “company” entered at checkout is not enough on its own. The LLC should retain proportionate evidence that the customer is acting in business:

• legal name and business address;
• a valid VAT number where one is available;
• a VIES validation record for an EU VAT ID;
• an order, contract and account profile consistent with business use;
• an invoice addressed to the entity that actually receives the service.

If an EU customer is awaiting its VAT number, Article 18 allows other evidence of business status where the customer says it has applied and the supplier carries out reasonable identity or payment checks. This is not permission to replace any invalid VAT ID with a buyer's assertion. Customers outside the EU need the business evidence appropriate to their circumstances, rather than a VIES search that does not cover them.

For suppliers established in mainland Spain or the Balearic Islands, ROI registration, VIES and Modelo 349 belong to a separate domestic reporting framework. Our guide to B2B services invoiced from Spain to the EU follows that specific workflow.

If you work from Spain and also sell outside the EU, the guide to invoicing international clients from Spain covers contracts, withholding, currencies and the role of a US LLC.

B2C digital sales: the consumer's country drives the result

For electronically supplied services sold to consumers, EU rules generally locate the supply in the Member State where the customer is established, has a permanent address or usually resides. The LLC charges the applicable rate for that country and reports the VAT through the compliance route it has chosen.

This does not turn the LLC into a European company. It adds a VAT identification and reporting layer while the US entity remains the contractual seller, unless a different seller is deliberately introduced.

A serious checkout needs to establish three things before confirming the tax result:

1. Is the buyer acting as a business or a consumer?
2. Where is the buyer actually located?
3. What specific service or product is being purchased?

Changing processor or receiving EUR instead of USD does not alter those underlying facts.

Who can use the EUR 10,000 threshold?

The European Commission limits this simplification to suppliers established in only one Member State. Add together the covered cross-border B2C telecommunications, broadcasting and electronic services and intra-EU distance sales of goods, excluding VAT. The aggregate must not exceed EUR 10,000 in either the current or the preceding calendar year. It is not a separate allowance for each country, platform or activity, and it does not cover every type of service.

For this calculation, the services go to consumers in another Member State, and goods must be dispatched from the supplier's sole Member State of establishment to another Member State. Sales from any EU warehouse cannot simply be added under the same simplification.

A US LLC with its actual place of business outside the EU plans VAT for its electronic B2C sales from the first supply located in the Union. Adding an EU fixed establishment does not make the threshold available. Non-Union OSS provides a central reporting route when the LLC meets that scheme's conditions.

Before launch, decide whether to advertise one VAT-inclusive final price or a base price to which the applicable VAT is added. Then choose the reporting route and payment channel. This gives you a meaningful comparison of margins by market before you spend on customer acquisition.

Union OSS and non-Union OSS

The One Stop Shop allows a business to report VAT due in multiple Member States through a single Member State of identification for the transactions covered by the scheme.

Non-Union scheme

The non-Union scheme is available to taxable persons that are not established in the EU and supply covered B2C services to EU consumers. A US LLC with no business establishment or fixed establishment in the Union can select a Member State of identification and use it to report VAT for all relevant Member States of consumption.

If Spain is selected:

• registration, changes and cessation are handled through Form 035;
• periodic VAT returns are filed through Form 369;
• the non-Union return is quarterly;
• filing and payment are due by the end of the month following the quarter;
• returns remain due while registered, including periods with no covered supplies.

OSS is optional. The alternative is to register and comply nationally wherever required, which is usually a less efficient route for a digital business serving several countries.

Union scheme

The Union scheme addresses a different footprint, including EU-established suppliers, EU fixed establishments and the transactions assigned to that scheme. If the business later develops a sufficiently permanent European operation or changes which establishment actually makes the supply, the original non-Union analysis must be revisited.

Our dedicated guide to non-Union OSS for a US LLC explains registration, currency conversion, corrections, Form 369 and the supporting record in depth.

Evidence of customer location

A country selected from a dropdown is not automatically decisive. For B2C electronic services, the seller should collect and retain consistent evidence of where the consumer belongs. Depending on the channel, relevant evidence can include:

• billing address;
• the country linked to the bank or payment instrument;
• IP address and reasonable geolocation;
• SIM country code where relevant;
• fixed-line information;
• other commercially reliable information obtained during the sale.

The operating rule is to hold the required number of non-conflicting items of evidence for the applicable case, commonly two. Conflicting evidence should trigger a review before the transaction is finalised for reporting; it should not be resolved by choosing the lowest VAT rate.

OSS records must be retained for ten years from the end of the year in which the transaction took place. They need to reconstruct the Member State of consumption, type and date of supply, taxable amount, rate, VAT due, payments, adjustments and the evidence used to locate the customer.

A payment processor is not automatically the seller

Stripe, PayPal and other payment processors can collect for the LLC without taking over the sale. In that model, the LLC normally remains the customer-facing seller and retains the corresponding VAT responsibilities.

A genuine Merchant of Record occupies a different contractual position. It sells to the consumer under its own terms, collects the payment, issues the customer-facing sales document and normally handles indirect tax for that sale. The label alone proves nothing: the agreement, invoice, refund policy and checkout identity must all support the model.

Article 9a of Regulation 282/2011 also presumes that a platform taking part in an electronic supply acts in its own name on the provider's behalf, unless the conditions for identifying the underlying provider as supplier are met. A participant authorising the charge or delivery, or setting the general terms of supply, cannot simply name someone else as supplier to change that result. An intermediary that only processes payment and does not take part in the supply is outside this presumption. What the platform actually does matters alongside its contract.

The choice affects margin, customer ownership, chargebacks, data access and tax administration. A Merchant of Record can be excellent for some B2C product lines. Direct LLC sales can offer more control for B2B, high-value services and brands that want to own the commercial relationship.

Four practical examples

SaaS sold to a French company

The LLC verifies the business identity and VAT ID. The B2B rule applies and the customer accounts for VAT through reverse charge. An automated recurring payment does not turn a verified company purchase into B2C.

Automated content access sold to a German consumer

The service is electronically supplied and located in Germany. The LLC charges the German rate and can include the transaction in its non-Union OSS return.

One-to-one advice delivered by video call

Human expertise is the substance of the service. The business first classifies the professional service and identifies the customer's capacity; it does not assume the electronic-services rule merely because Zoom was used.

A platform contracts as the seller

Where a genuine Merchant of Record issues the consumer invoice and assumes the sale, the LLC receives a settlement under the platform agreement. The commercial records must reflect that legal chain rather than presenting every end-customer payment as a direct LLC sale.

Worked example: a EUR 120 price, VAT, fees and a refund

Illustrative example, not a client case. Assume a direct sale of digital content for a final price of EUR 120, VAT at an assumed 20%, and a total processing fee of EUR 3. Payment and settlement are both in EUR, without currency conversion or other charges. These are calculation assumptions, not a provider's quote or a VAT rate for the whole of Europe.

Divide the final price by 1.20 to obtain the taxable amount: 120 / 1.20 = 100 EUR. Do not subtract 20% of the final price. The processing fee reduces the cash received, but it does not make the EUR 117 payout the taxable amount of the sale: 120 - 3 - 20 = 97 EUR remains before other costs and taxes on profit. The EUR 97 is not net profit.

Now assume half the sale is refunded. The customer receives EUR 60: EUR 50 of taxable value and EUR 10 of VAT. If the processor retains its entire EUR 3 fee and adds no further charge, 117 - 60 - 10 = 47 EUR remains after setting aside the remaining VAT. Link the adjustment to the original sale and document it under the applicable scheme; the bank debit alone is not the full record. Articles 73, 78 and 90 of the VAT Directive distinguish consideration, tax and reductions in the taxable amount.

Use the same calculation when comparing direct sales with a Merchant of Record. Compare the amount left after VAT, fees and the actual refund terms, not just the platform's advertised percentage. The same consumer price across several countries can produce different net revenue when their VAT rates differ.

Build the commercial chain once

The strongest setup starts with a coherent commercial architecture:

• the correct LLC signs contracts and appears as seller where intended;
• the catalogue separates professional services, electronic products and mixed offers;
• checkout distinguishes B2B from B2C and gathers proportionate evidence;
• pricing and margin policy state whether VAT is included or added;
• processors, bank accounts and currencies form one intelligible money flow;
• invoices, refunds and adjustments preserve the same seller identity;
• OSS, national registrations or a Merchant of Record match the actual channel.

That is the real value of an LLC: not a bank account in isolation, but the legal and operational centre of a company equipped to contract, collect revenue and scale internationally.

Common questions about digital services VAT

Does charging in USD change the VAT treatment?

No. The payment currency does not change who buys or where the supply takes place. You can collect USD or EUR; reporting conversions follow the chosen scheme's rules. VAT and foreign-exchange costs are separate amounts.

Is every online course an electronic service?

No. An automated course and live teaching are different supplies. Virtual education can follow destination rules even without automation. A specific education exemption also needs its own assessment; calling a product a course does not establish one.

Can an LLC report European VAT without creating another company?

Yes. An eligible LLC can use non-Union OSS and remain the seller. Confirm where its business is actually established and whether it has a relevant EU fixed establishment. A postal address or VAT number alone does not settle that question.

Does the processor take VAT out before paying me?

That depends on the contracted service. A payment-only processor may deduct its fee and pay out the rest without filing VAT for you. Establish separately who calculates the tax, who collects it and who submits the return.

Does a processing fee reduce VAT on a direct sale?

Not in the example: the customer pays EUR 120 for a supply worth EUR 100 plus EUR 20 VAT. The EUR 3 fee is a separate cost. Its own tax treatment and any deduction depend on the provider's invoice and the applicable regime.

Do all my B2B sales belong in OSS?

No. Non-Union OSS covers qualifying B2C services, not B2B invoices following the general reverse-charge rule. One LLC can serve both channels while identifying the treatment of each sale correctly.

What should I review before selling in several countries?

A sample of the service, target markets, customer type, platform contract, and an example price and invoice. Those facts let you choose the company structure, VAT route and payment channel before scaling sales.

A US LLC ready for your next market

At Exentax, we start with what you sell and where you want to grow. Share your website, target markets and current payment arrangements. Our team reviews the LLC, banking, processors and invoicing with you, so the decisions fit your business rather than a standard package.

Where non-Union OSS fits, we coordinate registration and the ongoing filing work. Where another channel makes more sense, we explain its costs and scope. You can make the decision with clear figures and a team available through implementation and growth.

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