In June, the Commission said that non-European companies must charge VAT for on-line sales of software and music and that the companies could choose the EU country in which they wanted to register and pay VAT. The level of VAT in the EU varies from country to country. The lowest rate is in Luxembourg, at 15%, making it the obvious choice of VAT registration for any US company. However, according to BBC reports, the French government is now arguing that, because this will deny France of tax revenue, US companies should register in all EU states. Not surprisingly, the US does not support this view.
Belgium has instead suggested going ahead with the plan to register in any EU state but requiring that the revenues are shared among all EU states.
In the US, legislators are trying to address the issue of adapting sales tax laws to e-commerce. Twenty-seven states are participating in a Streamlined Sales Tax Project to a system which hopes to overcome the problem of there being 7,500 sales tax jurisdictions in the US with widely varying rules on the calculation of taxes and the products to which they should apply.