VAT and sales tax on in-game purchases when you sell direct

The app store was your tax collector

When a player buys gems through Apple or Google, the store is the seller for tax purposes. EU law presumes that a platform taking part in the supply of an electronic service, “such as a marketplace for applications”, acts in its own name (Implementing Regulation 282/2011, Art 9a). UK law does the same through VATA 1994 s.47(4), and HMRC’s guidance says that where you sell digital services through a platform, “the digital platform is responsible for accounting for VAT on the supply instead of you.” Japan, India, New Zealand and Brazil have similar rules. The store charges the player’s local tax, files the returns and pays you a net amount.

Move the same sale to your web shop and someone else has to do that work. Who depends on how you take payment:

EU law carves pure payment processors out of the platform rule (Art 9a(3)), which is why a payment service provider leaves the tax with you. The rest of this page sets out what that means market by market. It is general guidance; confirm your own position with a tax adviser before you launch.

EU VAT: taxed where the player lives, from the first sale

The VAT Directive lists “games, including games of chance and gambling games” among electronically supplied services (Annex II). For a sale to a consumer, Article 58 puts the place of supply where the player lives, so you charge the player’s country’s rate: 19% in Germany, 20% in France, 22% in Italy, 25% in Sweden, 27% in Hungary, down to 17% in Luxembourg, per the Commission’s Your Europe table last checked on 13 July 2026. Rates change often (Finland moved to 25.5%, Estonia to 24%, Slovakia to 23%), so pull them from Your Europe at each filing rather than hard-coding them.

The threshold most studios hear about does not apply to most studios. Article 59c lets a business keep charging its home rate on cross-border consumer sales up to €10,000 a year, but only if it is established in a single EU country, and the €10,000 counts sales to all other EU countries combined. A studio in the US, UK, Canada or Japan has no threshold. VAT is due in the player’s country from the first sale.

Filing is simpler than the rate table suggests. The One Stop Shop lets you register in one EU country and file one return for all of them:

OSS is optional. The alternative is a VAT registration in every EU country where you have players. A UK studio counts as non-EU for these purposes and uses the non-Union scheme.

For each sale you must hold “two items of non-contradictory evidence” of where the player lives (Art 24b). Article 24f lists what counts: billing address, IP address or other geolocation, bank or card details such as the card’s issuing country, the SIM’s mobile country code, a fixed landline, or other commercially relevant information. Most checkouts can capture IP geolocation and the card’s issuing country, which gives you two items. When they disagree, for example a player traveling abroad or behind a VPN, you need a rule for which evidence wins, and ideally a third item to settle it. EU-established sellers with under €100,000 of cross-border sales can rely on one item from a third party such as the payment service provider; non-EU studios cannot.

A buyer who gives no VAT number can be treated as a consumer (Art 18(2)). That covers almost every player.

UK VAT: no threshold for studios outside the UK

The UK threshold of £90,000 applies to UK businesses. A studio based outside the UK has none. GOV.UK says you must register “regardless of taxable turnover” if your business is based outside the UK and you supply any goods or services to the UK, or expect to in the next 30 days. UK VAT is 20%.

HMRC treats games as digital services and asks for two pieces of information as evidence of where each consumer lives. For small sellers using a payment service provider, it suggests pairing the billing address or phone country code with the provider’s two-letter country code for the card.

US sales tax: one set of rules per state

The US has no national sales tax. Each state with a sales tax sets its own nexus rules, product rules and rates, and many localities add their own. FastSpring, which collects US sales tax as a merchant of record, describes its coverage as “all 45 applicable states”.

Since the Supreme Court’s 2018 Wayfair decision, a state can require a remote seller to collect without any physical presence. The South Dakota law the Court upheld set the benchmark most states copied:

The 200-transaction test matters more for games than for most sellers. At a $10 average order, 200 transactions is $2,000 of sales, so a small web shop can owe tax in a state long before it reaches $100,000 there. States are now dropping that test. Utah’s SB 47 removed it, effective 1 July 2025 according to the Sales Tax Institute. Illinois says that from 1 January 2026 “the 200-transaction threshold no longer applies”. Kentucky enacted HB 757 in 2026 to redefine its nexus standard, reported to take effect on 1 August 2026 with a $100,000-only test. Avalara, a tax-software company, reports that several other states dropped the count earlier. We have not confirmed those with each state, so check the state’s revenue department before relying on any list.

Nexus tells you whether you must collect. Taxability tells you whether a given item is taxed at all, and for games it varies:

Treat those two as proof that the answer differs by state and by product. Build a matrix with one row per state where you have nexus and one column per product type: the base game download, subscriptions or battle passes, virtual currency, and items bought directly. Tax engines supply default answers, but the classification is your decision if you are the seller.

Other markets: rates and thresholds for a foreign seller

Most large game markets now tax foreign sellers of digital services to consumers. The table shows the position for a studio selling direct as of September 2026. Where a platform or MoR is the seller, most of these regimes put the obligation on it instead.

“Tax authority” means we read the authority’s own page. “Wording not rechecked” means we located the page but took the wording from a search extract. “Adviser summary” means an accounting firm or tax-software company’s summary; treat those rows as a starting point for your adviser. China is not in the table: we found no general registration scheme for foreign sellers of digital services, and we have not verified the position with a Chinese source, so ask an adviser before selling there direct.

Mexico has a games-specific item. KPMG reports that its 2026 reform added an 8% excise tax (IEPS) on violent or adult-rated video games, including digital access from abroad, and that a decree of 31 December 2025 waives it in full provided the tax is not passed on to consumers. We have not checked the official gazette; ask a Mexican adviser before pricing.

What a merchant of record changes

With a reseller MoR, the player buys from the MoR, so the MoR is the one registered, charging and filing in each market on its list. You sell to the MoR, and your tax on that sale follows business-to-business rules, covered on merchant of record accounting.

Doing it yourself has a tooling cost on top of staff time. Stripe Tax Basic lists 0.5% per transaction where you are registered, and Stripe Tax Complete, which adds registrations and filings, starts at £70 a month for two registrations and four filings a year, as shown to a UK visitor on 20 September 2026. Those prices cover software, not the adviser who answers the taxability questions above. The other line items are on hidden fees, and the full comparison on merchant of record vs payment service provider.

An MoR also sets how tax appears in your prices. With tax added on top, the player in Italy pays more than the player in Germany for the same $10 pack, and you receive the same amount from both. With tax included, every player pays the same price and your share varies by country: a $10 VAT-inclusive price leaves $8.33 before fees after UK VAT at 20%, and $8.20 after Italian VAT at 22%. If your price points are round numbers that include tax, model the lower figure.

Dates that changed the rules

Before your first web sale

1. Rank your top 15 countries by player spend and write down, for each, who will be the seller and whether that party is registered there.
2. If you use an MoR, get its current list of tax registrations and compare it with that ranking. Ask what happens to sales in countries it does not cover.
3. If you use a payment service provider, register for the non-Union OSS (or the Union OSS if you are in the EU) and UK VAT before launch, and set a monthly check of US sales by state against each state’s threshold.
4. Capture two items of location evidence at checkout, IP geolocation and card issuing country at minimum, with a rule for conflicts, and store them for 10 years.
5. Build the US taxability matrix for base game, subscription, virtual currency and items, and have a US adviser sign it off.
6. Decide tax-inclusive or tax-exclusive pricing per market, and rebuild the price table with the right amount left after tax.
7. Put the first OSS deadline in the calendar. A return covers each calendar quarter, including a part quarter at the start, and is due by the end of the following month.