Are digital games taxed differently than other software for VAT/GST/similar taxes?

Thanks for the explanation! Do you know if there's any difference for mobile games vs PC/console games in terms of VAT classification? I've heard mobile apps sometimes get treated differently.

Mobile games generally follow the same classification as other games for VAT/GST purposes. The delivery platform (mobile vs PC/console) typically doesn't affect the tax classification - it's more about the nature of the product itself rather than how it's delivered. Where you might see differences is in how the app stores handle tax collection. Apple and Google have their own tax compliance systems that might simplify certain aspects for developers, but the underlying tax rates and classifications are typically governed by the same rules regardless of platform.

How does it handle different types of game monetization? Like if we have base game sales plus DLC and in-game currencies? Does it break those down separately?

I'm skeptical about these AI tax tools. Does it actually give jurisdiction-specific advice? I've been burned before by generic tax software that doesn't account for local nuances.

It actually does break down different monetization types separately. The system has different classifications for base game sales, downloadable content, virtual currencies, and subscription services. This was super helpful because some jurisdictions treat virtual currency purchases differently than direct digital product sales. Regarding jurisdiction-specific advice, that's actually where it really shines. It doesn't just give generic rules but shows you the specific regulations for each country and region. I was particularly impressed with how it handled the EU VAT rules versus Asia-Pacific GST requirements, highlighting exactly where the treatment differed.

Wait, how does this actually work? Do they just call the tax office for you? Couldn't I just do that myself?

Yeah right. No way they get through to tax authorities that quickly when I've spent literal hours on hold. Sounds like a scam to me.

They use a system that navigates the phone trees and holds in line for you. When an actual representative is reached, you get a call connecting you directly. It's basically like having someone wait on hold for you. Yes, you could technically do it yourself if you have hours to waste on hold. That's exactly the point - most of us don't have that kind of time to spare, especially when dealing with multiple tax jurisdictions.

Do you know if there are any resources that compile these different classifications by country? Trying to manage this manually is becoming a nightmare for our finance team.

There isn't a single comprehensive resource I'm aware of that covers all jurisdictions and keeps up with the frequent changes. KPMG and Deloitte publish digital service tax guides that cover some of this, but they're not gaming-specific. Your best approach might be to use a digital tax compliance platform that specializes in this area. The major ones keep their classification systems updated as regulations change, which is honestly the only practical way to manage this at scale unless you have a dedicated tax team for each region.

In most US states with marketplace facilitator laws, if you're selling through Steam, Epic, or similar platforms, they should be handling the sales tax collection and remittance for you. For your direct sales, you'd need to handle that yourself based on your nexus. Outside the US, it varies a lot. In the EU, for example, marketplaces often have to collect VAT on behalf of sellers, but there are thresholds and exceptions.

Thanks for the clarification! That's helpful for the US side of things. I guess I'll need to check with each individual marketplace about international requirements. The documentation from some of these platforms is not very clear about who's responsible for what.

That's a really good point! We actually do have some games with random reward mechanics. Do you know which countries have specific tax regulations for these features? I know there are gambling regulations in some places, but wasn't aware of specific tax implications.

Belgium, the Netherlands, and Japan have been at the forefront of regulating loot boxes, though their approaches differ. Belgium has essentially classified them as gambling, which has both regulatory and tax implications. Japan has specific regulations for gacha mechanics. South Korea has a complex system where certain game mechanics can trigger different tax classifications. China has restrictions on these features that don't necessarily change the tax classification but do impact how you can monetize. The UK is currently reviewing these mechanisms, and there's a possibility of new classifications coming. The tax implications often follow the regulatory ones - once something is classified as gambling or a regulated activity, different tax rules typically apply.

This is really helpful! I hadn't considered how the ongoing service components might affect classification. Our games do have multiplayer servers and we push regular content updates - does this mean we need to split our revenue recognition for tax purposes, or is it more about how we report the overall product category? Also, regarding the DST thresholds you mentioned, do you know roughly what those revenue levels are? We're growing pretty quickly and want to make sure we're prepared if we hit any of those triggers.

Great question about revenue splitting! In most cases, you don't need to split the revenue for tax purposes unless you're specifically charging separately for different components (like base game + subscription fees). If customers pay one price for the complete package including servers and updates, it's typically treated as a single digital product sale. However, if you have separate charges - say a $60 base game plus a $10/month subscription for premium features - then yes, you'd likely need to treat those as different revenue streams with potentially different tax treatments. Regarding DST thresholds, they vary significantly by country. France's DST applies to companies with global digital revenue over €750M and French digital revenue over €25M. The UK's DST has similar thresholds (£500M global, £25M UK). Italy and Spain have comparable levels. Most smaller game companies won't hit these thresholds directly, but as I mentioned, you might be affected indirectly through your distribution platforms. The EU is also working on a unified DST that could replace individual country versions, but implementation keeps getting delayed. Worth monitoring if you're doing significant business in Europe.