VAT on digital web service - service

Question

I have a website where customers can create marketing content. Nothing is downloaded.
Do I charge VAT in the USA / UK for example.
I know that VAT applies on digital downloads but what about an online service?

Answer 1

The USA does not have a value-added tax system, the UK does.
The UK is still part of the European Union (EU), so for the EU's 2015 VAT rules on the cross-border supply of digital services to be applied a few criteria first need to be met:
A digital service is defined as one that does not require human
intervention and needs to be provided via the internet. The service
needs to be automated. An online service can be automated, the rules do not just target digital downloads.
Here are some examples of what services are affected (source: Irish Government Revenue website):
(a) Digitised products, (such as software and changes to or upgrades of
software) services which provide or support a business or personal
(b) Presence on an electronic network (for example, a web site) services
automatically generated from computer, via the Internet or an
(c) Electronic network, in response to specific data input by the customer other services which are automated and dependent on the Internet or an electronic network for their provision
The service offered needs to be cross-border. Services supplied
within one Member State, for example a UK-based company supplying a
digital service to a UK consumer, are not affected. A digital
service supplied by a US company to a consumer in an EU Member State
is affected.
The supply comes under the EU VAT rules if it is a
business-to-consumer (B2C) supply. Supplies to businesses (i.e. when
the customer supplies a VAT number) are not affected.
If it is a B2C supply then the consumer's location needs to be
identified by the supplier so as to apply the correct VAT rate.
Consumers can be identified using non-sensitive data detected in the
transaction such as IP address, credit card BIN number, mobile phone
SIM card code, and billing address. Two pieces of evidence must
match for the supplier to identify the consumer's location.
Once the consumer's EU location is identified then the VAT rate
should be applied to the digital service B2C supply.
Physical supplies to consumers in the EU are, for now, unaffected.
Disclaimer: I work for Taxamo. I would also encourage you to contact your tax advisor for more information specific to your circumstances as the level of detail provided in your question meant I had to make some presumptions.