Thread by @rafaelcodes

I have closed my GitHub sponsors account.

It's a bit of a shame, I find the program promising as it picks people up where they report issues. And it has shown that it can even support an open source developer's livelihood. changelog.com/posts/i-just-h…

Unfortunately, illegally so.

How so? Until now I did not offer any rewards for sponsorships but planned to introduce them. In this context, I asked GitHub how VAT is handled for sponsorships. It is not. GitHub's receipts even mention VAT, but GitHub says that sponsorship is not applicable.

GitHub says they consider themselves a payment processor, not a merchant of record and that that's part of the terms you agreed to. Legally, this makes VAT processing your responsibility. And VAT is due on any exchange, but not when receiving money without a counter performance.

So why not just pay VAT? The problem is that you need to pay VAT in the country that you are selling the service to. And this requires you to validate your customer's location, typically by asking for a billing address.

But GitHub won't share this data with you.

Instead, GitHub recommends to check the optional location in the profile of the people you receive sponsorship from. This is of course not good enough. And furthermore, you must always demarcate the VAT you charge someone in an invoice, what GitHub does not do.

To make things worse, if you offer a 'digital good' for a sponsorship, for example access to a streaming a video course, many countries apply special rules for VAT handling. When selling in the EU, you'd need to store two data points for any customer you sell to.

Again, GitHub is not handling this for you and is neither giving you access to the information only they have. So from a legal point of view, you cannot really sell digital services via GitHub.

And there are more issues. Even if I tracked down any sponsor, I would still not have demarcated the VAT on the invoice that GitHub sends. And GitHub neither gives you proper documentation for your own records. Any audit would be a nightmare.

If you are using GitHub sponsors for coffee money and don't run a business, I don't think you should worry though. And I think that tax authorities will likely come for GitHub at some point, but not for the people using the platform.

Why I think that? Because it happened to Patreon which now charges VAT. And to other digital service platforms like OnlyFans. I am honestly a bit baffled that a Microsoft-owned global, billion dollar cooperation handles VAT so naively.

They can of course declare themselves to not be the merchant of record, but if they act like one - and I think they do quite obviously - and if any tax authority in the world considers them to be one, they will still be the ones being charged with VAT claims and penalty taxes.

But for me personality, I dislike getting near such gray areas. VAT in international software consulting is a headache as it is. And I never want to get near B2C transactions or manually selling digital services. And that's why I am out, at least until GitHub gets this fixed.