# How to Sell Digital Products: Tax, Refunds, Platforms

> To sell digital products, pick something you create once and deliver automatically, such as templates, courses or software, and sell it through a merchant of record or your own shop. The hard part is tax and consumer law: EU consumers pay VAT where they live, US states set their own sales tax rules, and refund rights lapse only with explicit consent.

- URL: https://ohne-startkapital.de/en/business-models/sell-digital-products/
- Language: en
- Updated: 2026-10-19
- Publisher: Ohne Startkapital (OnlineBuilders LLC, https://onlinebuilders.biz)

Making a PDF costs nothing but time. That is why digital products get pitched as the way to start without money. It is half true. The other half is VAT in 27 EU countries, a refund right you have to switch off properly, and the question nobody likes: how will buyers find it?

Sort those out first and you avoid back taxes and angry customers later.

## What you can sell, and the work each type creates

Roughly five groups. They differ less in technology than in how much work they create after the sale.

| Product | Work before launch | Work after each sale | UK VAT rate if registered |
|---|---|---|---|
| E-book or guide | Writing, layout, cover | Low | 0 % |
| Templates (spreadsheets, contracts, designs) | Low to medium | Updates when rules change | 20 % |
| Video course | High | Student questions, hosting | 20 % |
| Presets, fonts, graphics, stock photos | Medium | Low | 20 % |
| Software, plugins, apps | Very high | Support, maintenance, security | 20 % |

UK e-books have been zero-rated since May 2020, in line with printed books. Germany applies its reduced 7 percent rate. Courses and templates do not get that treatment in either country, so be honest about what you are selling.

Software is the outlier: the most work before and after launch, and the best shot at recurring revenue. If you have a software idea and do not build it yourself, you need a partner for [software development](https://onlinebuilders.biz/solutions/software-development), and without a budget that usually means giving away equity.

## Platform, merchant of record or your own shop

The most important decision is not the product. It is who legally sells it, because that decides who deals with tax, receipts and refunds.

**Three ways to sell a digital product**

| | Marketplace | Merchant of record | Own shop |
|---|---|---|---|
| Who is the seller to the customer? | you | the MoR | you |
| Cross-border VAT and sales tax handled | partly | yes | no |
| You own the customer data | no | partly | yes |
| Fixed costs with zero sales | low | none | shop fee, hosting |
| Fees per sale | medium | higher | payment provider only |

Our own classification. Terms vary by provider, so check current conditions before you start.

Merchants of record such as Paddle or Lemon Squeezy buy your product from you and resell it in their name. You get one payout and one statement. They deal with tax in every country and with thousands of customer receipts. Fees are higher, but they take on the most expensive admin of all.

For a product launched with no capital, that is almost always the right start. Move to your own shop once the fee savings justify the extra work.

## VAT and sales tax across borders

This is where most first-time sellers get caught out.

Start with EU customers. Digital services to consumers are taxed where the customer lives. EU-based sellers get a small exemption: if cross-border sales to EU consumers stay at or below €10,000 a year, they charge their home rate. Above that, they charge the customer's rate, 20 percent in France or 27 percent in Hungary, and report it through the One-Stop Shop. Sellers outside the EU, including the UK and US, get no threshold at all and owe EU VAT from the first sale, normally through the non-Union OSS scheme.

For UK customers, the picture is simpler. UK businesses only have to register for VAT once taxable turnover passes £90,000, according to [HMRC's threshold page](https://www.gov.uk/how-vat-works/vat-thresholds). Overseas sellers of digital services to UK consumers have no such threshold.

The US is a patchwork. There is no federal sales tax. Each state decides whether digital goods are taxable and when an out-of-state seller has to collect. Many states set that point at $100,000 in annual sales into the state, but the rules differ. Using a merchant of record makes this someone else's problem.

**Example: a £19 template sold to a UK customer by a VAT-registered seller**

- Price incl. VAT: £19.00
- VAT included (20 %): − £3.17
- Net revenue: £15.83
- Platform and payment fees (assumed 10 % of gross): − £1.90
- **Left before income tax: £13.93**

The fee is an assumption for illustration. Below the VAT threshold you keep the VAT share, but EU and US rules still apply to sales abroad.

Work with numbers like these, not the sticker price. At £13.93 per sale, £1,000 of pre-tax profit takes about 72 sales.

## Refund rights for digital downloads

Consumers in the UK and EU normally have 14 days to cancel an online purchase, digital content included. Without extra steps, someone could download your course and ask for their money back. The right lapses once delivery starts only if:

1. the buyer expressly asked for immediate delivery,
2. they acknowledged that this means losing the cancellation right, and
3. you confirmed the contract to them in a durable form, such as an email.

In practice that means an unticked checkbox in checkout that the buyer has to tick. Pre-ticked boxes do not count.

Germany, where this site is based, has added one more rule for online contracts: an electronic cancellation function labelled "Vertrag widerrufen", always reachable during the cancellation period, under § 356a of the civil code. If you sell to German consumers through your own shop, you need it. Merchants of record take this on as the legal seller.

## Rights to what you sell

You can only sell what you hold the rights to. Your own writing and photos are straightforward. Templates that bundle stock photos, fonts or icons depend on those licences: many allow use in your own projects but not resale as part of a product. Check every licence before you package anything.

Content generated with AI tools is a grey area. Whether copyright protects it, and how much, is unsettled in many countries. If a product is almost entirely generated, you may struggle to stop copycats.

## First buyers without an ad budget

Digital products with no audience do not sell. This is the part that costs time when there is no money for ads.

Three routes work without a budget. Start from a service: if you already advise clients, you know which questions repeat, and a template or guide can answer them. That is why many people begin with one of the [low-cost service businesses](https://ohne-startkapital.de/en/business-models/start-business-with-no-money/) and productise later. Run a pre-sale: a page with a description, a price and a buy button before the product exists. If nobody buys, you lost a weekend, not a quarter. Publish where your buyers already look, in niche forums, professional groups and search.

Pre-sales fit the logic of [bootstrapping a business](https://ohne-startkapital.de/en/business-models/bootstrapping-a-business/), because customers pay for the creation. Promise a delivery date and keep it.

## Before you launch

Decide three things in this order: whether you need to register, whether to use a merchant of record, and how you will track tax thresholds. If you have a job, you can [start this as a side business](https://ohne-startkapital.de/en/first-steps/side-business-while-employed/) as long as your contract allows it. Your next step: write down the five questions clients or colleagues ask you most often. One of them is your first product.

## FAQ

### What digital products sell best?

Products that save a specific group of people time on a task they repeat: spreadsheets for landlords, contract templates for freelancers, design assets for a particular tool. Broad products for everyone tend to drown in free alternatives.

### Do I need to register a business to sell digital products?

Usually, once sales are regular. In the UK, trading income above 1,000 pounds a year means registering for Self Assessment. In Germany, selling digital products is normally a registered trade.

### What is a merchant of record?

A company that legally buys your product and resells it to the customer in its own name. It collects and pays VAT or sales tax, issues receipts and handles refunds, and pays you your share. Paddle and Lemon Squeezy work this way.

### Can I refuse refunds on digital downloads?

In the UK and EU, consumers lose their 14-day cancellation right on digital content only if they expressly agree to immediate delivery and acknowledge that they lose the right. Without that step in checkout, they can still cancel.

Photo: Glenn Carstens-Peters glenncarstenspeters, CC0 (https://commons.wikimedia.org/wiki/File:Stylus_on_a_graphics_tablet_(Unsplash).jpg)