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B2B vs. B2C Customers

docs101 supports two distinct customer types optimized for different business models. Understanding when to use each type is important for proper invoicing, VAT compliance, and financial reporting.

When to Choose B2B​

Use the B2B (Business) customer type for:

  • Business Transactions: Sales to other companies, corporations, or professional entities.
  • International Trade: Cross-border transactions within the EU or with non-EU countries.
  • VAT ID Holders: Customers who have a valid European VAT identification number.
  • Reverse Charge Scenarios: Transactions where the reverse charge mechanism applies (B2B services within the EU).
  • Organization Names: Customers with distinct business entities or legal structures.

B2B Example Use Cases​

  • Software license sales to a German technology company.
  • EU cross-border consulting services (reverse charge applies).
  • Wholesale goods to a distributor across borders.
  • SaaS subscriptions to international businesses.

When to Choose B2C​

Use the B2C (Consumer) customer type for:

  • Direct Consumer Sales: Transactions with private individuals or end consumers.
  • Retail Purchases: Small transactions or one-off purchases.
  • Domestic Consumers: Private individuals without business registration.
  • No VAT Complexity: Standard VAT applies without reverse charge considerations.
  • Simplified Documentation: Basic name and contact information only.

B2C Example Use Cases​

  • E-commerce sales to individuals.
  • Domestic retail transactions to private buyers.
  • Professional services to private consumers.
  • Product sales to non-business customers.

Key Differences​

VAT ID Field​

AspectB2BB2C
VAT ID FieldAvailable (for compliance)Not applicable
ValidationCan validate via VIESNot validated
Reverse ChargeEligible when valid VAT ID from different EU countryAlways standard VAT

Invoicing and VAT Handling​

B2B Invoices:

  • May include VAT ID and validation status.
  • Subject to reverse charge rules for B2B services within the EU.
  • Cross-border transactions may show 0% VAT when reverse charge applies.
  • Exemption codes appear on the invoice when applicable.

B2C Invoices:

  • Always show the full VAT amount charged.
  • Standard VAT rates apply (country-specific).
  • No reverse charge mechanism.
  • No exemption codes.
  • Simpler tax treatment.

Address Requirements​

B2B:

  • Organization name typically included on invoices.
  • Both billing and shipping addresses often needed.
  • Business address format (company street address).

B2C:

  • Personal name only (no organization).
  • Single residential address typically sufficient.
  • Simplified address structure.

Reverse Charge Eligibility​

The Reverse Charge mechanism (EU Directive 2006/112/EC) applies when:

  • The customer is a B2B customer with a valid VAT ID.
  • The customer is located in a different EU country than the seller.
  • The VAT ID has been validated via VIES.

When reverse charge applies, VAT responsibility shifts to the buyer. The invoice shows 0% VAT with a reverse charge statement.

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B2C customers are never eligible for reverse charge. Standard VAT always applies.

Practical Examples​

Example 1: EU Cross-Border B2B with Reverse Charge​

Scenario: You provide web development services to a German GmbH from another EU country.

Setup:

  • Customer Type: B2B
  • Customer Location: Germany
  • VAT ID: DE123456789
  • VAT ID Validated via VIES: Valid

Result:

  • Invoice shows 0% VAT (reverse charge applies).
  • Invoice includes reverse charge statement.
  • The German buyer is responsible for reporting the VAT.
  • VIES validation provides the audit trail.

Example 2: Domestic B2C Retail Sale​

Scenario: You sell consumer products to a private buyer in your home country.

Setup:

  • Customer Type: B2C
  • Customer: John Smith (private individual)
  • No organization name
  • Standard billing address

Result:

  • Invoice shows full VAT at standard rate.
  • Simple tax treatment.
  • Standard invoice format.
  • No exemption codes or reverse charge logic.

Switching Customer Types​

If you create a customer with the wrong type, you can edit and change it. However:

  • Changing from B2C to B2B may require adding a VAT ID and running VIES validation.
  • Changing from B2B to B2C means any reverse charge settings will no longer apply.
  • Consult your tax advisor if making changes that affect historical invoices.

Compliance Considerations​

B2B Compliance​

  • Always validate VAT IDs before relying on reverse charge eligibility.
  • Keep VIES validation timestamps for audit purposes.
  • Document reverse charge eligibility in your records.
  • Review EU VAT regulations for your service types.

B2C Compliance​

  • Ensure the correct VAT rate is applied (country and date-specific).
  • Keep clear records of consumer transactions.