In amongst the post I wrote the other day about Books, eBooks and eBook readers I said

Another item that concerns me is the cost of eBooks. I often buy novels from bookshops as part of a 3 for 2 offer or similar. Looking at the iBooks store I was amazed to discover that for one book I was considering, it actually cost more than it would to walk into a bookstore and buy it at full RRP. This doesn't seem right to me somehow. And it doesn't mean that I value the author's work any less, just that there is a lot less delivery costs involved with getting the content to me, and I expect to see the benefit of some of that.

What I hadn't appreciated until jonnynexus retweeted Press Futuist's tweet

Why UK ebooks aren't much cheaper than print in <140 characters. VAT @17.5% on ebooks (not print) outweighs manufacturing savings of c. 12%.

was the VAT aspect.  The HMRC has a lovely page about Zero-rating of books etc which has some rather delightful and comical definitions of what constitutes a zero rated book, for example

These normally consist of text or illustrations, bound in a cover stiffer than their pages. They may be printed in any language or characters (including Braille or shorthand), photocopied, typed or hand-written, so long as they are found in book or booklet form.

but it would appear to be the following paragraph which differentiates the supply of an eBook rather than the book itself

The supply of text by electronic transmission, via the internet, or similar means is also standard-rated. Such supplies are of services, not of goods, and different VAT rules will apply to them (such as those on the place of supply of services – see Notice 741 Place of supply of services.

So, you pay VAT for the service of being able to download the book, rather than the book itself.  The content is still zero-rated (I think!).

Interesting stuff!