Every time I want to buy something on itch, I get the following prompt:
"Due to 2015 VAT MOSS regulations for EU this seller requires evidence of buyer location for purchases. Please provide your billing address to continue." (btw the link is broken.)

Followed by a whole lot of fields for me to enter my full name, full address, city, county, zip code, etc. This is really annoying and tiresome to enter every time, and these fields do NOT get saved between purchases (I'm not saying they should, since that would be privacy invasive for such sensitive information). It also doesn't matter if you choose to pay with card or PayPal, you have to enter it regardless.

It could be really off-putting for first-time itch customers who aren't used to this, especially the more privacy-conscious ones - asking them for their most personal info could be seen as a red flag.

Is all of this really necessary? How do other stores avoid forcing their EU users from doing this kind of thing? Could we somehow get rid of this prompt?

Why is this information not required when we're paying for a "pay what you want" game, but IS required if the game has a minimum cost? Is it because it's considered a donation and somehow the laws are different?

Yes.

It's also what other stores like GOG and Steam need, and I don't think they're "breaking the law" by not requiring addresses.

GOG is based in Europe. I don't know what Steam does to get around this requirement, if it's true.