Dropshipping from China to USA, billing from company in EU, Slovenia

Solved
dobenec
Tourist
4 0 1

Hi,

 

we are planning to start a dropshipping business, starting with establishing a company in Slovenia, EU. Plan is to dropship from China to the USA. What we'd like to know is;

  • What is the tax policy in that case? Do we invoice with or without VAT/taxes or do we have to charge tax (if so, in which country)?
  • Is there a need for any special certificates, tax numbers, customs processes, or any other document?

 

Thank you very much for your help!

0 Likes
Victor
Shopify Staff
Shopify Staff
865 76 218

This is an accepted solution.

Hi @dobenec,

Thank you for reaching out with your question. Whilst Shopify cannot give direct legal advice on matters of taxation, I'd be happy to offer some general information that I hope will be of some use to you.

In terms of selling to the USA, you most likely will only need to charge sales taxes to customers if you have a tax nexus in one or more states. A tax nexus can be physical, such as having employees, offices or housed inventory in a state, or economic, where you meet a minimum revenue threshold and/ or a minimum number of orders from a specific state.

If we take a look at California, for example, having a physical location, any employees, an affiliate, or a presence at a tradeshow in the state could constitute you having a physical tax nexus, and you would only be deemed as having an economic nexus in the state if you had a taxable annual revenue of $500k or more generated from sales to Californian residents. As you are based in Slovenia and shipping products from China, you likely would not meet any of these criteria, and would therefore not be required to charge sales taxes to customers there. This would likely apply to the other 49 states too, but you'd want to check and ensure that you do not have a tax nexus in any of them before you sell there. I'd suggest checking out this state-by-state tax nexus breakdown on TaxJar, which is a great resource.

As you are based in Slovenia and the European Union, you'll want to refer to your nation's and the EU's VAT laws to gain a better understanding of your responsibilities. However, I did take a look at europa.eu to find out more information, and the following information was provided when I entered in that you'd be selling goods outside of the EU's borders:

If you sell goods to customers outside the EU, you do not charge VAT. However, you may still deduct the VAT that you paid on related expenses, such as for goods or services purchased specifically to make those sales.

I hope this information is of some use to you, but I would encourage you to do your own research into your tax obligations, and to consult a tax professional if you are still unsure. Please let me know if you have any further questions.

Kind regards,

Victor | Shopify Social Care

Victor | Social Care @ Shopify 
 - Was my reply helpful? Click Like to let me know! 
 - Was your question answered? Mark it as an Accepted Solution
 - To learn more visit the Shopify Help Center or the Shopify Blog

dobenec
Tourist
4 0 1

Hi @Victor,

 

thank you very much for your answer & effort, this is really very helpful!

 

Kind regards

GaryBusey1
Excursionist
30 0 13

Hi Victor,

Can I ask a question.

We are dropshipping from Canada, but sell to USA, Aust and NZ.

Products are coming from China.

My understanding is because i am not selling in Canada I do not charge taxes. And because I dont have nexus or anything in the states I dont collect tax here or Aus.

And I only have to report income taxes.

Can you confirm I have this correct?

 

Thanks

 

0 Likes
Victor
Shopify Staff
Shopify Staff
865 76 218

Hi @GaryBusey1,

Shopify cannot provide direct advice when it comes to confirming what your tax obligations are; this of course varies by region and the individual circumstances of each merchant. It's true that if you do not have a physical location or tax nexus in the country or countries you are selling to, you may not be required to charge sales taxes to your customers there, but countries and regions do also have distance-selling laws that need to be considered. I would recommend referring to the tax legislation of the countries you have mentioned and seeking out help from a dedicated tax professional if you are still unsure of your tax obligations.

Kind regards,

Victor | Shopify Social Care

Victor | Social Care @ Shopify 
 - Was my reply helpful? Click Like to let me know! 
 - Was your question answered? Mark it as an Accepted Solution
 - To learn more visit the Shopify Help Center or the Shopify Blog

0 Likes