I'm EU based company and sell products worldwide. All our product prices shown are final and include tax (VAT).
So for example, if the product price is 20€, then a customer from Germany pays €16.67 for the product plus €3.33 tax (20%), whereas the customer from the US pays €20 for the product and 0% tax. The advantage of having taxes included in the price is that all customers see the final price.
This kind of practice is quite common among web shops (at least EU based), and even some articles explain the same way (for example Sufio.com articles)
But I can't find an answer, is it legal from our side? Or is it against the law? Or is it in between, a grey area?
I recently had a situation where a customer outside EU demanded that he has the right to get the VAT back. That would have been right if we would have charged the tax. Although our invoice indicates that the tax was 0%, then he said that it is his right and it's against the law (to treat him differently?). So he believes that he should be treated like anyone else, and pay the same amount as EU based customer minus taxes. That got me confused and to prevent such possibilities in the future, I would like to know if this is legal from our side, to have the same final price to every customer (regardless if we pay the tax or not from that specific order).
Maybe someone has already searched/asked and got some answers if this kind of practice is legal at all?
Thank you all!
Nick here from Shopify.
Great question, taxes can be complicated even on the best of days. One thing I wanted to say from the outset is that we at Shopify are not tax experts by any means, and we do suggest consulting with your local tax office or a professional accountant. Either of those would know the tax laws best for your country/ area/ region and would be able to guide you.
Shopify has some very helpful guides on taxes for non-USA countries which you can see here and should you need it a guide on tax overrides and exemptions. The tax overrides and exemptions could be for US customers should it be applicable. This is something I would check with your local tax office or an accountant first though.
Hope this helps and guides you in the right direction for best next steps.
All the best, Nick
Thank you for the answers! I consulted with my accountant as well, and she said that it shouldn't be a problem. And to be extra sure, I should state the tax information somewhere (for example in FAQs or something). Then it shouldn't be a surprise to any customer who later thinks that he/she has the "right" to get tax deducted (from 0% VAT invoice).
Great to hear you spoke to an accountant about that and got it confirmed. The accountants and local tax officers are the real experts and know best. And that is a fantastic idea to mention it somewhere on your site and covers you here.
Best of luck.