Based in UK, selling in the US - Tax Help Required

[SettledValue]

Hi there Guys 🙂

We have just recently launched our first Dropshipping store. We are based in the UK, However we will be targeting and making sales Primarily in the USA.

That said, how do we go about setting up Store Taxes? For example, Joe buys a Hoodie from us. Joe lives in Austin,TX. Since we dropship, Joe's product goes directly from the alixexpress/oberlo supplier to Joe himself. So it never enters UK territory, never passes through our hands. I would assume that we'd have to pay taxes for the USA, since that's where the purchase was made. What about us though. Do we have to set up any tax for the UK considering we are operating from here (like income tax or something akin to that - sorry, not a tax savvy person, hence the question). Anyone with the same situation as ours that made it work, and if so, how? 

We'd really appreciate an answer to this, so that we can operate without any future issues with our revenue.

Thanks in advance 🙂

Regards

Rob and Mac

[Nick · Accepted solution]

Hi, Rob and Mac, 

Nick here from Shopify. 

A really good question as taxes are difficult to figure out even on the best of days. The first thing I would always suggest is visiting your local tax office or a professional accountant about this to make sure you charging the correct taxes for your business. 

From what you have asked, I would lean towards the customer paying USA taxes as the supplier is based there as you mentioned. If you sent the product from the UK, then there would more than likely be an import duty tax via customs. But I am not a tax accountant by any means and can't stress visiting your local tax office or an accountant enough to be 100% here. 

Shopify also has a very helpful guide on how to set up taxes if you are not in the USA which might be some use to you here.  

Hope this helps and don't hesitate to ask to any other questions should you have any. 

All the best, Nick

[Nick · Accepted solution]

Hi, Rob and Mac, 

Nick here from Shopify. 

A really good question as taxes are difficult to figure out even on the best of days. The first thing I would always suggest is visiting your local tax office or a professional accountant about this to make sure you charging the correct taxes for your business. 

From what you have asked, I would lean towards the customer paying USA taxes as the supplier is based there as you mentioned. If you sent the product from the UK, then there would more than likely be an import duty tax via customs. But I am not a tax accountant by any means and can't stress visiting your local tax office or an accountant enough to be 100% here. 

Shopify also has a very helpful guide on how to set up taxes if you are not in the USA which might be some use to you here.  

Hope this helps and don't hesitate to ask to any other questions should you have any. 

All the best, Nick

[SettledValue · Accepted solution]

Hi there Nick,

Thanks for your reply. Since posting this we actually got in touch with our accountant so I figured I'd share what information we got.

Firstly, this is dropshipping. That of course means the goods are not actually coming from us, nor the UK what so ever.  So in all hopefulness that rules out customs.

According to our accountant, in the scenario described above (UK based, dropshipping directly to US market) the only tax of concern for you is the Income tax that you pay since you set up your own company to run the store. According to our accountant this applies once your company is established, which you have time to do for the first 3 months after the date of the first purchase made in your store (ergo, the date you made your first revenue.)

Also, thanks for the link. It seems the information there fortifies what i have previously written. Only time you'd charge taxes in this scenario is for the goods being sold inside the EU, but the US generally seems to be covered from the consumer's side.

Again thanks, and have a great day. 🙂

Mac

[Nih2407]

Hi,

Very useful information. How do you deals with insurance for your UK based business.

[CharlesVal]

Thanks Mac,

Sorry to bump an old thread but this is the exact answer I was looking for.

Can you please clarify one thing; Who pays the sales tax in USA then? Will the customer in the US has to pay something extra once he gets the product? (I don't plan to add tax to the price)

If the customer will have to pay again then it won't look good to my brand.

[Rieka]

Hi,

Did you ever find out the answer to this?

Do we, as retailer, have to charge sales tax to the customer and, if so, where do we pay it - surely we have to be registered somewhere to do that? The whole US sales tax thing has got me so confused it is stopping me moving forward with my plans to dropship in the US.  Any help appreciated.

Claire

[Nick]

Hi Mac, 

Thank you so much for getting back here and sharing your findings from your accountant. Hopefully, some others will see this information and find it valuable also, so it is much appreciated. 

Glad to hear you know what your tax charges are now and moving forward and I wish you the best of luck with it all. 

Cheers, Nick

[Artenil_Rakipaj]

Hi Mac,

Could you please give me your accountant's contact information as I am struggling to find one that understands this.

I would be very grateful.

Artenil

[awaisbajwa969]

Hi There,

while research for USA business marketplaces for my business I got one website article. and hope this article is too useful to increase sales and profit as well 

[Nih2407]

Hello,

Thank you.

[J4C2Y]

I haven't got any information to solve this problem, however I would like to ask a question on how you are operating. I am 16 and is based in the UK I will be starting and setting up a dropshipping business in the near future. The problem that I face is that my audience that I will be selling to is the US even though i am based in the UK so I just wanted to know any information I should be aware of when doing it this way.