Does VAT tax apply to dropshipping in US, Canada, and UK?

AgonMedia
Visitor
2 0 0

I reside in Norway, and I am engaged in dropshipping through Cjdropshipping. This entails the products being both warehoused and dispatched from a location outside the European Union (specifically, they are stored and shipped from China). I have come across information suggesting that if I sell within the EU, I am obligated to pay VAT taxes on my revenue. However, I have also heard that if I exclude European countries from my target market and focus solely on the United States, I may not be required to pay VAT, as the products are neither stored nor shipped from an EU nation or Norway.

My inquiry is whether this information is accurate. Additionally, I am curious about whether the same principle applies to Canada and the United Kingdom, particularly considering that the UK is no longer a member of the EU.

Replies 3 (3)

TeemuEAS
Shopify Partner
120 1 22

Dear AgonMedia, 

 

VAT is paid on all shipments to European countries, either by the end-customer or by you. Exactly as you said. The first option is simply poor customer service and will result in increased returns and not returning customers. 

 

You do not have to exclude the areas, however. You should take the taxes into account in your pricing model so you will be able to collect them without committing a murder on your margins. 2 options: 

 

Inclusive pricing: you will have a flat price (or slightly varying) for Europe. VAT will be calculated down from the price, depending on the country. The average is 21%, but the range is 17 - 27 with the biggest markets near the 20% mark. 

 

Exclusive pricing: more suited for GST markets like US. They are more accustomed to slight increase at checkout, it is in the region of 5-8%. Compare that to the hike Europeans would face! They would simply drop the cart and run away screaming never to return. 

 

UK has adopted the European models. EU + UK is over 500m very affluent customers and you really should not overlook them. Especially with help from teams and apps like https://apps.shopify.com/eas-eu-compliance

You really don't have to break your back to be able to sell to the regions, EAS will configure your store for you. 

 

Do familiarise yourself with the Markets section of Shopify. It is a powerful tool, but takes some effort. EAS can remove some / most of it, but you should have basic understanding of how it works and what is possible. 

EAS EU & UK Compliance app is a fully automated European VAT solution for Shopify.
AgonMedia
Visitor
2 0 0

So does this mean that If I stop selling to the EU, that I wont have to pay VAT? 

TeemuEAS
Shopify Partner
120 1 22

VAT is not applicable on revenue, it is applied on sales to end-consumers and B2B in the same jurisdiction. You can and should adjust your prices to include taxes, so increase the price by the approximate amount of VAT. Then you would collect the taxes. 

 

But in short, yes, if you do not sell to a VAT country, there is no VAT to be paid. 

EAS EU & UK Compliance app is a fully automated European VAT solution for Shopify.