I've just opened my own store on Shopify after years of selling on Etsy. I'm currently only selling to the UK on my Shopify store as I'm a little confused as to what I'll need to do with regards to the taxes obtained when selling to places like the US. I'm aware that I can set up tax calculators & options to include/exclude based on location of sale, but I would really appreciate if someone could explain what needs to be done once a sale has occurred & tax received. My current understanding is that, providing I have the right settings selected, I make a sale to the US for example, they pay the required tax, which is then included in my pay out. From there, I will then have to pay onwards as required - this is the bit that I'm unfamiliar of - how do I go about this? Is it just as simple as adding in somewhere on my usual annual tax returns? Etsy does all this for sellers, so just wanted to get my head around it before I consider opening my own website up to overseas - I don't want to be met with any unexpected fees and would like to understand what I am doing. Sorry - probably seems really simple and I'm hoping once it's been explained it will be, but I'm a little puzzled by it at the moment, so would appreciate any help and explanations! 🙂
Thank you for your question, and welcome to Shopify! Selling internationally can be a daunting process, especially when it comes to important aspects of running your business such as charging and remitting sales taxes, but we have plenty of resources that can help explain how sales taxes work in other countries.
As you're focusing on selling to the United States, we can focus there first. Sales taxes are charged on the state level and, generally, whether or not you are required to charge sales taxes to US customers depends on whether or not you have a tax nexus in the state the customer is in. A tax nexus can be defined by physical factors, such as you having employees, a warehouse, or an office in a given state. If you are based in the United Kingdom and have no physical prescence in the United States, you would not be deemed as having a tax nexus in any state based on physical criteria.
However, remote sellers may be deemed to have a tax nexus in a state based on economic factors as well. If you meet certain sales thresholds, such as earning over an amount of revenue or making over a minimum amount of sales from customers in a given state, then you may be deemed as having a tax nexus in a state based on these economic factors. Each state will have their own thresholds; you can view more information about each state and how taxes are charged on our US taxes reference page on the Shopify Help Center.
Our reference page will include links to pages from a state's tax authority, and here you should see more about the economic nexus thresholds for a state. For example, if we look at the relevant link for Florida, we can see that the threshold is $100,000 USD for the past calendar year. If you earned over $100,000 in a calendar year from sales to customers in Florida, you would likely be required to register for sales taxes in Florida, begin charging sales taxes to your Floridian customers, and start remitting those sales taxes to the Florida state tax authorities.
The long and short of this is that if you do not have any physical presence in the United States and are just starting to sell products there, you will not need to charge sales taxes to your US-based customers just yet. This may of course change over time if you start making more sales there, and our US tax liability tool will notify you if you are close to crossing an economic tax threshold. Please note that while I have provided this information as accurately as possible, Shopify does not manage your taxes for you and we would always recommend speaking to a tax professional if you are unsure of your obligations.
In terms of selling overseas from a UK tax perspective, this is not something I can advise too much on but sales made to other countries should be zero rated from a VAT perspective; meaning US-based or other overseas customers are not paying UK VAT on their orders. Shopify offers international pricing features for merchants using Shopify Markets, meaning you can charge different prices that are inclusive or exclusive of tax based on the customer's location.
I understand that this is a lot of information, but I hope it helps! Please let me know if you have further questions.
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