International selling - managing Taxes and duties in EU , US and UK

[pallavi0301]

Hi All,

I am an e commerce brand based in Australia and have received a few orders and enquiries from customers in UK, France and Spain. I want to start running facebook ads and start selling in these countries but have no idea about the following:-

1) Should I add any apps or figure out a way to include import duties and taxes at check out for those customers or let them pay on their own on arrival ? Should I just mention the same at checkout page / cart page ? I want to have happy customers. Are there any helpful apps ? 

2) I am already using currency converter on my store . I dont charge taxes on products in Australia. Do I need to start charging that to sell in UK/ EU / US ? How do I do that from a single store ? 

3) Will I need to be registered as a tax payer in these countries where I sell ? Like for VAT etc ? Or is that only applicable if I cross a certain sale threshold in amount ? I understand Australia has tax treaties with most countries. 

It is so overwhelming to sell outside australia , and I want to remain compliant , but there is just so much potential that I dont want to miss out. Esp with the holiday season. 

Please help

[BreezyFile]

Hey, I can't answer all these questions, but I can give you some guidance on the US sales tax portion of this.

When Do You Need to Collect Sales Tax in the US?

In the US, you need to collect sales tax if one of the following conditions is true:

1. Physical Presence: You have a physical presence in the state (yourself, an employee, a warehouse, inventory, storefront, etc.).

2. Economic Nexus: You cross the economic nexus thresholds set individually by each state. You can review these thresholds in Shopify's admin under Settings > Taxes and Duties > Review Insights (it's in the top square about US Sales Tax). These thresholds usually require either:

   • A minimum of 100 individual transactions in a specific state within a 12-month period, or
   • $100,000 in sales in a specific state within a 12-month period.

If either of these conditions is met, you must register with that state. For example, if you sell $100,000 of product in New York or have an employee there, you must register with the state of New York and begin collecting sales tax on any shipments to New York. Conversely, if you ship to California or Florida and haven't crossed the nexus thresholds there, you won't need to collect sales tax for those states.

Setting Up Sales Tax in Shopify

To enable tax calculations for New York (and the same process applies to the UK and EU), follow these steps:

1. Go to Settings > Taxes and Duties.
2. Click United States + Add Region.
3. Add New York.

From that point forward, whenever you ship to New York, you'll collect sales tax. When shipping elsewhere, no tax will be collected.

Filing Sales Tax

When it’s time to file, go to Analytics > Reports > United States Sales Tax Report and filter by the appropriate date range for your reporting period. Click into the New York report to assist you in filing your taxes with the state on their website.

Sales Tax License and EIN

One important point to note is that once you've determined you have an obligation to collect sales tax in a state, you need to register for a sales tax license. This will also require you to federally register your business to obtain an Employer Identification Number (EIN), which the state will use to identify you. To obtain an EIN, you'll need to file an 1120F with the federal government, stating various details about your foreign business and affirming that you do not owe any income tax. Once you have your EIN, you can register with the states and start collecting taxes.

Summary

In summary, if you don't have a physical presence in a state and haven't made any sales there, you don't need to do anything regarding US sales tax. Once you cross the thresholds or establish a physical presence, you'll need to become compliant.

I hope that helps! Let me know if you have any questions.

[TeemuEAS]

Good questions Pallavi0301! 

Shopify limits duty calculation to Advanced and Plus plans. You can check if your products are applicable for duties for example here: https://ec.europa.eu/taxation_customs/dds2/taric/taric_consultation.jsp?Lang=en. Note that duties are applied for over 150€ intrinsic value shipments in EU and £135 in UK. There are ways to take collect duties at least partially, but it depends on how badly they would affect your margins. Taxes are payable for all values. Sales value thresholds have been abolished in 2021 for distance sales to European countries. 

If your products fall below the Low Value Consignment thresholds (which are the same as duty thresholds), you can take advantage of the simplifications by registering for UK VAT and EU IOSS. UK VAT does not obligate to use a 3rd party for the registration, but we highly recommend having an automated service in place for report filing as the penalties are disproportionate for not handling everything correct and in time. EU IOSS requires an Intermediary, a role which EAS is happy to take. 

Store configuration does take some effort and research, which is why we handle the configuration on your behalf as our customer. it is included in our monthly fees, no extra charge. You will have a template on how to handle the configuration as a result - in addition to collecting correct taxes of course. We can have in compliant in EU in a few days, UK registration takes a bit longer. 

Our application can be viewed here: https://apps.shopify.com/eas-eu-compliance