Sales tax - Selling from Japan to overseas customers

Accounting & Taxes
1

Hi!

We are planning to start an online store to sell snack and noodles from Japan to international customers.

We’ll register the business in Japan, and we’ve buyers from the US, Canada, UK, and major countries in Europe.

We’re a little bit confused what would be the sales tax liability in this situation.

For example:

  • Say the product price is $50 including tax.
  • A US customer purchase the product.
  • Would the sales tax be based on Japan’s tax, or US tax? Would we file the sale tax in Japan?
2

Hi @Jacky121 ,

These are really great questions, taxes can be difficult to navigate even on the best of days.

The first thing I would recommend you to do is to speak to a local tax official or accountant in your region to see which taxes you need to pay or might be liable for. I did recently write a US sales tax FAQ which might provide some more information for the US sales tax side of things, but outside of that, I am not completely sure. There’s a section for international stores outside the US and how they might be liable:

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With regards to Canadian and UK sales tax liability for international merchants, I recommend doing some research and speaking to your local tax official. I can’t stress that enough. Shopify also has a guide for setting up taxes for stores based out of Japan which can be seen below:

Hopefully this helps and answers your question. How’s the rest of your store set up going?

3

Hello @Jacky121

Since your business in Japan, I highly recommend you to contact local tax office to obtain more information to make sure every process is done correctly. Because you pay Japanese VAT in Japan when buying your items from suppliers, you’ll be able to get JP VAT refund from your tax office in Japan. It’s better to have an accountant for these paperwork! (and this work only if you have tracking number of orders exported)

If you want to sell taxes included, you’ll need to ship with the incoterm DDP (Delivery Duty Paid). So it will bring you other fee to pay to the carriers.
*Be careful: From Japan, you can not ship DDP with Japan Post. It has to be with DHL, Fedex or UPS.

Besides the VAT from the delivery country, you’ll have to support DDP processing fee from the carrier (it could be 800 to 2000 yen depending on the carrier). If you want to ship to Europe, this might be more complicated. You’ll need to register for an IOSS number, charge for VAT at checkout to your customers. You’ll need a different number for the UK as well. You can see more details on our blog.

Checklist for international shipping

Frankly speaking, if you sell “not too expensive” product, I believe it’s better to not charge for VAT on your store and have your customers being in charge of paying for VAT and other customs fees at delivery. This is the most common process for most international sellers. To answer specifically to your questions with your example:
When shipping to the US ＝＞ if the order is less than 800 USD, the customer in the US will not have to pay any taxes. So you don’t really need to think about it.

If you ship from Japan, please try Ship&co application. Our app is Japan-based (supporting several languages Japanese, English, Korean, Chinese, and French) but we do support major carriers like DHL, FedEx, UPS, and of course Japan Post to make an international shipment from Japan. It requires you only few steps to set up the account and start our services for free. We offer 14-day free trial. If you already have your store ready and your carrier account ready, you can register both to Ship&co and get started. For FedEx, we have special discount for Ship&co users. Please dive in to this campaign page for more info. For Japan Post, you don’t need an account to make a shipment in Ship&co.

Feel free to reach out to us via hello@shipandco.com if you want to know more information.

Happy to help!