Tax concerns - UK-based and drop shipping to US only using US suppliers

Accounting & Taxes

Topic summary

UK-based merchant planning to dropship to US customers via Spocket’s US suppliers seeks clarity on US sales tax obligations, especially when the supplier and customer are in the same state.

Guidance provided:

  • Shopify support: UK income tax applies in the UK; US sales tax depends on “tax nexus” (a sufficient connection to a state, e.g., using a warehouse there). If nexus exists, register and collect/remit that state’s sales tax. Advised confirming warehouse locations and consulting state-level rules; shared links and US tax professional resources.
  • Spocket: End customer typically pays consumption tax. In the US, collection is required when sales nexus thresholds are met; in the EU, VAT rules depend on business location and distance-selling thresholds. Merchants don’t pay VAT to suppliers but must charge VAT to EU customers. Spocket can provide supplier warehouse states if given supplier names via support.

Updates/decisions:

  • OP will gather supplier warehouse states from Spocket and consult a US tax professional for definitive advice.

Status: Open/ongoing. Key unanswered item: Whether the OP has nexus in any US state and resulting registration/collection requirements. A later participant asks for the outcome.

Summarized with AI on December 31. AI used: gpt-5.
4

Hi Fin!

I understand that taxes and dropshipping can be a big confusing, but hopefully I can help you here :slightly_smiling_face:

As a rule of thumb, it’s most often the end customer who is paying consumption tax (GST, VAT, sales tax).

My understanding is that you are a retailer in the EU. Therefore, whether or not you need to charge sales tax in the US, and VAT in the EU depends on a few things:

  1. In the United States, you must charge GST when you have sales nexus in a particular state. Typically you must meet a threshold of sales in order to have sales nexus. Since you are just starting out, it doesn’t sound like you have sales nexus and therefore won’t be required to collect and remit taxes on your US sales. Here’s an article on sales nexus: https://quaderno.io/blog/definitions-the-various-us-sales-tax-nexus/
  2. In the EU, it depends on whether your business is located in the EU or not. If your business is located in the EU then you must charge VAT on each EU sale. But the tax rate depends on how much you sell annually. There are “distance selling thresholds,” which dictate whether you charge the tax rate of your home country or the customer’s country.

In summary, taxes are confusing because it entirely is dependent on your scenario. However you are not required to pay any VAT to Spocket suppliers, but you are required to charge your end customers VAT and remit that. If you need your invoices for what you’re paying to your suppliers for every order, you can download them from your Spocket dashboard through the steps in the article here.

Meanwhile, if you could chat with us or send us an email at support@spocket.co, we can give you our supplier’s warehouse location (state).

I hope this helps!

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