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UK Company: Selling in EU and US - VAT & TAX

Client is selling global and has reached threshold in different countries.

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We have a client who is based in the UK and sells too the UK, EU and US.

They have reached the threshold in both regions and are needing to sort returns for both regions.

1. We have decided to use a company called 'VAT Global' which will sort the EU Sales returns (one stop)

2. The issue is what to do with US sales tax, do you have any advice or reccomendations on how to deal with this?

Thanks again all!

Replies (11)

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By Hugo Fair
21st Sep 2021 12:46

As with all VAT questions .. selling what (goods or services)? And to who (B2B or B2C)?
Lots of other missing info, but you won't get much further without at least answers to these two questions.

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Replying to Hugo Fair:
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By paul.benny
21st Sep 2021 13:39

+1

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Replying to Hugo Fair:
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By AFL
21st Sep 2021 14:50

Good Point, my apologies... Was too much in a rush...

Selling Goods and B2C
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Any other focus questions I need to answer?

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By paul.benny
21st Sep 2021 13:38

Brief primer on US sales taxes
US sales taxes are levied at state level (and potentially also by county/city). For the most part sales taxes are only applicable to goods. The range of goods in scope varies from one state to another. B2B supplies are exempt but vendor must hold an up to date exemption certificate from purchaser. Unlike with VAT, B2C pricing is always displayed excluding sales tax.

As a very general principle, sellers become liable to charge sales tax when they have a presence (people, property, stock) in a state. So if you're just shipping goods from UK to US, there is probably no sales tax due.

If you do have a presence in USA, you're potentially also in scope for federal and state income taxes. And if so, a local adviser is essential.

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Replying to paul.benny:
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By AFL
21st Sep 2021 14:53

Ah okay, very interesting...

Thanks for this Paul!

They are selling goods from the UK (B2C) and they do not hold any presence in the US, however they have been prompted that they need to register and sort out the US tax.

Hope all is well also!

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Replying to AFL:
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By I'msorryIhaven'taclue
21st Sep 2021 15:46

Is that because they are, as you alluded to in your post, on the cusp of breaching a State t/o or volume threshold in the US? Or perhaps because of ecommerce sales practises?

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Replying to I'msorryIhaven'taclue:
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By AFL
22nd Sep 2021 07:50

Shopify has stated that there'll be a need to start collecting sales tax in certain states

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Replying to AFL:
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By paul.benny
21st Sep 2021 17:33

AFL wrote:
...they have been prompted that they need to register and sort out the US tax.

By whom? As far as I know (which is not much), shipping goods from UK to consumers in US doesn't result in a liability to US taxes for the UK sender.

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Replying to paul.benny:
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By AFL
22nd Sep 2021 07:52

Shopify has stated that there'll be a need to start collecting sales tax in certain states

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Replying to AFL:
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By paul.benny
22nd Sep 2021 09:40

This sounds like the rules in the UK that put the obligation onto eBay etc to ensure VAT is collected on B2C imports.

I would imagine (although I don't know) that Shopify will provide that service. They certainly need to be involved at the customer side to determine the applicable rate based on the nature of product and the ship-to address, and then to apply it to the price. Remember in the US prices are always quoted excluding sales tax.

In this situation, I'd get a basic understanding of what Shopify will do for your client and encourage them to pay Shopify to take care of it.

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Replying to paul.benny:
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By AFL
22nd Sep 2021 10:52

This is currently what we're looking in to and trying to get sorted.

Thank you through for your time and ideas!

Have a great week!

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