Expanding internationally comes with one major challenge: taxes.
With each country enforcing its own set of tax rules, it’s crucial for brands to understand and adhere to these regulations to ensure compliance with local laws and inform customers about the final price of their purchase.
International Ecommerce Taxes: Key Takeaways
- US companies may need to collect VAT or GST when selling internationally
- Tax obligations depend on de minimis thresholds and sales thresholds
- VAT/GST is typically paid by the customer but collected by the merchant
- Many countries require tax registration once you exceed a revenue threshold
- Solutions like Seller of Record (SOR) can simplify global tax compliance
What is VAT and GST?
VAT (Value-Added Tax) and GST (Goods and Services Tax) are consumption taxes applied to goods and services in most countries outside the US.
VAT (Value-Added Tax)
VAT is applied at each stage of the supply chain where value is added. While businesses collect and remit VAT, the end consumer ultimately pays the tax.
GST (Goods and Services Tax)
GST is typically applied to the final sale price of goods and services at checkout. Like VAT, it is collected by the seller and remitted to local tax authorities.
Key Difference Between VAT and GST
- VAT: Applied throughout the supply chain
- GST: Typically applied at the final sale
Both systems allow businesses to reclaim taxes paid on business expenses under certain conditions. Understanding VAT and GST is crucial for businesses as these international e-commerce taxes can significantly impact the landed cost of a product. Over 160 countries worldwide have some form of indirect taxes that apply to the sale of goods and services. Key markets like Canada, Australia, New Zealand, and Singapore use GST while the United Kingdom (UK) and the European Union (EU) have a VAT structure.
Unlike sales tax in the US which is typically only imposed on transactions within the seller’s own state, VAT and GST can be assessed anytime you sell to consumers abroad, no matter where your business is located.
Additionally, most countries will require VAT and GST to be paid at the time of import along with any duties. Some countries however, do require merchants to report taxes periodically, similar to a US federal tax return.
Do US Companies Have to Pay VAT or GST?
Short answer: Indirect taxes are paid on imports, but some markets require merchants to collect and remit taxes outside the import process for low-value goods.
Even without a physical presence abroad, US ecommerce companies can be required to:
- Register for VAT/GST in certain countries
- Collect tax at checkout
- File and remit taxes to local authorities
When do International Ecommerce Taxes Apply?
Ecommerce businesses need to stay informed about tax regulations in any country where they have customers, due to the potential of payment obligations. There are two main thresholds to be aware of when it comes to fiscal compliance in international markets: the tax de minimis threshold and selling threshold.
Tax De Minimis Thresholds
The term “de minimis” in the context of taxation refers to the minimum value of goods or services that must be reached before taxes such as VAT, GST, or duties are applied. Orders valued below this amount are exempted from incurring any international ecommerce taxes. However, once an order exceeds the threshold, VAT/GST gets applied to the full shipment value.
De minimis thresholds can vary greatly across countries and they are evolving rapidly.
For example, the European Union is phasing out its €150 duty de minimis threshold starting July 1st, 2026, meaning all imports may soon be subject to customs duties.
For example, Canada allows products valued under $40 CAD (~$29 USD) to be imported tax-free when shipped by a carrier, while Australia has a much higher threshold, allowing shipments valued up to $1,000 AUD (~$640 USD) across the border without being taxed.
De minimis thresholds play a critical role in landed cost and customer experience. When taxes and duties aren’t calculated upfront, customers may be surprised with additional fees at delivery which is one of the leading causes of cart abandonment in cross-border ecommerce. To avoid this, many brands implement landed cost solutions that calculate and display total costs at checkout.
Selling Thresholds
In addition to a de minimis tax exemption, oftentimes countries will set a selling threshold, also known as registration thresholds, allowing smaller merchants to forego tax registration until their revenue exceeds a specified limit.If your sales are below the threshold, you may not need to register or collect tax.
Some countries like Australia and New Zealand offer “distance selling thresholds” that benefit small and infrequent sellers. This means that only if your revenue exceeds a certain amount within a specific time period do you need to register for a local tax ID and handle VAT/GST at the point of sale rather than on import.
Meanwhile, markets such as Switzerland and Singapore have a more complex threshold system, where registration and tax obligations only apply if your sales of low-value goods (LVG) surpass a predetermined limit.
Sales thresholds determine when your business becomes legally responsible for tax compliance in a given market. Because rules differ significantly brands expanding internationally often face increased operational complexity as they scale. This is why many ecommerce brands explore solutions like Seller of Record (SOR) to manage tax compliance without setting up entities or registrations in every market.
Evolving Ecommerce Tax Rules
The international ecommerce landscape is ever-evolving, with new regulations emerging to keep pace with the expanding digital economy. There have been more global tax changes in the past three years than the last three decades as countries are introducing new electronic services and revising compliance laws. While understanding and adapting to these developments can be a challenge, we’ve put together a few helpful resources that break down the ecommerce tax rules in some of the top global markets.
Country-Specific Tax Guides
- EU VAT Compliance: What E-Commerce Brands Need to Know for B2C Imports
- UK VAT Guide for E-Commerce: Understanding B2C Import Rules
- Australia GST for E-Commerce: What DTC Brands Need to Know
- Singapore GST: Navigating Compliance for US Ecommerce Brands
How Passport Can Help with International Ecommerce Taxes
Here at Passport, we understand the intricacies that come with international e-commerce taxes. That’s why we created our Passport Seller of Record® (SOR) designed to give brands a simpler way to handle VAT/GST compliance with a quick and seamless enrollment process.
Under the SOR program, companies will use Passport’s tax IDs to clear shipments, avoiding complex registrations and filings. As a merchant, you’ll simply collect VAT/GST at checkout, and Passport will manage the rest, including tax returns with the proper authorities and even monitoring sales thresholds that apply to certain countries.
Passport currently offers a Seller of Record solution for the following markets:
- European Union (EU)
- United Kingdom (UK)
- Australia (AU)
- New Zealand (NZ)
- Norway (NO)
- Singapore (SG)
- Switzerland (CH)
By partnering with a shipping carrier like Passport, you can take advantage of outsourcing international tax collection and remittance so you can focus on growing your brand. Our in-house compliance experts are ready to help guide you through any complex regulations and get your products to customers around the world.
To get started, reach out to our team here.
Authored by Thomas Taggart
Head of Global Trade | Passport
Thomas Taggart is a cross-border commerce leader with more than 20 years of experience in international shipping and regulatory affairs. As the Head of Global Trade, Thomas helps ecommerce brands go global by simplifying international trade, tax, and product compliance issues. Prior to Passport, he brought international shipping solutions to market through multiple roles in UPS’s product development organization.
Frequently Asked Questions
What is the difference between VAT and GST?
The main difference is how they are applied: VAT is collected at multiple stages of the supply chain, while GST is typically applied once at the final point of sale. In practice, both function similarly for ecommerce sellers.
Do US companies have to pay VAT or GST?
US companies don’t pay VAT or GST themselves, but they may be required to collect and remit these taxes when selling to customers in certain countries.
When do I need to register for VAT or GST?
You typically need to register when:
- Your sales exceed a country-specific threshold, or
- You sell into markets that require tax collection from the first sale (such as the EU for many imports)
How do VAT and GST work for ecommerce?
For ecommerce, VAT and GST are usually collected at checkout or at import, depending on the country’s rules. The seller is responsible for collecting the tax and remitting it to local authorities.
What is a de minimis threshold?
A de minimis threshold is the minimum order value below which duties—and sometimes VAT/GST—do not apply. Orders above this value may be subject to taxes.
What happens if I don’t collect VAT or GST?
If required taxes aren’t collected, shipments may be delayed, customers may be charged unexpected fees at delivery, and businesses can face compliance penalties.
Do I need a VAT number to sell internationally?
In many cases, yes. Once you exceed a threshold or are required to collect VAT/GST, you must register for a local tax ID—unless you use a solution like Seller of Record (SOR) to handle compliance.
How can I simplify international tax compliance?
Many brands use solutions like Passport Seller of Record® (SOR) to manage VAT/GST collection, filing, and remittance without registering in every country.