Online selling has made it easy to reach customers in dozens of countries. Tax rules have not become easier to match. A seller in Manchester can take orders from Munich, Miami and Melbourne in the same afternoon, and each of those sales may fall under a different tax system with different thresholds, rates and filing rules.
Most sellers do not set out to get tax wrong. The problems creep in quietly: a threshold crossed without anyone noticing, a marketplace assumed to handle tax when it does not, or tax collected by a marketplace recorded in the books as if the seller owes it. By the time someone looks closely, there can be years of back tax, interest and penalties to sort out.
This guide explains how VAT, US sales tax and GST generally apply to online sellers, how marketplace rules change who is responsible, and the most costly mistakes we see when rescuing e-commerce books. It is a practical overview, not tax advice. Every business’s position depends on where it is based, where it sells and how it fulfils orders, so always confirm the detail with a qualified tax adviser.
Quick answer: what taxes do online sellers need to worry about?
Online sellers usually need to consider VAT in the UK and EU, sales tax in US states where they have nexus, and GST in countries such as Australia, New Zealand and Canada. Each applies when you exceed a registration threshold or meet other rules. Marketplaces often collect tax on your behalf, but not always, and not for your own website.
Key takeaways
- Tax is usually due where the customer is, not just where your business is based.
- Most regimes use registration thresholds, and thresholds are often measured on gross sales, not payouts.
- Marketplace facilitator and deemed supplier rules make Amazon, eBay, Etsy and TikTok Shop responsible for some tax in some countries, but never for sales through your own Shopify store.
- Storing stock in a country, including in a marketplace fulfilment centre, can create a registration obligation there regardless of sales levels.
- The books must show which tax was collected by you, which was collected by a marketplace, and which is genuinely owed.
How do VAT, sales tax and GST apply to online sellers?
VAT, sales tax and GST are all taxes on consumption, usually charged where the customer is. Online sellers become responsible when they cross a registration threshold, hold stock in a country, or sell into a market with no threshold for foreign sellers. Marketplaces may take on the duty for certain sales, which changes what the seller must collect and report.
Three questions decide almost everything
- Where is the customer? Most modern rules tax online sales in the customer’s country or state. Selling from the UK does not mean only UK rules apply.
- Where are the goods when sold? Stock held in a fulfilment centre abroad, such as an Amazon FBA warehouse in Germany or the US, often creates a registration obligation in that country from the first sale.
- Who is the seller of record for tax? On some marketplaces, in some countries, the marketplace is treated as the supplier for tax purposes and collects the tax. On your own website, you always are.
How the main regions compare
The table below is a simplified overview of the general position for non-resident online sellers of goods. It leaves out many exceptions. Verify every figure against the official source before relying on it.
| Region | Tax | When a non-resident seller usually needs to act | Marketplace role | Official source to check |
|---|---|---|---|---|
| United Kingdom | VAT | Overseas sellers generally have no registration threshold for UK sales of goods held in the UK; UK businesses register above the VAT threshold (£90,000 at the time of writing) | Marketplaces are deemed suppliers for many overseas sellers and for low-value imports | HMRC |
| European Union | VAT | EU-based sellers: cross-border sales to EU consumers above €10,000 a year are taxed in the customer’s country. Non-EU sellers generally have no threshold, and stock held in an EU country usually requires local registration | Marketplaces are deemed suppliers in some cases, including many low-value imports and sales by non-EU sellers from EU stock | European Commission and each member state |
| United States | Sales tax (state level) | Economic nexus in each state, often around $100,000 of sales into the state in a year, plus physical nexus from stock or staff | Marketplace facilitator laws in all states with sales tax make marketplaces collect on their sales | Each state’s revenue department |
| Australia | GST | Registration usually required above an A$75,000 annual turnover from Australian sales | Electronic distribution platforms collect GST on low-value imported goods | Australian Taxation Office |
| Canada | GST/HST (and PST in some provinces) | Registration rules for non-resident sellers depend on how goods are sold and stored | Platform operators have collection duties in some cases | Canada Revenue Agency |
Why thresholds trip people up
Thresholds are almost always measured on sales value, not on the money you receive. A seller who records Amazon or Etsy payouts as income will see a figure far below their true gross sales. It is easy to believe you are well under a threshold when you crossed it months ago. Our post on gross vs net accounting covers this in detail.
How does VAT work for online sellers in the UK and EU?
UK and EU VAT is charged at the rate of the country where the goods are consumed for most online sales to consumers. UK businesses register above the UK threshold. EU sales can often be reported through the One Stop Shop (OSS) or Import One Stop Shop (IOSS), but stock held in an EU country normally needs a local VAT number.
UK VAT for UK-based sellers
A UK business must register for VAT when its taxable turnover over the previous 12 months exceeds the registration threshold, or when it expects to exceed it in the next 30 days alone. At the time of writing the threshold is £90,000. The test is a rolling 12 months, not your accounting year, so it needs checking every month.
Turnover here means the value of your sales, not what marketplaces pay you. A seller whose payouts total £70,000 can easily have gross sales well over £90,000 once fees, advertising and refunds deducted by the platform are added back.
UK VAT for overseas sellers
Overseas sellers storing goods in the UK, for example in an Amazon fulfilment centre, generally must register for UK VAT from their first UK sale, as there is no threshold for non-established businesses. For many of these sales, and for imported consignments valued at £135 or less, online marketplaces are treated as the deemed supplier and account for the VAT themselves.
EU VAT: OSS and IOSS
Since July 2021 the EU has used a simplified system for cross-border online sales to consumers:
- Union OSS lets EU-based sellers report VAT on sales to consumers in other EU countries through one quarterly return in their home country, once their cross-border sales exceed €10,000 a year in total.
- Non-Union OSS covers certain services by non-EU businesses.
- IOSS covers imported consignments worth €150 or less. Registering lets the seller charge VAT at checkout so the customer pays no import VAT on delivery.
OSS only covers sales to consumers moved from one country to another. It does not cover sales from stock held in a country to customers in that same country. A UK seller using Amazon’s Pan-European FBA, for example, can end up with stock in several EU countries and a VAT registration obligation in each.
Deemed supplier rules in the EU
Where a marketplace facilitates sales of imported goods of €150 or less, or sales by non-EU sellers from stock already in the EU, the marketplace is often treated as the supplier for VAT. In those cases the marketplace charges and pays the VAT, and the seller’s own VAT return treats the sale differently. Getting this split right in the books is essential, otherwise VAT can be paid twice or not at all.
How does US sales tax work for online sellers?
US sales tax is set by individual states, and sometimes by local areas within them. A seller must register and collect in a state once it has nexus there, either physical (stock, staff or premises) or economic (sales above the state’s threshold). Marketplaces collect on sales they facilitate, but sales through your own website remain your responsibility.
Economic nexus
Since the 2018 Supreme Court decision in South Dakota v. Wayfair, states can require out-of-state sellers to collect sales tax once their sales into the state pass a set level. Many states use around $100,000 of annual sales, some higher, and a few still also count the number of transactions. Each state defines the measurement period and which sales count, so a seller needs to track sales by state continuously.
Physical nexus from inventory
Stock stored in a US warehouse can create nexus in that state regardless of sales volume. Amazon FBA sellers in particular can find inventory spread across many states as Amazon moves stock between fulfilment centres. That inventory can create physical nexus, so it is worth reviewing state by state with a US sales tax specialist.
Marketplace facilitator laws
Every state that has a sales tax also has a marketplace facilitator law. Amazon, eBay, Etsy, Walmart Marketplace and TikTok Shop typically calculate, collect and remit sales tax on sales made through their platforms. Two important caveats:
- Marketplace sales may still count towards your economic nexus threshold in some states, which matters if you also sell through your own store.
- Your Shopify store is not a marketplace facilitator. If you have nexus in a state, you must collect and file for those website sales yourself.
GST in Australia and elsewhere
Australia applies GST to sales made to Australian consumers. Overseas businesses generally must register once their Australian turnover reaches A$75,000 in a 12-month period. Low-value imported goods (A$1,000 or less) are usually taxed at the point of sale, with electronic distribution platforms such as Amazon or eBay collecting GST on sales they facilitate.
New Zealand, Canada, Singapore, Norway and Switzerland, among others, have their own versions of these rules. The pattern is similar: registration above a threshold, marketplace collection for low-value imports, and local registration when stock is held in the country. If you sell meaningful volumes into any of these countries, check the local position before you start selling, not after.
What are the most costly tax mistakes online sellers make?
The most costly mistakes are missing a registration threshold because sales were recorded net, assuming marketplaces handle all tax, ignoring stock held abroad, double-counting tax a marketplace already paid, and applying one tax treatment to every channel. Each can lead to back tax, interest and penalties, often discovered years later.
| Mistake | What usually goes wrong | Typical consequence |
|---|---|---|
| Recording payouts as sales | Turnover looks lower than it is, so a threshold is missed | Late registration, back tax on past sales, penalties and interest |
| Assuming the marketplace handles everything | Website sales, or sales outside facilitator rules, go untaxed | Unpaid tax on your own store’s sales |
| Ignoring stock held abroad | FBA or 3PL stock creates a registration duty from the first sale | Unregistered trading in a country, possible account suspension |
| Paying tax a marketplace already collected | Marketplace-collected tax is included in your own return | Overpaid tax that is slow to reclaim |
| Not charging tax on your own website | Checkout tax settings never switched on after registration | Tax owed out of your own margin |
| One tax code for every channel | Deemed supplier and facilitator sales mixed with direct sales | Wrong returns, hard-to-audit records |
| No sales tracking by country or state | Nobody can tell when a threshold is reached | Thresholds crossed silently |
Worked example: the cost of a missed UK VAT threshold
The figures below are illustrative and simplified. A UK seller, not VAT-registered, sells on Amazon UK and through its own Shopify store. Its bookkeeper records each payout as sales. Over 12 months, payouts total £72,000, so everyone assumes the business is comfortably under the £90,000 threshold.
When the books are rebuilt on a gross basis, true sales over the same 12 months are £104,000. The extra £32,000 was deducted by the channels as fees, advertising and refunds before payout. The business actually crossed the threshold eight months earlier.
Once HMRC is notified, the business must account for VAT from the date it should have been registered. Suppose £80,000 of sales were made after that date. Because no VAT was charged to customers, the VAT is generally treated as included in the price, so the amount due is one-sixth of the sales at the standard rate:
| Item | Amount |
|---|---|
| Sales since the date registration was required | £80,000 |
| VAT treated as included at 20% (£80,000 ÷ 6) | £13,333 |
| Penalties and interest | Possible, depending on the delay and HMRC’s view of the circumstances |
That £13,333 comes out of profit the business has already spent. Had sales been recorded gross from the start, the threshold would have been spotted in time to register, set prices to include VAT and recover VAT on costs.
The same pattern appears in other regimes. A US seller tracking only payouts can cross a state’s economic nexus threshold without knowing, and then owe uncollected sales tax for every sale made since.
How should online sellers set up their books for VAT, sales tax and GST?
Record every channel’s sales gross, split by the customer’s country or state, with separate tax codes for tax you collected, tax a marketplace collected and zero-rated or out-of-scope sales. Keep a liability account for each tax registration, and review threshold tracking monthly so registrations happen before they are overdue.
Build the structure
- Record sales gross through clearing accounts. Gross sales are the basis of every threshold test. See our guide to multi-channel bookkeeping for the account structure.
- Capture the customer’s location. Connector apps can split marketplace sales by marketplace and, often, by tax jurisdiction. Your Shopify tax reports show sales by country and state.
- Create tax codes by treatment, not just by rate. For example: UK standard-rated sales, EU OSS sales by country, marketplace deemed supplier sales, US marketplace-collected sales, US self-collected sales by state, and out-of-scope sales.
- Keep one liability account per registration. A UK VAT control account, an OSS liability, a sales tax payable account per US state where you file, and so on. Each should reconcile to the return filed.
- Record marketplace-collected tax as passing through, not as yours. Where the marketplace collects and pays the tax, it should not land in your sales or your tax liability.
A monthly and quarterly routine
- ☐ Monthly: update the rolling 12-month sales total for each country and US state against its threshold.
- ☐ Monthly: check where stock is held, including any new fulfilment centres or 3PL locations.
- ☐ Monthly: reconcile each tax liability account to the tax reports from Shopify and your marketplaces.
- ☐ Quarterly: confirm checkout tax settings on your own website match your current registrations.
- ☐ Before each filing: confirm marketplace-collected sales are excluded or treated correctly in the return.
- ☐ Annually: review the whole position with a tax adviser, especially if you have added a channel or a country.
When to get help
Get specialist help if you think a threshold may have been crossed in the past, if you hold stock in another country, if your books record payouts rather than gross sales, or if you have received a letter from a tax authority. In these situations, the order of work matters: the books usually need to be rebuilt on a gross basis first, so a tax adviser can see the true position and, where appropriate, approach the authority voluntarily. Voluntary disclosure is often treated more favourably than a problem discovered by the authority.
Frequently asked questions
Do I need to charge VAT if Amazon already collects it?
Not on sales where Amazon is the deemed supplier, because Amazon accounts for that VAT. You may still need to charge VAT on other Amazon sales, and on sales through your own website. Your books and VAT return must separate the two.
Is the UK VAT threshold based on sales or profit?
It is based on taxable turnover, which is the value of your sales, not profit and not marketplace payouts. Check it on a rolling 12-month basis every month, using gross sales from every channel.
Do I need to register for VAT in Europe if I use Amazon FBA?
Often, yes. Storing stock in an EU country through FBA usually requires a VAT registration there. Programmes that move stock between countries can create several registrations. Check the position for each country before stock is moved.
Does Shopify collect sales tax for me?
Shopify can calculate and charge tax at checkout once you configure your registrations, but it does not file or pay the tax for you in most cases. You remain the seller responsible for registering, filing returns and paying tax on your store’s sales.
What is economic nexus?
Economic nexus is a US state’s rule that an out-of-state seller must collect sales tax once its sales into the state pass a set level in a year. Thresholds and measurement rules vary by state, so sales must be tracked state by state.
What happens if I find I should have registered years ago?
Tax will usually be due on past sales from the date registration was required, with possible interest and penalties. Rebuild the books on a gross basis to find the true position, then take advice on a voluntary disclosure, which is often treated more favourably.
The bottom line
Selling globally means dealing with tax globally. You do not need to become a tax expert, but your books must show gross sales by country and state, which tax you collected and which a marketplace collected, and where your stock sits. With that in place, thresholds are spotted in time, returns are accurate and nothing comes as a surprise.
If you are unsure whether you have crossed a threshold, or your books only show payouts, Rescue My Books can rebuild your sales figures so you and your tax adviser can see exactly where you stand.
This article is general information, not tax advice. Rules and thresholds change and vary by country, state and business. Always confirm your position with a qualified tax adviser.
