Tips for Print on Demand Taxes

The simple sales to start with is the ‘Sales Tax’. This is the name for the tax that is applied to products/services being sold in the US. In the EU and UK, the tax is named VAT (Value Added Tax). Some nations will name this Goods and Services Tax or GST.

The main difference between the Sales and VAT taxes is that the sales tax is charged at the final, purchasing stage. VAT, on the other hand, is imposed on every step of production.

The taxes used to be very simple. You would pay the appropriate rate of tax from where you’re based. However, with eCommerce, this is now becoming very challenging. Another more complicated element is that shoppers don’t pay for the sales tax directly to the governments anymore, it is collected by the businesses and then paid to the government.

When it comes to US Sales tax there is a historic note of what is called ‘sales tax nexus’. This has been, for decades, what essentially meant where you have a physical presence. So if you had a single office in Washington, you would pay the sales tax for that area.

However, since 2018, this has changed. Instead, now the tax is applied if a business starts to sell more than 200 units or generates more than $100,000 in sales in any given state. So you could sell 200 units at $1 each that would mean you would have to pay sales tax in the state, even though you’ve only earned $200.

In regards to VAT, this is much different. You need to pay VAT if you’ve got a UK or EU billing address. This is regardless of where your customer is based. So if you’re based in London and selling to customers in the US, then you have to pay VAT.

There is a slight difference here. In the UK, you are allowed a certain amount of sales before you have to register for VAT. This figure increases every year slightly, so always check with the latest government information as to whether you’re past the threshold.

However, there is some good news if you’re worried about how you’re going to calculate all that tax. First of all, there are features within the Shopify system that allows you to have the correct and right sales tax/VAT added to the shop.

The Shopify system also has the default rights, which are updated when required. However, you can update and override the default options yourself if needed.

You should also check that you don’t have products that are exempt from VAT. For instance, in the UK, children’s clothes are exempt from VAT. However, in the US many food products that are to be consumed off-premises are exempt for tax.