If you sell online to customers in different countries, you’ve probably noticed that “the tax” means something completely different depending on where the buyer sits. This is a high-level map of how the main systems work, so you know the right questions to ask. It is not tax advice, and the thresholds and rules change often, so always confirm the specifics for your situation with your region’s authority or a qualified adviser.
Three systems, one idea
Sales tax, VAT and GST are all consumption taxes, meaning the end customer ultimately bears the cost and the business acts as a collector. But they work differently:
- US Sales Tax is charged at the point of sale and varies by state, county and even city. There’s no single national rate.
- UK VAT (Value Added Tax) is a single national tax applied at each stage of the supply chain, with businesses reclaiming the VAT they pay on their own purchases.
- Canada GST/HST combines a federal Goods and Services Tax with, in some provinces, a harmonised or separate provincial tax.
- Australia GST is a flat national Goods and Services Tax applied to most goods and services.
Same underlying idea, very different mechanics. That difference is exactly where online sellers trip up.
The US: nexus is everything
The US has no national sales tax. Instead, each state sets its own rules, and your obligation to collect depends on whether you have nexus in that state. Nexus used to mean a physical presence such as an office or warehouse. Now most states also apply economic nexus, meaning that once your sales into a state cross a certain dollar or transaction threshold, you’re required to register and collect there, even if you’ve never set foot in it. Marketplaces like Amazon often collect on your behalf, but selling through your own store can leave the responsibility with you. The practical takeaway: track where your customers are, watch your sales volume by state, and register where you cross the line.
The UK and EU: VAT and the registration threshold
In the UK, you generally must register for VAT once your taxable turnover passes a set threshold, though you can register voluntarily below it to reclaim VAT on costs. Once registered, you charge VAT on your sales, reclaim it on eligible purchases and file regular returns. Selling into the EU adds another layer: digital products and physical goods have their own cross-border rules, and schemes exist to let you report EU-wide sales through a single registration rather than registering in every country. If you sell digital services to EU consumers, the place-of-supply rules can mean charging the customer’s local rate from your very first sale, so check before you assume a threshold protects you.
Canada and Australia: national GST plus local twists
Canada layers a federal GST over provincial taxes that vary by province, with some provinces using a combined HST. Registration thresholds apply, and like the US you need to think about where your customers are based.
Australia runs a cleaner single national GST, with a registration threshold based on turnover. Overseas sellers shipping low-value goods to Australian consumers can also fall within the net, so “we’re not based there” isn’t always a safe assumption.
What this means for your bookkeeping
Cross-border tax isn’t really a tax problem first, it’s a data problem. To stay compliant you need clean records of:
- Where each customer is located at the point of sale
- Your cumulative sales by region so you spot threshold breaches early
- Tax charged and tax paid, kept separate and reconciled
- Filing deadlines for each jurisdiction you’re registered in
Get the data right and registration, filing and reclaiming become routine. Get it wrong and you face penalties or surprise bills. This is one of the most common areas where growing online businesses quietly fall out of compliance without realising it.
Cross-border tax rewards good systems and punishes guesswork. If you’re expanding into new markets and aren’t sure where your obligations begin, this is exactly the kind of thing we keep clean as part of our bookkeeping work. To see where you stand right now, book a free Strategic Business Audit and we’ll flag any gaps before they become problems.