Selling to the US from the UK

[Aquarius909]

Can you settle a debate between me and a friend:

A UK based website of a VAT registered company has started generating some business in the US. The website owner adopts a policy of keeping the VAT element of any item bought online by (and shipped to) a US customer. So, for example, if Product A sells on the site for £120 ordinarily with a UK customer this would mean £100 to the website owner and £20 to HMRC but now for a US customer it means £120 to the website owner and £0 to HMRC.

Is this legal? Or how should a UK-based website deal with sales to the US without adopting a dual pricing strategy?

[STURBO]

It's legal.

It's what happens at airports. Dixons do it just as you say.

Eg Camera with Ticket price £120

Flying outside EU: Dixons get £120, HMRC £0
Flying within EU: Dixons get £100, HMRC £20

I think in the airport example they are fleecing their customers who are outside the EU.

In the online example I suppose it depends on the shipping charge calculations, and profit margins etc.

Customers in the US may also need to pay import duty / sales tax to the US government upon receipt.

Cheers

[Aquarius909]

I'm surprised by this. Don't US customers have the right to ask for a VAT-free price? Or is it a case that if they don't then that's just their tough luck and the retailer gains?

[muppetdave]

If I remember correctly, there's not actual need for 'us' to provide our boarding card/passports when making a purchase in an airport. It's simply to allow the retailers to record details for that exemption/rebate?

[48k]

Yes it's legal and what my accountant advised me to do when I was in the same situation selling items on website which could be purchased by non EU customers. The non EU customer is seeing a vat free price. It's just that the vat free price is £120 not £100. It's the simplest way of doing it without having to build intelligence in to the website to ask for or guess the customers' location and display appropriately tailored pricing.

[STURBO]

muppetdave said:

If I remember correctly, there's not actual need for 'us' to provide our boarding card/passports when making a purchase in an airport. It's simply to allow the retailers to record details for that exemption/rebate?

Yes but Dixons just won't sell you anything without it. Really poor approach in my opinion. They should just sell stuff at the correct price and add VAT if appropriate.

[Aquarius909]

Fascinating. Thank you all for your input. This has been most illuminating!

[The Moose]

48k said:

Yes it's legal and what my accountant advised me to do when I was in the same situation selling items on website which could be purchased by non EU customers. The non EU customer is seeing a vat free price. It's just that the vat free price is £120 not £100. It's the simplest way of doing it without having to build intelligence in to the website to ask for or guess the customers' location and display appropriately tailored pricing.

It's hardly complicated 'intelligence' to build into an ecommerce site!

[48k]

The Moose said:

48k said:

Yes it's legal and what my accountant advised me to do when I was in the same situation selling items on website which could be purchased by non EU customers. The non EU customer is seeing a vat free price. It's just that the vat free price is £120 not £100. It's the simplest way of doing it without having to build intelligence in to the website to ask for or guess the customers' location and display appropriately tailored pricing.

It's hardly complicated 'intelligence' to build into an ecommerce site!

That's quite a sweeping generalisation.
It depends on a number of factors, the primary one being: are you dealing with an off the shelf ecommerce package or Billy Bespokes hand crafted "I know a bit of code, me" website.

Edited by 48k on Thursday 5th January 08:40

[KevinCamaroSS]

48k said:

The Moose said:

48k said:

Yes it's legal and what my accountant advised me to do when I was in the same situation selling items on website which could be purchased by non EU customers. The non EU customer is seeing a vat free price. It's just that the vat free price is £120 not £100. It's the simplest way of doing it without having to build intelligence in to the website to ask for or guess the customers' location and display appropriately tailored pricing.

It's hardly complicated 'intelligence' to build into an ecommerce site!

That's quite a sweeping generalisation.
It depends on a number of factors.
What is not in doubt is that the simplest way of doing it is to have one price.

Agreed, how would you confirm that a customer is from a tax-free location?

[The Moose]

48k said:

The Moose said:

48k said:

Yes it's legal and what my accountant advised me to do when I was in the same situation selling items on website which could be purchased by non EU customers. The non EU customer is seeing a vat free price. It's just that the vat free price is £120 not £100. It's the simplest way of doing it without having to build intelligence in to the website to ask for or guess the customers' location and display appropriately tailored pricing.

It's hardly complicated 'intelligence' to build into an ecommerce site!

That's quite a sweeping generalisation.
It depends on a number of factors, the primary one being: are you dealing with an off the shelf ecommerce package or Billy Bespokes hand crafted "I know a bit of code, me" website.

Edited by 48k on Thursday 5th January 08:40

It is a sweeping generalization however that doesn't stop it being simple 'intelligence'. Some countries you pay others you don't. Where it does become more complex is within the EU with companies with EU VAT number vs private individuals but that's not what we're talking about!

[48k]

The Moose said:

48k said:

The Moose said:

48k said:

Yes it's legal and what my accountant advised me to do when I was in the same situation selling items on website which could be purchased by non EU customers. The non EU customer is seeing a vat free price. It's just that the vat free price is £120 not £100. It's the simplest way of doing it without having to build intelligence in to the website to ask for or guess the customers' location and display appropriately tailored pricing.

It's hardly complicated 'intelligence' to build into an ecommerce site!

That's quite a sweeping generalisation.
It depends on a number of factors, the primary one being: are you dealing with an off the shelf ecommerce package or Billy Bespokes hand crafted "I know a bit of code, me" website.

Edited by 48k on Thursday 5th January 08:40

It is a sweeping generalization however that doesn't stop it being simple 'intelligence'. Some countries you pay others you don't. Where it does become more complex is within the EU with companies with EU VAT number vs private individuals but that's not what we're talking about!

I think we're talking about different things. I was referring to the technical implementation of the website not the tax rules themselves.

[The Moose]

48k said:

The Moose said:

48k said:

The Moose said:

48k said:

Yes it's legal and what my accountant advised me to do when I was in the same situation selling items on website which could be purchased by non EU customers. The non EU customer is seeing a vat free price. It's just that the vat free price is £120 not £100. It's the simplest way of doing it without having to build intelligence in to the website to ask for or guess the customers' location and display appropriately tailored pricing.

It's hardly complicated 'intelligence' to build into an ecommerce site!

That's quite a sweeping generalisation.
It depends on a number of factors, the primary one being: are you dealing with an off the shelf ecommerce package or Billy Bespokes hand crafted "I know a bit of code, me" website.

Edited by 48k on Thursday 5th January 08:40

It is a sweeping generalization however that doesn't stop it being simple 'intelligence'. Some countries you pay others you don't. Where it does become more complex is within the EU with companies with EU VAT number vs private individuals but that's not what we're talking about!

I think we're talking about different things. I was referring to the technical implementation of the website not the tax rules themselves.

Me too!

If country in EU list charge VAT, else VAT = 0!!

[48k]

The Moose said:

48k said:

The Moose said:

48k said:

The Moose said:

48k said:

Yes it's legal and what my accountant advised me to do when I was in the same situation selling items on website which could be purchased by non EU customers. The non EU customer is seeing a vat free price. It's just that the vat free price is £120 not £100. It's the simplest way of doing it without having to build intelligence in to the website to ask for or guess the customers' location and display appropriately tailored pricing.

It's hardly complicated 'intelligence' to build into an ecommerce site!

That's quite a sweeping generalisation.
It depends on a number of factors, the primary one being: are you dealing with an off the shelf ecommerce package or Billy Bespokes hand crafted "I know a bit of code, me" website.

Edited by 48k on Thursday 5th January 08:40

It is a sweeping generalization however that doesn't stop it being simple 'intelligence'. Some countries you pay others you don't. Where it does become more complex is within the EU with companies with EU VAT number vs private individuals but that's not what we're talking about!

I think we're talking about different things. I was referring to the technical implementation of the website not the tax rules themselves.

Me too!

If country in EU list charge VAT, else VAT = 0!!

My bold, to try and help explain.

What is the country? That's the point.

An example scenario. The webserver receives an anonymous request for the product page. Anonymous because the visitor has not logged in. The visitor could be a human, it could be a robot, web page scraping software, sat behind a proxy server etc. etc.

The software on the webserver has to perform some processing logic to determine what country the visitor is from and thus what price to send back in the web page for the product.

How it does that depends on a number of factors, one of which is whether the webserver is running an off the shelf ecommerce package which offers that functionality straight out of the box, or whether it's a bespoke written web shop.

So as I said - the simplest way of doing it is to not do any of that and always return one price regardless.

Not sure how else I can explain it TBH.

Edited by 48k on Friday 6th January 15:56

[227bhp]

KevinCamaroSS said:

Agreed, how would you confirm that a customer is from a tax-free location?

The delivery address kind of gives it away.

[ecs]

You're meant to make 'reasonable' checks and generally use the IP and customer address to verify their location. This gets even more complicated when you're selling to the EU - see VAT MOSS.

[KevinCamaroSS]

227bhp said:

KevinCamaroSS said:

Agreed, how would you confirm that a customer is from a tax-free location?

The delivery address kind of gives it away.

No it does not, I can order and pay for something and have it delivered anywhere, does not make it the correct address for VAT.

[The Moose]

KevinCamaroSS said:

227bhp said:

KevinCamaroSS said:

Agreed, how would you confirm that a customer is from a tax-free location?

The delivery address kind of gives it away.

No it does not, I can order and pay for something and have it delivered anywhere, does not make it the correct address for VAT.

If the merchant is delivering straight to a country outside of the EU then VAT does not need to be charged (regardless or where the person physically is at the point of ordering, where they live, whether they shagged the misses last night or anything else).

You can try to justify it (and this isn't directed solely at you Kevin) whichever way you like however it's pretty shady practice and it really isn't complicated logic to build into your shopping cart. The 2 possibilities are:

1. An off the shelf package; Whilst I'm sure there will be one out there somewhere, I've never come across an off the shelf package that doesn't have the ability to charge VAT to some regions and not others.

2. A bespoke solution; if the dev team can't handle this, they shouldn't be building a bespoke solution!!!

[Ean218]

The Moose said:

If the merchant is delivering straight to a country outside of the EU then VAT does not need to be charged (regardless or where the person physically is at the point of ordering, where they live, whether they shagged the misses last night or anything else).

You can try to justify it (and this isn't directed solely at you Kevin) whichever way you like however it's pretty shady practice and it really isn't complicated logic to build into your shopping cart. The 2 possibilities are:

1. An off the shelf package; Whilst I'm sure there will be one out there somewhere, I've never come across an off the shelf package that doesn't have the ability to charge VAT to some regions and not others.

2. A bespoke solution; if the dev team can't handle this, they shouldn't be building a bespoke solution!!!

Agree with this entirely, it looks like a pretty shoddy bit of work if it cannot even work out VAT, it's not as if it is a new tax just dreamt up!

[RM]

227bhp said:

The delivery address kind of gives it away.

On that basis do you suggest that the website doesn't show the price until after the customer provides the delivery address?