Guidance warning. Please note that the following guidelines do not constitute tax, legal, or other professional advice and must not be used as such. It is the sole responsibility of all Prodigi clients to comply with all legal and sales tax requirements for issuing sales tax or VAT invoices in respect to your sales transactions. If you are unsure as to what the contents of an invoice you issue to your customers should be, we suggest that you contact your tax advisor. Prodigi cannot assist you with any legal or tax advice as we’re not accountants or legal experts, and we stress that none of the following may be taken as professional advice.
How will sales taxes and/or VAT be applied to our invoices?
All cost prices shown in our platform exclude tax. Your order with us may then be subject to local sales tax rates, depending on the following conditions:
- where your business is based;
- where the item is printed;
- where the item is shipped; and
- and in the case of VAT, whether your business is VAT-registered.
All of the logic for applying and collecting the correct sales taxes for each of your orders is automatically determined by our platform when each order is placed.
How does VAT work in the EU?
To help reduce the administrative burden on companies there are national VAT registration thresholds set by each individual country in the European Union.
The basic rules are as follows:
- Retailers may sell to private individuals in other EU States under their local VAT number, charging their home VAT rate. For Prodigi, this means adding UK at 20% to our invoices.
- Once retailers pass each respective EU country’s distance selling annual VAT threshold, they must register as a non-resident VAT trader in that country.
- They then can continue to sell, but must charge the local VAT rate if trading in that country.
If a non-EU based company is selling below these thresholds, it does not need to register for VAT.
Once over these limits within the same calendar year, it must apply for a VAT number. Each member country of the EU is free to set its own distance selling registration threshold.
The following table outlines the 2019 limits for each country.
|Czech Republic||CZK 1,140,000|
Once VAT registered in a new country, there will be EU VAT compliance regulations to follow. These will include ensuring invoices are issued according to the local laws. Regular VAT returns will also have to be submitted to the respective countries.
In addition to VAT returns, retailers may also be required to complete separate Intrastat filings (detailing the movement dispatched goods from their home state to the state of their customer) once the value of the goods goes over a certain threshold.
The Intrastat thresholds by country are as follows:
|Country||Arrivals simplified||Full||Dispatches simplified||Full|
|Austria||€750,000||€12 million||€750,000||€12 million|
|Belgium||€1 million||€25 million||€1.5 million||€25 million|
|Bulgaria||BGN 280,000||BGN 11.7 million||BGN 460,000||BGN 5.6 million|
|Croatia||-||HRK 1.2 million||-||HRK 2.2 million|
|Czech Republic||CZK 12 million||-||CZK 12 million||-|
|Denmark||DKK 5 million||-||DKK 6.7 million||-|
|Estonia||€130,000||€6 million||€230,000||€5.5 million|
|Germany||€500,000||€46 million||€800,000||€38 million|
|Hungary||HUF 100 million||HUF 14 billion||HUF 170 million||HUF 5 billion|
|Latvia||€100,000||€4 million||€200,000||€2.5 million|
|Lithuania||€170,000||€6 million||€280,000||€3 million|
|Poland||PLN 2 million||PLN 93 million||PLN 4 million||PLN 50 million|
|Portugal||€250,000||€6.5 million||€350,000||€5 million|
|Romania||RON 900,000||RON 20 million||RON 900,000||RON 10 million|
|Slovenia||€200,000||€9 million||€120,000||€4 million|
|Sweden||SEK4.5 million||-||SEK9 million||-|
|United Kingdom||£250,000||£24 million||£1.5 million||£24 million|
Also refer to our blog post on VAT and print on demand.
What are the annual EU distance selling thresholds for VAT?
Each member country of the EU is free to set its own distance selling registration threshold.
The following table outlines these limits for each country:
|Czech Republic||CZK 1,140,000|
What is sales tax nexus?
Sales tax nexus applies to companies trading in the US.
Sales tax nexus is the connection between a seller and a US state that requires the seller to register, collect, and remit tax on sales made in that state.
The term is used when a retailer has a physical presence in a particular state but also applies to online retailers when they have:
- Employees or salespeople in a State.
- Store inventory or stock in a State.
- Pass an individual State’s economic threshold for total revenue or number of transactions in that state.
The sales thresholds vary from $10,000 to $500,000 in sales, and some States don’t have a transaction threshold at all. For an excellent guide as to the specifics of sales tax nexus and whether they apply to your business we recommend TaxJar’s Sales Tax by State: Economic Nexus Laws blog post.
It is the responsibility of all Prodigi clients to ensure they pay any applicable sales taxes to the countries they are transacting in.
What are the sales tax implications for dropshipping in the US?
A drop shipment is a sale where a retailer accepts an order from an end-consumer and then places the order with a third party (e.g. a print on demand manufacturer or print api platform) and instructs the third party to produce and then deliver the item to the customer.
When it comes to sales taxes, the drop shipping fulfilment model is made particularly complex due to issues of nexus, product sourcing, customer location, and the location of our dropshipping print labs.
Simplified, our drop shipment sales tax model involves:
- Retailer (You) taking the end-customer order and charging appropriate sales taxes;
- Retailer (You) placing the order with the drop ship platform (Prodigi);
- Drop shipping platform (Prodigi) charges Retailer (You) with the appropriate sales taxes for that specific order (Prodigi determines these automatically based on each order’s specific delivery criteria);
- Platform (Prodigi) places the order with the manufacturing lab;
- Manufacturing lab (Partner or Prodigi) charges Platform for order and applies the correct local sales taxes for the order;
- Manufacturing lab (Partner or Prodigi) contracts with a courier partner to deliver the product to the customer.
- Courier company invoices Manufacturing lab (Partner or Prodigi) for shipping service and applies correct local sales taxes to shipment invoice.
If the Retailer (You) have nexus in the State where the sale occurs, the Retailer (You) collects sales tax from the end-customer, even if the retailer engages a third-party drop shipping platform or print lab to manufacture and deliver the product.
Prodigi will only ever responsible for the sales tax nexus of any platform transactions if the Retailer (You) are using our payment gateway services (e.g. via our mobile SDKs) and we are acting as the Merchant of Record (see “How are sales taxes handled when Prodigi acts as the Merchant of Record?”).
How are sales taxes handled when Prodigi acts as the Merchant of Record?
When clients use our merchant payment services (for example if using our Print Shop, Mobile SDK checkout or Photo Book platforms) then Prodigi becomes the Merchant of Record and establishes the financial relationship directly with the end-consumer.
This means the commercial relationship is direct between the consumer and Prodigi and thus all applicable taxes will be handled by Prodigi. When issuing clients with their share of the profits on any transaction (e.g. Product Selling Price minus the Cost of Goods Supplied) then the self-generated VAT invoices we produce will be subject to the addition of UK VAT at 20%.
Once clients approach or pass the UK VAT threshold of £70,000 then they will need to register for a UK VAT number in order to reclaim the VAT on any invoices.
For transactions in the US, Prodigi adheres to the economic nexus laws once the transaction thresholds for each individual State have been exceeded.
What is IOSS?
On the 1st of July 2021, the European Union – as part of its wider VAT reform – launched the Import One-Stop Shop (IOSS) platform to simplify the declaration and payment of VAT for B2C imports from outside of the EU up to a value of €150.
This optional platform requires you to register with a single EU Member State to manage your sales VAT throughout the EU, removing the need to register for VAT in every country you’re selling goods to.
When selling goods to consumers in the EU, registering with the IOSS means you can collect accurate VAT for the purchase from the consumer at the point of sale, which can then be declared and paid in a periodic VAT return. Shipments containing a valid IOSS number with an intrinsic value of less than €150 (NB this is only a scheme for small value goods) will therefore not be subject to import VAT — since VAT will be taken based on the transaction’s origin — potentially helping products move through customs quicker.
Registering for the IOSS platform isn’t obligatory, and you can continue to declare and pay VAT on EU imports as you do today. You can read more about these changes on our website.
Where can I register for an IOSS number?
If registering for the scheme from outside the EU then Ireland is viewed as the preferred option for many businesses. The Netherlands is a good alternative — although it should be noted that many member states don’t appear to have the software systems currently set up required to actually implement this programme efficiently at this time.
How is OSS different from IOSS?
The One-Stop Shop (OSS) platform is similar to IOSS with the purpose still being to simplify the declaration and the payment of VAT for B2C sales up to a value of €150. However, the OSS platform is specifically designed for merchants based in the EU selling goods to customers who are also within the EU.
Depending on your location, you may need to use either an IOSS or OSS number.
How do I use my IOSS/OSS numbers for orders?
You can inform us of your IOSS or OSS numbers by updating your company details in your Prodigi account. These details will then be used for all applicable orders automatically.
Does Prodigi charge US sales tax?
Prodigi charges US sales tax on all orders being delivered to US addresses, unless you can provide proof of exemption.
If you’re registered for US sales tax and can provide us with an exemption certificate for each state you’re registered in, you won’t need to pay US sales tax. Exemption certificates can be emailed to email@example.com. You’ll also need to update your online store to start charging US sales tax. This is supported by most major ecommerce platforms such as Shopify, WooCommerce, etc.
If you sell through a marketplace that automatically charges US sales tax to the buyer, then please contact firstname.lastname@example.org.
You can also email us at email@example.com with any questions about exemption certificates.
How much US sales tax will I be charged?
Prodigi will charge you based on the value of the items we’re selling to you, and invoices will include the US sales tax rate of each order’s destination state where applicable. We’ve included a complete list of US sales tax rates by state here so that you can find out if and how much you’ll be charged.
Do I need to register for US sales tax?
If you’re not currently registered for US sales tax, you might want to take legal/accounting advice on whether you should be.
Will VAT be applied to my order?
If your order is being delivered to the UK, you’ll be charged VAT (sales tax) on the fulfilment costs at the applicable UK sales tax rate of 20%.
Regarding your IOSS guidelines, it seems that these are only applicable for orders being shipped from outside the EU into the EU. Does this mean that import tax / customs fees don’t apply to Prodigi products manufactured in the Netherlands?
Yes, that’s correct! Since IOSS only applies to orders imported into the EU, there won’t be any such charges for orders being shipped from the Netherlands to the EU.
How do I collect the correct VAT if I don’t have an EU VAT / IOSS / OSS number?
You should consult with your tax advisor to determine whether you should be registered for VAT and how much VAT to charge your customers.
Do I need to have a VAT / IOSS / OSS number to be able to place orders with Prodigi?
No. We supply products to both retail and wholesale customers, some of whom are not VAT registered. If you’re unsure as to whether or not you should have one, you should consult with your tax advisor.
Is VAT charged on both products and shipping?
Where chargeable, VAT is charged on both products and shipping.
Whose responsibility is it to ensure that any applicable import tax / customs fees are paid?
It’s the responsibility of the end customer to pay for these fees.
Is Prodigi responsible for charging VAT on all orders and declaring them, or will the end customers be required to do this themselves?
Prodigi is responsible for charging the applicable VAT to the merchant.
Should I register for sales tax in the US?
You should consult with your tax advisor to determine whether you should be registered for sales tax in the US and how much sales tax to charge your customers.
How much sales tax will be applied to my orders in the US?
This varies by state. This blog post provides more details on the sales tax requirements for each state.
I'm being charged sales tax on orders in the US, but I'm also paying state taxes. Isn't this double taxation? Can I remove one of these taxes?
You may be able to register as exempt from sales tax in the US where you’re being charged taxes if you’re purchasing products for resale only. This means that you’re buying the products with the intention of selling them to your own customers, who will be charged sales tax instead. However, the requirements to register as exempt can vary between states, so you’ll need to check the rules that apply to your business in each state. Keep in mind that if you’re not eligible for exemption, you may still need to pay both taxes.
I’m being charged sales tax on all of my US orders, however, nearly all of these orders are processed on Etsy, which automatically charges US sales tax to my customers. How do I notify you of these sales?
If submitting orders manually through the Prodigi dashboard, you can select the option to confirm that US sales tax has been charged on the order. And if ordering items in bulk through the dashboard, you’ll be able to fill in a form to declare this.
Can I pay any applicable import tax / customs fees upfront so that my customers don’t have to pay them?
It’s necessary to charge your customers the correct VAT, sales tax and / or customs fees. These taxes must also be charged by Prodigi to its merchants where applicable.
Can you put a lower value on the order?
No. Unfortunately, this isn’t possible.