VAT vs sales tax: what changes when a US business sells into the EU

EU VAT is not a sales tax with another name. It is charged at every stage of the chain, it sits inside the price the consumer sees, the seller owes it on a sale to a consumer, and a business outside the EU gets no sales threshold before it starts.

What you do:

1. Where you collect the VAT, show every price to an EU consumer with the VAT already in it. The listed price is the final price. VAT is also due on what you charge for shipping and packing (Art. 78Directive 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 78Click opens the article on EUR-Lex.). Where the carrier collects it from your customer at the door, the VAT is not in your price. Say before the order that import VAT may be payable on delivery (Art. 369z(1)(a)Directive 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 369z, paragraph 1, point (a)Click opens the article on EUR-Lex.; Directive 2011/83/EU, Art. 6(1)(e)Directive 2011/83/EU, Consumer Rights Directive (consolidated text of 27 September 2026)Article 6, paragraph 1, point (e)Click opens the article on EUR-Lex.).
2. Find out who collects the VAT on each sale: a marketplace, you, or the carrier at the border. Three facts decide it: where the goods ship from, the parcel’s value, and whether a marketplace takes the order. The full table is on EU VAT for online sellers.
3. Where you are the one who charges it, register before your first sale. A business based outside the EU has no threshold (Art. 59cDirective 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 59cClick opens the article on EUR-Lex.). Sales from an EU warehouse to consumers in other EU countries go through the one-stop shop (VAT OSS); parcels up to EUR 150 shipped from the US can go through the import one-stop shop (IOSS), for a US business always with an EU intermediary (Art. 369m(1)(b)Directive 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 369m, paragraph 1, point (b)Click opens the article on EUR-Lex., Art. 369m(1)(c)Directive 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 369m, paragraph 1, point (c)Click opens the article on EUR-Lex.).
4. Issue a VAT invoice where EU law asks for one: for every sale to a business, among others (Art. 220(1)Directive 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 220, paragraph 1Click opens the article on EUR-Lex.).
5. Selling to the UK as well: it runs its own VAT. Register with HMRC separately; your EU registration does not cover it.

How VAT differs from sales tax, side by side

Why VAT is charged at every stage, and sales tax only once

Sales tax waits for the last sale. A business that buys goods to resell gives its supplier an exemption certificate, and “the seller should not collect sales or use tax on that transaction” (Streamlined Sales Tax, Exemption Certificate).

VAT does not wait. Every sale carries it, from the factory to the consumer. Each business then deducts the VAT it paid on its own purchases and pays over only the difference (Art. 1(2)Directive 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 1, paragraph 2Click opens the article on EUR-Lex., Art. 168Directive 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 168Click opens the article on EUR-Lex.). The consumer, who deducts nothing, carries the whole tax.

EU consumer prices include the VAT

The price an EU consumer sees on your listing is the price they pay, VAT included. EU law defines the selling price as “the final price for a unit of the product […] including VAT and all other taxes” (Directive 98/6/EC, Art. 2(a)Directive 98/6/EC, Price Indication Directive (consolidated text of 28 May 2022)Article 2, point (a)Click opens the article on EUR-Lex.). Before an online order is placed, you must show “the total price of the goods or services inclusive of taxes” (Directive 2011/83/EU, Art. 6(1)(e)Directive 2011/83/EU, Consumer Rights Directive (consolidated text of 27 September 2026)Article 6, paragraph 1, point (e)Click opens the article on EUR-Lex.). A listing price without the VAT, with the tax added at checkout, does not meet the first rule. One case differs: a parcel shipped from outside the EU without IOSS. There the customer owes the import VAT and the carrier collects it (Art. 369z(1)(a)Directive 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 369z, paragraph 1, point (a)Click opens the article on EUR-Lex.), so your price holds none. Before the order, say that such charges may be payable (Directive 2011/83/EU, Art. 6(1)(e)Directive 2011/83/EU, Consumer Rights Directive (consolidated text of 27 September 2026)Article 6, paragraph 1, point (e)Click opens the article on EUR-Lex.).

So the VAT comes out of your price, not on top of it. A product listed at EUR 24.00 in a country with a 20% rate holds EUR 4.00 of VAT. You keep EUR 20.00. Shipping and packing you charge the customer are part of what the VAT is charged on (Art. 73Directive 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 73Click opens the article on EUR-Lex., Art. 78Directive 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 78Click opens the article on EUR-Lex.).

Who collects the VAT on your EU sale

Three parties can collect it, and the sale decides which one.

• The marketplace, in two cases: an imported parcel worth up to EUR 150, and any sale to a consumer of goods already in the EU by a seller from outside the EU (Art. 14aDirective 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 14aClick opens the article on EUR-Lex.). You charge no VAT on those sales.
• You, on goods you ship from an EU warehouse to a consumer, and on parcels up to EUR 150 you sell through IOSS (Art. 33Directive 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 33Click opens the article on EUR-Lex., Art. 369lDirective 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 369lClick opens the article on EUR-Lex.). The VAT is that of the country the parcel goes to.
• The carrier, from your customer, on a parcel shipped from outside the EU without IOSS, until 30 June 2028. The customer pays it before delivery (Art. 369yDirective 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 369yClick opens the article on EUR-Lex., Art. 369zDirective 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 369zClick opens the article on EUR-Lex.). Above EUR 150 the parcel goes through a full import, and import VAT is paid by the person the EU country names (Art. 201Directive 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 201Click opens the article on EUR-Lex.).

Which case is yours, and how each one is declared, is on EU VAT for online sellers.

No sales threshold for a business outside the EU

In the US, a state may make a seller with no presence there collect its sales tax, once the seller passes the state’s threshold. The Supreme Court ended the physical-presence rule in 2018, in a case on South Dakota’s law, which covered sellers with more than USD 100,000 of sales into the state, or 200 or more transactions, a year (South Dakota v. Wayfair). South Dakota has since dropped the transaction count. Its test is now more than USD 100,000 in gross sales into the state, in the previous or current calendar year (South Dakota Department of Revenue, Remote Seller Bulletin, August 2025).

The EU has no such line for you. VAT is due on a business’s sales of goods in the EU, and on imports, from the first one (Art. 2(1)(a)Directive 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 2, paragraph 1, point (a)Click opens the article on EUR-Lex., Art. 2(1)(d)Directive 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 2, paragraph 1, point (d)Click opens the article on EUR-Lex.). The two EU thresholds you may read about do not reach a business based outside the EU:

• EUR 10,000 keeps cross-border sales on home VAT, and only for a business established in one EU country (Art. 59cDirective 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 59cClick opens the article on EUR-Lex.).
• The small-business exemption lets an EU country exempt small turnover, and only for businesses established in the EU (Art. 284Directive 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 284Click opens the article on EUR-Lex.).

One EU return in place of one per state

In the US, each state where you must collect has its own registration and its own returns. The Streamlined system registers you in any or all of its 24 member states at once, and you still file “with each Streamlined State you register in” (Streamlined Sales Tax, Remote Sellers).

The EU has two one-stop shops that replace a registration in each country:

• OSS, for goods you ship from an EU warehouse to consumers in other EU countries. One return a quarter covers every destination, filed and paid by the end of the following month (Art. 369bDirective 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 369bClick opens the article on EUR-Lex., Art. 369fDirective 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 369fClick opens the article on EUR-Lex., Art. 369iDirective 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 369iClick opens the article on EUR-Lex.).
• IOSS, for parcels up to EUR 150 shipped from outside the EU. One return a month. A business based outside the EU uses it through an EU intermediary, unless its country has a VAT assistance agreement with the EU and the goods ship from there. Norway has one; the US does not (Art. 369lDirective 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 369lClick opens the article on EUR-Lex., Art. 369mDirective 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 369mClick opens the article on EUR-Lex., Art. 369sDirective 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 369sClick opens the article on EUR-Lex.; Commission, Register to OSS; GOV.UK, IOSS registration). With an IOSS number on the import declaration, the parcel enters without import VAT (Art. 143(1)(ca)Directive 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 143, paragraph 1, point (ca)Click opens the article on EUR-Lex.).

Where you register, and how, is on EU VAT for online sellers.

What an EU VAT invoice must show

You must issue an invoice for every sale to a business, and for a sale shipped between EU countries to a consumer unless you declare it through OSS (Art. 220(1)Directive 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 220, paragraph 1Click opens the article on EUR-Lex.). EU law fixes what goes on it: among other things, a sequential number, your VAT number, the VAT rate and the VAT amount (Art. 226Directive 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 226Click opens the article on EUR-Lex.).

The UK runs its own VAT, apart from the EU’s

The UK has its own VAT, collected by HMRC, with a standard rate of 20% (GOV.UK, VAT rates). Your EU VAT number, OSS and IOSS do not cover a sale to Great Britain. IOSS does cover a parcel to a consumer in Northern Ireland (GOV.UK, IOSS registration).

• Registration. The GBP 90,000 turnover threshold does not help you. For sales you make yourself, a business based outside the UK that supplies goods or services to the UK must register “regardless of taxable turnover” (GOV.UK, Register for VAT). A seller whose only UK sales go through a marketplace liable for the VAT may apply for an exemption from registration instead (GOV.UK, online marketplaces).
• Parcels of GBP 135 or less shipped to customers in Great Britain carry UK VAT charged at the point of sale, not at the border. Sold from your own site, you charge it and register for it. Sold through an online marketplace, the marketplace is liable (GOV.UK, overseas goods sold directly; GOV.UK, online marketplaces).
• Parcels above GBP 135 follow the normal import VAT and customs rules.
• Goods already in the UK when sold: you register and account for the VAT on your direct sales; through an online marketplace, the marketplace is liable for the VAT on the sale. You still owe the import VAT and customs duty when the stock first enters the UK, and you register for VAT or apply for an exemption (GOV.UK, online marketplaces).

What happens if you do nothing

In the US, if a seller does not collect the sales tax, the consumer owes use tax at the same rate, and a seller required to collect stays liable too (Streamlined Sales Tax, Exemption Certificate; South Dakota v. Wayfair). In the EU, the debt stays with the seller. On a sale to a consumer where you are the seller for VAT, the VAT is yours to pay, whether or not you charged it (Art. 193Directive 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 193Click opens the article on EUR-Lex.). A price you set without VAT in it still holds the VAT, and it comes out of your margin.

Until 30 June 2028, without IOSS, your customer meets the VAT at the door: the carrier collects it before it hands over the parcel (Art. 369zDirective 2006/112/EC, the VAT Directive (consolidated text of 14 April 2025)Article 369zClick opens the article on EUR-Lex.). A customer who expected to have paid already can refuse the parcel.