VAT & Tax implications RE: selling in the USA

[thepeoplespal]

I've made arrangements to enable me to sell our range of products to customers in USA and Canada.

This will be under a drop-shipping arrangement (We take the order and money from the customer, we pay our supplier, and they ship the product to our customer), at no time does the product come into the EU.

So will these sales incur any VAT from HM Customs and Excise when/if we hit the VAT threshold or would these sales be exempt.

If anyone has any help with regard to this or any other words of advice for me I'd be grateful to hear about it.

[Eric Mc]

Exports to non-EU countries are normally Zero Rated (not Exempt). However, I would advise you to get hold of the VAT Leaflet covering supplies of goods and services to overseas customers as this area can get quite complicated. The leaflet should be obtainable as a pdf file from the Customs and Excise website.

There should be no tax implications - sales would be treated as part of the normal trade sales of the business.

If your business is a limited company, there may be some additional disclosures required in the statutory accounts.

[Don]

We used to sell services in the US. All that was VAT free...hundreds of thousands of £s worth.

This was a few years ago now - best to check current regulations with your auditors...

[davidy]

Biggest issue in selling to the USA is the insurance aspect, most business insurance (public and product liability) excludes selling to the US (due to the potential high ligigation costs). You can obviously get exclusions to this but it can cost you!

I would check your insurance policies before you ship anything to the US.

davidy

[thepeoplespal]

Eric Mc said:

Exports to non-EU countries are normally Zero Rated (not Exempt). However, I would advise you to get hold of the VAT Leaflet covering supplies of goods and services to overseas customers as this area can get quite complicated. The leaflet should be obtainable as a pdf file from the Customs and Excise website. There should be no tax implications - sales would be treated as part of the normal trade sales of the business. If your business is a limited company, there may be some additional disclosures required in the statutory accounts.

Thanks the tip, its not a limited company, so no worries there. I think we will have to get a US Dollar bank account if we start doing any sales.

As to insurance I'll have to find out a few more details, I wouldn't expect product liability for dresses to be too onerous, but you never know.

[davidy]

Until someone falls over putting one on, then sues you, it is the USA you are dealing with here!! My advice would be:-

1) Become a Ltd company, this obviously limits your liability to the business, rather than yourselves
2) Ensure you have proper insurance in place

Trading with the USA can be a real minefield, be careful out there!

davidy