Setting Up Tax for International Sales: A Step-by-Step Guide

Tax is the part of selling internationally that quietly stops a lot of otherwise-ready merchants in their tracks. Different countries use different systems, different rates, and different filing rules, and the language around it is deliberately intimidating. The good news is that you do not need to understand every jurisdiction on earth to start selling abroad — you need to understand the handful of systems that actually apply to your customers, register where you are genuinely obliged to, and configure your store so the right amount is charged at checkout. This guide walks through all three.

A quick, important note: this is general information to help you understand how cross-border tax works and how to set it up in your store. It is not tax or legal advice, and thresholds and rules change. Before you register or file anything, confirm your position with a qualified accountant or the relevant tax authority for the countries you sell to.

The three tax systems you'll actually meet

Almost every consumption tax you encounter as an online seller falls into one of three families. Knowing which one applies tells you how it behaves.

• VAT (Value Added Tax). Used across the UK, the EU and many other countries, typically in the 15–27% range. VAT is charged on the sale and shown as part of the price to consumers. If you sell to shoppers in a country where you are VAT-registered, you generally charge that country's VAT, then remit it. For a UK-specific walk-through, see our guide to UK VAT for online sellers.

• GST (Goods and Services Tax). Used in Australia, New Zealand, Canada, Singapore, India and others. It behaves much like VAT — a broad tax on consumption — but each country sets its own rate and registration threshold, and some (like Canada) layer regional taxes on top.

• US sales tax. The odd one out. There is no national sales tax; instead each state — and often the county and city within it — sets its own rate. You only collect in states where you have nexus, meaning a physical presence or enough economic activity (commonly around US$100,000 in sales or 200 transactions a year into that state) to create an obligation. It is also generally added on top of the displayed price at checkout, rather than being included in it.

Registration thresholds: where you're actually obliged

You are not required to register everywhere the moment you make a sale. Most systems have a threshold below which you have no obligation, and getting these right saves you from both under-collecting and needlessly registering in places you don't need to.

• UK VAT: registration becomes compulsory once your taxable turnover passes £90,000 in a rolling 12-month period. Below that you can register voluntarily, but you're not required to.

• Selling into the EU: since the 2021 reforms there's a single EU-wide distance-selling threshold of €10,000 for cross-border B2C sales. Cross it and you charge each customer's local VAT rate — but you can report all of it through one One Stop Shop (OSS) return rather than registering in every member state. Our guide to selling to the EU from the UK post-Brexit covers OSS, IOSS and the post-Brexit paperwork in detail.

• US states: economic nexus thresholds are set per state, most commonly $100,000 in sales or 200 transactions into that state within a year. You track your sales into each state and register once you cross its line.

• GST countries: thresholds vary widely — Australia's is A$75,000, for example — so check each market individually.

The practical takeaway: research the thresholds for the specific markets you're targeting, not every country in the world. Most new international sellers only cross a threshold in one or two places for a good while.

Duties and import taxes are a separate thing

It's easy to conflate the tax you collect at checkout with the customs duties and import VAT that can apply when a parcel crosses a border. They're different problems. Duties are charged by the destination country on goods entering it, and how you handle them — whether the customer pays on delivery (DDU) or you collect everything up front (DDP) — dramatically affects the buying experience. Under-preparing here is one of the most common causes of refused or returned international parcels. We cover the trade-offs in selling internationally from the UK: customs and duties, and shipping mechanics more broadly in our shipping strategy guide.

Setting it up in Dirora

Once you know where you're obliged to collect, configuring your store is the straightforward part. In Dirora, open Settings → Tax Configuration and enable tax for each region you sell to. From there you can:

• Apply the correct rate by region. Set the rates for the countries (and, where relevant, states) where you're registered, so the appropriate amount is calculated based on the customer's shipping address.

• Choose tax-inclusive or tax-exclusive pricing. This is the switch that makes VAT and US sales tax markets behave differently — more on that below.

• Keep the data you'll need to file. Every order records the tax charged and the rate applied, and Dirora's order reports and real-time analytics let you export it when it's time to complete a return.

Tax rarely sits in isolation from currency. If you're quoting prices to international shoppers, our multi-currency and multi-language guide pairs naturally with this one — Dirora's Multi-Currency support lets customers see and pay in their own currency, while your tax settings determine what's added or included on top.

Getting the price display right

This is where sellers most often trip up, because the convention is the opposite in different markets:

• UK and EU (VAT): the price a consumer sees must include VAT. A £30 product is £30 at the shelf and £30 at checkout — the tax is already inside it.

• US (sales tax): prices are typically shown without tax, and the sales tax is added at checkout based on the delivery address.

Dirora supports both conventions, so you can present tax-inclusive pricing to your UK and EU customers and tax-exclusive pricing to US shoppers from the same catalogue. Setting this correctly isn't just cosmetic — displaying VAT-exclusive prices to EU consumers can breach local consumer-pricing rules, so it's worth getting right from day one.

Record keeping and filing

Whatever systems you end up registered for, the underlying discipline is the same: keep clean, complete records. For every transaction you want the tax collected, the rate applied, the customer's location and the date. Dirora captures this automatically and exports it from your order reports, which turns filing a VAT, OSS or state return from an archaeology project into a data export. Store your records securely, keep them for as long as each jurisdiction requires (often six years or more), and reconcile them before each filing deadline.

Start small, expand deliberately

You don't have to solve every market before you launch. Sell into your home country and one or two nearby markets first, register only where you're genuinely obliged, and add regions to your tax configuration as your sales into them grow. It's far easier to switch on a new region in your store than to unpick a year of mis-collected tax. When you're ready to expand the storefront side to match, our features overview and pricing page show what's included on each plan — and, worth noting on thin international margins, Dirora charges no transaction fees on any plan.