In June, the U.S. Supreme Court uprooted about a half-decade of accepted sales tax policy when it changed how states can now determine sales tax collection requirements from remote (out-of-state) sellers.
This year, Australia instituted its GST tax on virtually all imported goods. The new law eliminated the “tax-free” threshold of AU $1,000 that allowed buyers to import products from the U.S. and Europe and effectively pay no tax on imported goods placing local merchants at a significant disadvantage.
eBay changed its platform to include the 10 percent GST tax to display on listings to buyers located in Australia.
The marketplace would collect the 10 percent tax and submit it to the Australian Tax Office and most often remote sellers were not even aware this happened on their listings unless an Australian buyer asked a question about it.
However, Amazon decided to go another way and completely banned the sales of goods to Australia from all of its non-Australian platforms.
Instead, the company decided to add a section to the Australian site that added a selection of “imported goods” from other marketplaces that Australians could buy, but with the 10 percent GST added.
This is only a small sampling of major recent changes that have impacted cross-border or interstate sales for small businesses.
As marketplaces like eBay and Amazon continue to expand and dominate in significant consumer countries such as the U.S., UK, Germany, and others, political leaders are faced with declining tax revenues from local merchants.
New “Umsatzsteuer” (Sales Tax) Law in Germany?
German consumers are expected to purchase over $70 billion in goods online in 2018, reaching over $90 billion by 2022.
With a nearly double-digit annual growth in online sales, on Wednesday the German federal government apparently will present a new proposal that tries to mitigate lost sales tax revenues due to the explosive growth of global eCommerce.
Details are still a bit sparse, but it seems German finance minister Olaf Scholz is proposing that marketplaces such as Amazon and eBay must collect sales taxes from sellers that are not registered in Germany’s tax system and may even have to collect sales taxes from those that have failed to remit the taxes.
In other words, the government wants to collect sales taxes on sales from out-of-country sellers, especially from popular seller location countries such as China and the U.S., and make eBay, Amazon, and other online marketplaces responsible for collecting those taxes.
How this scheme is supposed to work should come to light later this week during a cabinet meeting when the proposal will be officially discussed. But it appears the government is aiming to have this law in place starting January 1, 2019.
The German government claims it is losing hundreds of millions of sales tax revenue per year from sales that originate outside Germany and are not properly taxed in Germany.
Marketplaces Are The Target
Unlike the U.S. situation with sales tax, it seems other countries have decided to go straight after marketplaces to help them collect sales and similar revenue based taxes.
For sellers that is clearly the simplest method as marketplaces become the responsible party to the government agencies for their collection efforts.
However, sellers may want to look at how to price products differently between countries.
Unlike the U.S., most buyers in other countries expect all taxes to be included in the sales price. To accommodate local customs, but also fall in line with local laws, marketplaces may display prices that are different from the prices sellers may enter for their goods on U.S. sites.
In select situations, that could place some seller’s prices into an uncompetitive position for the country. The concept of list it on the U.S. site and sell it globally may need some rethinking.
Especially U.S. sellers that may sell brand-name merchandise under U.S. pricing policies such as M.A.P. (Minimum Advertised Price) or the “Colgate Doctrine” want to rethink pricing strategies.
It may be wiser for these sellers to use localized country marketplaces to list their products so that they adjust the base price of their products before marketplaces slap new taxes on the displayed price to follow local laws and customs.
What do you think about the “taxation” of eCommerce around the globe? Head over to our Facebook Discussion Group or use the comments section below.