Best Practices for Sales Tax Display in The Checkout

Why is handling taxes in checkout so hard?

What are the different taxes involved?

Selling in Europe

  • B2C: Always charge VAT on the sale of digital goods using the VAT rate applicable in the European customer’s country.
  • B2B: Use the reverse-charge VAT mechanism. Do not collect VAT from the buyer, but request their VAT number and provide them with a detailed invoice.
  • B2C and B2B in the European country where your business operates: Always charge VAT when selling digital goods in your home country.
  • Outside your home country, in the EU:
  • B2C: Always charge VAT for all B2C sales. The VAT rate depends on the yearly volume of cross-border digital good sales you make across the entire EU. If you sell below €10,000 (~$12,000) in digital goods throughout the EU in a year, you may charge the VAT rate of your home country. If you sell more than this threshold in a year, then you must charge the VAT rate of your customer’s country of residency.
  • B2B: Do not charge VAT, but request the buyer’s valid VAT number for invoicing and your records. The buyer will pay the VAT themselves to their own government.
  • B2C: Always charge VAT at the rate of the European customer’s country of residence.
  • B2B: Use the reverse-charge VAT mechanism (provide an invoice with information and your customer will pay the VAT).
  • B2C: Always charge VAT. If your annual sales to that country exceed a certain threshold (which varies by country), charge the destination country VAT rate and register for a VAT number in that country. If your annual sales to the consumer’s country are below the imposed threshold, then you charge the VAT rate of your own country and file for taxes in your own country.
  • B2B: Use the reverse charge VAT mechanism and collect the business’ VAT number.

Real-world VAT examples

Selling in the U.S.

Selling in the rest of the world

Best practices when displaying pricing

Conclusion

2Checkout (now Verifone) is the leading all-in-one monetization platform for global businesses built to help clients drive sales growth across channels.

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2Checkout (now Verifone)

2Checkout (now Verifone)

2Checkout (now Verifone) is the leading all-in-one monetization platform for global businesses built to help clients drive sales growth across channels.

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