2020 sales tax changes
4: Ecommerce sellers gear up for international sales
Cross-border ecommerce is growing rapidly at a rate estimated to be two times that of traditional ecommerce. Forecast to reach $1 trillion in sales by 2020, by 2022, cross-border ecommerce sales could account for more than 15% of the world's online retail market. U.S. sellers certainly want a piece of the global pie — but there’s no international gain without tax pain.
While this report mainly deals with U.S. tax news and predictions, major tax events around the globe can’t be overlooked, especially by ecommerce companies.
The elephant in the room: Brexit
It’s practically impossible to talk about international news without mentioning Brexit, currently scheduled for January 31, 2020.
Since many U.S. businesses use the U.K. as a gateway to the largest single free market in the world, Brexit is likely to dramatically alter their access and benefits.
Business dealings in the EU will likely become more complex, bogged down by bureaucracy as well as new or higher VAT obligations or tariffs. The details have yet to work themselves out, but for any business that’s established a presence in the U.K. mainly as a means of operating in the EU, things are about to get trickier.
New rules for marketplaces: Simplification comes at a cost
To combat VAT fraud, new regulations are rolling out in France, Germany, Italy, and the U.K. The big change is that as of January 2020, marketplace facilitators in France are responsible for verifying the VAT numbers of non-EU sellers. They must also assess and report the VAT due to the tax authorities. The rest of the EU is planning to institute similar measures in 2021 but will go further by making the marketplace the ‘seller of record’ on certain transactions, meaning they must charge and remit any VAT due. In the U.K., marketplace facilitators are already helping ensure their non-EU sellers are VAT compliant.
Much like the manner in which economic nexus rolled out in the U.S., how this pans out globally will vary from country to country (that’s the complex bit).
Fraud alert: Cheap packages don’t get a pass anymore
Many countries with VAT will continue to work to close the VAT Gap in 2020 and beyond: The EU loses billions to VAT fraud every year — an estimated €137.5 billion in 2017 alone. To that end, more countries in the EU are scrapping low-value parcel relief, meaning VAT will apply to all sales by non-EU sellers (Norway is removing its low-value exemption starting January 1, 2020). This will have an enormous impact on American sellers that do business in the EU.
In 2021, online marketplaces will become the official seller of record for all their sales in the EU, and thereby responsible for charging and collecting VAT for their non-EU sellers.
And lest we forget …
President Trump’s unpredictable tariffs generally affect the global supply chain in numerous ways.