VAT and GST Basics for US Companies Selling Abroad

US sales tax is collected once, at the final sale to the end consumer. VAT and GST are collected at every stage of the supply chain, with each business in the chain charging tax on its sale and reclaiming the tax it paid on its own purchases, so only the value added at each step is actually taxed to the government. That matters for a US company because it means you may need to charge VAT to a business customer who can later reclaim it, register in a country even if you sell nothing directly to consumers there, and issue invoices formatted to that country's specific requirements, not your standard US invoice template.

Registration triggers differently depending on what you're selling and to whom. Selling digital services (software subscriptions, downloads, streaming) to consumers in the EU or UK generally requires VAT registration from your first sale, with no minimum threshold, because these rules were written specifically to stop foreign digital sellers from avoiding local tax. Selling physical goods usually has a threshold you can watch for, but once you cross it you typically owe VAT retroactively to the start of the period, not just going forward. Selling only to VAT-registered businesses (B2B) can sometimes shift the reporting obligation to the customer under a reverse-charge mechanism, which is why knowing whether your customer is a business or a consumer changes your obligation.

A VAT invoice has to show information a standard US invoice doesn't: your VAT registration number, the customer's VAT number if they're a business, the tax rate applied, and the tax amount broken out as its own line, not folded into the total. Most billing systems built for the US market don't do this by default, so this is worth testing with a real invoice before you have real customers depending on it.

• Confirm your billing system can capture and validate a customer's VAT or GST number
• Confirm it can apply the right rate by customer country and, in some countries, by product category
• Confirm the invoice template shows tax as a separate line, not bundled into the price

Once you're registered in a country, you owe a return on that country's schedule, whether or not you had meaningful sales that period. Missing a filing deadline in a country you barely sell into is a common way small companies rack up penalties for a market that's supposed to be a rounding error on revenue. Before you register anywhere, decide who owns each country's filing calendar and whether that's a local tax advisor, a global VAT compliance service, or an internal person tracking a spreadsheet of due dates. For gross margin across industries, benchmarking your own margin trend after adding foreign VAT compliance costs¹ can help you see whether the overhead of a new market is actually worth the incremental revenue.

VAT and GST rules, rates and registration thresholds vary by country and change over time, so treat any specific rate or threshold as something to verify at the time you need it, not something to assume from a prior launch. Before entering a new country, confirm with a local tax advisor or a global VAT compliance provider: whether your specific product category is taxed at the standard rate or a reduced one, whether you need a local fiscal representative, and what the registration lead time actually is, since some countries take weeks to process an application and you don't want to be selling there unregistered in the meantime.