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Online marketplace tax laws around the world

Online marketplace tax laws around the world

Following the rise of tax laws for e-commerce platforms, we’ve created a comprehensive list of every country and jurisdiction in the world where online marketplaces have tax obligations.

This is a supplement to our ongoing, up-to-date report on digital tax laws around the world that affect online sellers.

The tax requirements for e-commerce platforms can range from detailed reporting obligations to liability for actually collecting and remitting the consumption tax on B2C sales made through the platform.

In policies around the world, these platforms can be referred to in the following ways:

  • Online marketplaces
  • Electronic marketplaces
  • Electronic distribution platforms
  • Electronic interfaces
  • Marketplace operators
  • Marketplace facilitators

Each country’s definition might be slightly different, so if you’re curious whether tax laws apply to your platform or the marketplaces where you sell, please always double check with local authorities or a tax professional. 

Australia

In Australia an online marketplace is called an electronic distribution platform (EDP), and they are responsible for collecting GST on sales to Australian consumers.

EDPs are defined as “a service that’s delivered by electronic communication (such as a website)”, which allows vendors to make sales of low-value imported goods and/or digital products and services.

The following do not count as an EDP:

  • Services that only advertises your products (for example, providing a link for customers to buy goods from your website)
  • Carrier or delivery services
  • Payment processors

For vendors: If the EDP operator is responsible for tax, these sales do not count towards your turnover when deciding if you need to register for GST in Australia.

Check out the rest of the Australian Tax Office’s information about EDP tax laws for physical goods and digital products.

Canada

If you are a distribution platform operator, you’re required to charge and collect the GST/HST on the supply of qualifying goods that are sold through your platform by vendors who are not registered for GST/HST.

For vendors: If you are already registered under the normal GST/HST regime, then you are required to charge and collect the tax on your transactions, even if those sales are made via a distribution platform! As an online seller, learn more about Canada’s GST/HST for e-commerce and digital products.

Or continue reading the Canadian Revenue Agency’s information on GST rules for distribution platform operators.

European Union

In EU policy, online marketplaces are called “electronic interfaces.” Here’s the official definition from the VAT directive’s explanatory notes:

Electronic interface (EI) – should be understood as a broad concept which allows two independent systems or a system and the end user to communicate with the help of a device or programme. An electronic interface could encompass a website, portal, gateway, marketplace, application program interface (API), etc.

What the platforms are generally responsible for:

  • If the electronic interface is considered the deemed supplier in the transaction, then it is responsible for VAT.
  • If it is not the deemed supplier, then the platform is still obligated to keep VAT records.

In addition to the above guidelines, member states can put in place their own specific rules. For example, in Germany, online marketplaces are potentially liable for any VAT that their merchants fail to pay! Be sure to check the rules in the individual countries where you’re selling/operating.

Continue learning about how the EU VAT rules for online marketplaces affect your business. Or check out the European Commission’s information on e-commerce VAT.

India

In India marketplaces are called “electronic commerce operators” and are required to collect and remit some GST under the law known as “Tax Collection at Source (TCS)”.

However, it’s unclear whether platforms are required to collect the typical GST rate applied to various products, such as the 18% for digital goods. Instead, there seems to be a special tax mechanism going on.

India’s Central Goods and Services Tax Act Section 52 says:

These operators should collect “an amount calculated at such rate not exceeding one per cent [...] of the net value of taxable supplies made through it by other suppliers.” 

This suggests that vendors are still required to collect the GST on their individual sales to Indian consumers, but online marketplaces will take 1% of the vendor’s taxable sales and deposit it with the government. 

For vendors: If you are registered for Indian GST, you will receive a tax credit for the total amount collected by the platform operators.

Platforms without a physical location or local employee in the region must appoint a tax representative who is liable for registering and paying GST. Then they must provide monthly (and one annual) electronic reports of all sales and the tax collected.

Indonesia

Online marketplaces might be liable to charge and remit VAT on sales made to Indonesian consumers. Though there’s a provision for it in the law, it’s not very specific about which platforms the rule applies to.

An online marketplace operator is defined as:

(...) an entity which provides the electronic communication service that allows overseas merchants to make sales of digital products to Indonesian customers.

In addition to potential liability, online marketplaces have tax reporting requirements. They’re required to record all transactions by vendors and submit the details to Indonesia’s Directorate General of Taxes.

New Zealand

Marketplaces will generally be responsible for GST on a sale made by a vendor through the platform if:

  • the platform is registered or required to be registered for GST*
  • it is a sale of low value goods by a non-resident merchant to a consumer
  • either the platform or the vendor helps deliver the goods to New Zealand.

If none of the above applies, then the platform and the vendor must agree that the vendor is responsible for the GST. The documentation given to the customer (e.g. an invoice) must identify the vendor as the supplier and not the marketplace.

*Marketplace registration threshold: Platforms will need to count these sales, plus any other sales they make that GST applies to, towards its GST turnover. If the turnover meets the NZ$60,000 threshold in a 12-month period, the platform will need to register and return GST on these sales.

New Zealand’s Inland Revenue has provided more information about GST requirements for online marketplaces.

Thailand

Online marketplaces are called “electronic platforms” in Thai tax policy, and they’re liable for VAT on behalf of vendors only under specific conditions.

First, here’s the definition according to Thai law:

Electronic platform refers to market, channel, or any other procedure that many service providers use to provide their services to the service recipients. (Electronic platform acts as an intermediary between service providers and service recipients and facilitates service transactions.)

Electronic platforms that sell other electronic services (digital goods) must register for Thailand’s VAT once their sales surpass 1.8 million baht in one calendar year.

Once that income threshold is met, the platform is liable for VAT on behalf of the vendors if it also does these three things:

  • Offers the service
  • Receives payment of service
  • And delivers the service. 

Thailand’s Revenue Department provides more information about its e-Service tax law for online sellers and marketplaces.

United Kingdom

Online marketplaces can be liable for collecting and reporting VAT for sales to UK customers. These rules do not apply to Northern Ireland, which has its own specific tax regime since Brexit.

If the goods are located outside the UK

  • When an online marketplace (OMP) facilitates an import sale under £135, it is responsible for charging and reporting VAT.
  • If the import’s value is above £135, then the usual import VAT obligations fall on the vendor.

If the goods are already located inside the UK 

  • When an overseas vendor sells on an e-commerce platform and the goods are already in the UK, then the OMP is responsible for tax no matter the sale’s value. 
  • The overseas vendor will first sell the goods as a zero-rated supply to the OMP. (This can be declared in their UK VAT return in box 6.) The OMP will then sell to the consumer at regular UK VAT rates.

The UK’s HMRC has provided further guidance for goods sold via online marketplaces.

United States

Most states in the US have marketplace facilitator tax laws, which hold platforms responsible for collecting and remitting sales tax on behalf of the vendors. The trick is that each state’s laws will vary, as far as who the rules apply to and how.

Generally speaking, a marketplace facilitator only becomes responsible for sales tax once its platform sales in that state have surpassed a certain threshold and it has acquired economic nexus. Each state has its own sales threshold.

Currently the only states that do not have such laws are:

  • Delaware
  • Montana
  • New Hampshire
  • Oregon

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* At Quaderno we love providing helpful information and best practices about taxes, but we are not certified tax advisors. For further help, or if you are ever in doubt, please consult a professional tax advisor or accountant.