Cross-Border Selling Guide: Tariffs, VAT, and Sales Tax Nexus

Selling internationally opens up massive new markets — but it also introduces complex tax obligations that can eat into your margins if you are not prepared. Import tariffs, EU VAT, US sales tax nexus, and currency conversion all affect your bottom line. This guide walks through each obligation and shows you how to calculate your true cross-border profit.

1. Import Tariffs (Customs Duties)

When you import goods into the United States, you owe customs duties based on the product's Harmonized System (HS) code and country of origin. Tariff rates range from 0% (many electronics) to over 300% (certain agricultural products). Recent trade policy changes have added additional tariffs on goods from China, making it critical to calculate duties before pricing your products.

To calculate your import tariff: (1) find your product's HS code, (2) look up the duty rate for the country of origin, (3) multiply by the customs value of the goods, (4) add any additional fees (merchandise processing fee, harbor maintenance fee).

2. US Sales Tax Nexus

After the 2018 South Dakota v. Wayfair Supreme Court decision, states can require remote sellers to collect sales tax even without a physical presence. This is called "economic nexus." Most states require collection if you exceed $100,000 in annual sales or 200 transactions in that state.

If you sell through marketplaces like Amazon, eBay, or Etsy, the marketplace collects sales tax on your behalf under "marketplace facilitator" laws. But if you sell through your own website, you must register, collect, and remit sales tax in every state where you have nexus.

3. EU and UK VAT

If you sell digital goods or services to consumers in the EU, you must charge VAT at the customer's country rate once you exceed €10,000 in annual cross-border EU sales. VAT rates range from 17% (Luxembourg) to 27% (Hungary). The UK has similar rules post-Brexit, with a standard VAT rate of 20%.

For physical goods imported into the EU, the Import VAT applies. The EU removed the €22 low-value consignment threshold in 2021, meaning all imports are now subject to VAT. The IOSS (Import One-Stop Shop) system allows you to collect and remit VAT at checkout for goods under €150.

4. Currency Exchange

When selling internationally, you will receive payments in foreign currencies. Exchange rate fluctuations can significantly impact your profit. A 2% unfavorable exchange rate movement on a $50,000 order costs you $1,000. Always factor in a currency conversion margin (typically 1-3% charged by payment processors) when pricing international orders.

5. Calculating True Cross-Border Profit

Your cross-border profit is not just sale price minus cost. You must subtract: tariffs, customs fees, VAT or sales tax you owe, currency conversion costs, international shipping, return costs, and marketplace fees. Many sellers discover their international "profit" is actually a loss after accounting for all these costs.

Cross-Border Selling Checklist

1. Look up your HS code and calculate import tariffs
2. Check economic nexus in US states where you sell
3. Register for VAT if selling to EU/UK consumers
4. Factor in currency conversion costs (1-3%)
5. Calculate total landed cost (product + shipping + duties + taxes)
6. Set prices that maintain margin after all costs
7. Choose payment processors that handle multiple currencies
8. Track international sales separately for tax reporting

Start at the Cross-Border Trade Toolkit for all the tools you need.