Dropshipping Sales Tax & VAT Guide: US, UK, EU, Australia (2026)

Dropshipping tax rules changed — here's what you actually need to do in 2026

Dropshipping tax is one of the most confusing parts of running an e-commerce store, and the rules changed dramatically after the US Supreme Court's Wayfair decision (2018) and Brexit (2021). The short version: you probably need to collect sales tax in more US states than you think, and if you sell to the EU or UK, you need to register for VAT even as a non-resident seller. This guide walks through the 2026 rules for the US, UK, EU, and Australia.

Important disclaimer: This guide is for educational purposes only and does not constitute tax or legal advice. Tax rules change frequently and vary by jurisdiction. Consult a licensed tax professional in your jurisdiction before making tax decisions for your business.

US sales tax for dropshippers

Post-Wayfair (2018), US states can require sellers to collect sales tax even without physical presence in the state. This is called "economic nexus". Most states have set thresholds at $100K in annual sales or 200 separate transactions in the state. Once you cross the threshold in a state, you must register for a sales tax permit and collect tax from customers in that state.

The dropshipping-specific complication: when you dropship, there are typically two sales — the supplier's sale to you, and your sale to the customer. Both can trigger tax obligations. Some states require the supplier to collect tax from you (the retailer); other states require you (the retailer) to collect from the customer. The rules vary by state.

Practical steps for US dropshippers:

1. Track sales by state — Use TaxJar, Avalara, or a spreadsheet. Most Shopify stores can use Shopify's built-in tax reports.
2. Register in states where you hit nexus — Once you cross $100K or 200 transactions in a state, register for a sales tax permit with that state's Department of Revenue.
3. Collect tax from customers in those states — Shopify can automate this once you configure tax settings for each state.
4. File and remit — File sales tax returns monthly, quarterly, or annually depending on the state. Most states require electronic filing.
5. Get resale certificates — Provide your suppliers with resale certificates so they do not charge you sales tax on the supplier-to-you transaction. (You collect it on the you-to-customer transaction.)

State sales tax rates vary from 0% (Oregon, Montana, New Hampshire, Delaware) to 7.25% (California) plus local additions. Use our Sales Tax Calculator to estimate tax for common states.

UK VAT for dropshippers

Post-Brexit, the UK has its own VAT rules separate from the EU. Key points for non-UK dropshippers selling to UK customers:

• VAT registration threshold: £90,000 annual UK turnover (mandatory registration above this)
• Voluntary registration: Below £90K, you can register voluntarily. Useful if you want to reclaim input VAT.
• Import VAT: Goods imported into the UK valued under £135 are subject to VAT at the point of sale (collected by the seller). Above £135, import VAT is collected at the border.
• UK VAT rate: 20% standard rate, 5% reduced rate (some items), 0% zero-rated (some items)
• Registration process: Register with HMRC online. Non-UK residents must appoint a UK tax representative in some cases.

If you dropship to UK customers from a non-UK supplier and goods enter the UK via mail (under £135), you (the seller) are responsible for collecting UK VAT at checkout and remitting to HMRC. This is a significant change from pre-Brexit rules.

EU VAT for dropshippers

The EU introduced the OSS (One Stop Shop) scheme in July 2021, which simplifies VAT for non-EU sellers selling to EU consumers. Key points:

• IOSS (Import One Stop Shop): For goods valued under €150 imported into the EU. You collect VAT at checkout and remit via IOSS in your registered EU member state.
• OSS (One Stop Shop): For B2C sales of services and intra-EU distance sales of goods. Single VAT registration covers all EU sales.
• VAT rates: Standard rates range from 17% (Luxembourg) to 27% (Hungary). Most EU countries are 19-22%.
• Registration: Register in one EU member state (typically the one with the lowest rate or where you have the most sales). Use the OSS portal to declare and pay VAT for all EU sales.
• Goods above €150: Subject to import VAT and customs duties at the border. Customer pays these before delivery.

The IOSS scheme is particularly important for dropshippers. If you sell goods under €150 to EU consumers and use IOSS, the customer pays VAT at checkout (no surprise customs fees). This improves CVR significantly — customers hate getting hit with customs fees at delivery.

Australia GST for dropshippers

Australia introduced GST collection for non-resident sellers in 2018. Key points:

• Registration threshold: A$75,000 annual GST turnover from Australian sales
• GST rate: 10%
• Registration: Voluntary below threshold. Mandatory above.
• Collection: GST is included in the displayed price (not added at checkout).
• Low-value goods: Goods valued under A$1,000 imported into Australia are subject to GST at point of sale (collected by the seller).

Practical checklist for dropshippers

1. Track sales by country/state — Use Shopify's built-in tax reports or a tool like TaxJar.
2. Register when you hit thresholds — Don't wait. Late registration triggers penalties in most jurisdictions.
3. Configure Shopify tax settings — Once registered, set up tax collection for each jurisdiction in Shopify Admin → Settings → Taxes.
4. Get resale certificates (US) — Provide to suppliers so they don't charge you sales tax.
5. Use IOSS for EU sales under €150 — Improves CVR by avoiding surprise customs fees.
6. File and remit on time — Late filings trigger penalties. Use a tax automation tool if you are registered in many jurisdictions.
7. Consult a tax professional — Especially if you are doing $100K+/year. A good CPA saves you more than they cost.

Use the Sales Tax Calculator

Our free Sales Tax & VAT Calculator estimates tax for common US states, UK, EU countries, and Australia. Enter your sale price and select your region — the calculator shows tax owed and total price to customer. Pair it with the Profit Margin Calculator to factor tax into your net margin calculation.