A quick reality check
You add a UK buyer to a US storefront and everything shifts. Prices must show differently, tax gets applied at another point in the flow, and a simple refund now needs a tax-adjusted credit note. This section explains how to run checkout, pricing, and refunds cleanly when selling across the US and UK/EU. It is written for finance and ops teams that may also work with an offshore partner.
What this section covers
- How sales tax and VAT behave at checkout
- Inclusive vs exclusive pricing and how to choose
- Marketplace collection rules in practice
- Returns, refunds, and credit-note mechanics
- Reconciliation workflows that tie orders, tax, and ledger
Sales tax vs VAT at checkout: the core difference
Sales tax (US)
- Applied at the point of sale.
- Usually shown exclusive of list price on product pages, then added at checkout.
- Rate depends on destination and product taxability.
- Merchant or marketplace collects based on nexus and marketplace rules.
VAT (UK/EU)
- A consumption tax on value added at each stage.
- Often shown inclusive of VAT in consumer pricing.
- Rate depends on destination, product type, and B2C vs B2B status.
- Merchant charges VAT or uses a marketplace regime or import scheme where applicable.
Why this matters at checkout
- US buyers expect a pre-tax price with tax added in cart.
- UK/EU consumers expect the final price on the product page to already include VAT.
- Your storefront needs two display modes and clear tax messaging to avoid cart drop-off.
Pricing models: inclusive vs exclusive, coupons, and rounding
Inclusive pricing (typical for UK/EU B2C)
- List price includes VAT.
- Discount logic should reduce the VAT proportionally, not after-tax.
- Rounding needs to be stable at line level and order level.
Exclusive pricing (common in US)
- List price excludes sales tax.
- Discounts apply to the net price; tax calculates on the discounted base.
- Display “estimated tax” in cart and “final tax” at payment confirmation.
Operational guardrails
- Store the tax basis, tax amount, and total as separate fields per line.
- Fix a single rounding policy (round half up) and apply it at line level to avoid penny drift.
- Document how coupons affect tax. For VAT-inclusive pricing, the VAT element must reduce with the price.
Marketplace rules: who actually collects and remits
US marketplace facilitator rules
- Most large marketplaces calculate, collect, and remit sales tax for marketplace sales.
- First-party sales on your own site remain your responsibility where you have nexus.
- Reconcile marketplace tax reports separately from your web store.
UK/EU marketplace and import regimes
- Marketplaces may be the deemed supplier for certain cross-border B2C sales and will handle VAT for those orders.
- For direct sales into the EU or UK, you may need local VAT registration or to use import schemes.
- Keep marketplace order IDs and tax documents separate to avoid double remittance.
Action for finance
- Tag each order as “marketplace collected” or “merchant collected.”
- Store the tax registration used per order (for example, your UK VAT number) to support audits and refunds.
Returns and refunds: how tax should reverse
Sales tax (US)
- Refund original tax in proportion to the refunded amount.
- If you keep restocking fees, calculate tax on the net refunded base.
- Post a negative tax line to your sales tax payable account.
VAT (UK/EU)
- Issue a credit note that mirrors the original VAT treatment.
- For VAT-inclusive pricing, the refunded amount includes VAT; the VAT portion must be shown on the credit note.
- Exchange-driven returns need a linked document trail that shows price and VAT adjustments.
Operational checklist
- Credit note or refund memo references original invoice and lines.
- Proportional VAT or tax is recalculated and posted.
- Shipping and gift-wrap logic is consistent with your original tax treatment.
- Refund reports tie to payment processor payouts and GL.
Reconciliation workflow: daily and month-end
Daily
- Pull orders, refunds, and fees from storefront, marketplace, and PSP.
- Aggregate tax by jurisdiction and registration.
- Post summarized journals: net revenue, discounts, tax payable, shipping, and fees.
Month-end
- Tie tax payable to platform tax reports and marketplace statements.
- Match refunds and chargebacks to negative tax lines and credit notes.
- Review rounding differences and penny drift; post one adjusting entry if needed.
- Export jurisdiction summaries for filing.
Data you need on every line
- Tax basis, tax rate code, tax amount.
- Jurisdiction or registration used.
- Marketplace-collected flag.
- Original document link for refunds.
Selection criteria for your tax and checkout stack
- Display control: supports both VAT-inclusive and sales-tax-exclusive pricing and can switch by buyer location.
- Exemption handling: B2B VAT numbers and US resale or exemption flags with approval workflow.
- Refund engine: creates credit notes with correct tax reversal and posts to the GL.
- Marketplace parity: imports marketplace tax documents without trying to re-tax those orders.
- Reporting: jurisdiction summaries, audit trails, and API access for your BI tools.
- Access and privacy: role-based access, SSO, activity logs, and masked PII for offshore teams.
Working with an offshore team on cross-border tax
What to document
- Pricing mode by region and product type.
- Discount and coupon tax logic with examples.
- Refund playbook with sample credit notes.
- Who files returns for each jurisdiction and where reports live.
- Approval paths for tax overrides and exemptions.
What to restrict
- No local downloads of order exports with full PII.
- Time-bound credentials and activity logging for tax reports and PSP portals.
Takeaway
Use this guide to navigate Sales Tax vs VAT for Cross-Border Ecommerce: Checkout, Pricing, Refunds without guesswork. If you need a clean rollout with dual pricing modes, marketplace reconciliations, and refund-ready credit notes, Madras Accountancy can design the flow, document the SOPs, and run a short pilot with your stack.
