FAQ: Taxation

Introduction to consumption taxes

Consumption taxes are levied on goods and services, with businesses collecting them from customers on behalf of governments. These taxes vary by country, state, province, product type, client type and even postal code in some regions.

The introduction focuses on:

• Sales Tax (US) – Applied to goods and services
• Value-Added Tax (VAT) (UK & Europe) – A tax added at each stage of production

Unlike income tax, which individuals and businesses pay directly based on earnings or profit, consumption taxes are charged at the point of sale and paid by the customer. While collection methods vary, the result is the same: the end customer covers the tax.

Determining the exact tax isn’t straightforward. Several factors impact the tax treatment of physical goods, including:

• The ship-from and ship-to locations
• Whether the customer is a business or consumer
• Who owns the shipping contracts
• How each jurisdiction categorises the product

Tax rates can differ even within the same region. For example:

• A customer in downtown Los Angeles pays 9.5% sales tax on a jumper
• A customer in Culver City (also in Los Angeles County) pays 10.2% for the same item

Product taxability also varies:

• In Texas, cowboy boots are tax-free, but hiking boots are not
• In Ireland, children’s footwear is tax-free, while adult footwear is taxed

Unfortunately, no single formula determines which tax applies to your business or your customers. We recommend consulting a tax advisor for guidance specific to your situation.

Do I need a business and tax registration to place orders or sell with Prodigi?

No. Both businesses and individuals can place orders with Prodigi.

• If you’re an individual, we will apply taxes relevant to individual customers.
• If you’re the merchant of record, we will apply taxes based on B2B transactions.

However, whether you qualify as an individual or a business depends on the tax regulations in your operating regions. This classification affects how we charge taxes to you and how you must charge taxes to your customers.

If you’re unsure about your tax status, we recommend consulting a tax advisor.

How can I update my tax settings in my account?

You can update your tax settings in your Prodigi dashboard. This includes:

• VAT ID/IOSS/OSS – Add or update your tax registration details
• Resale/Exemption Certificates – Upload certificates for US tax exemptions
• Tax Preferences for US Orders – Adjust settings via a checkbox option

For further assistance, please reach out to our support team at support@prodigi.com.

Who is responsible for paying import taxes and customs fees?

We try to produce locally whenever possible, but due to our vast catalogue, some orders may cross borders and incur customs fees or import taxes.

The responsibility for these charges lies with the merchant, though they can choose to cover them for their customers. If the merchant doesn’t cover them, the end customer will be responsible for payment.

If you’re a merchant with a valid IOSS or OSS number, please make sure your details are entered in the dashboard to prevent unnecessary customs delays.

Who is responsible for ensuring that any applicable taxes are paid?

As a merchant, it’s important to ensure you comply with tax obligations in each geographic area where you do business. If you’re unsure of these obligations, please contact your tax advisor.

Prodigi is responsible for charging the correct tax amounts to our merchants, and our invoices will reflect this.

If Prodigi acts as the “merchant of record” (meaning we sell directly to the end customer and/or receive payments from the end customer – with the end customer being anyone who hasn’t provided proof of being a business), we’ll be responsible for charging the correct tax to the end customer. The merchant will receive the correct tax on their profit invoice. For more information, please refer to our FAQ: How are taxes handled when Prodigi acts as the merchant of record?.

Can I claim back consumption taxes on my order?

Certain businesses can claim back consumption taxes from suppliers’ invoices. Whether or not your business is eligible for a tax refund depends on local regulations, your business type and where your business is located or has tax registrations.

As a general rule, if you have a tax registration in a country, you can usually claim back the consumption taxes for that country on your suppliers’ invoices. If not, different rules may apply.

UK VAT

UK companies registered for VAT can claim back VAT on domestic supplies when filing their VAT returns.

For businesses outside the UK, without a UK VAT ID, eligibility for a refund depends on conditions such as not making taxable supplies in the UK, except when the buyer self-assesses UK VAT. UK VAT refund claims must be submitted by 31 December for VAT incurred between 1 July of the previous year and 30 June of the current year. The UK tax authorities generally process these claims within six months.

For more detailed information, please refer to the UK government’s guidance on VAT refunds for non-EU businesses visiting the UK.

US sales taxes

Sales taxes in the US depend on the state, territory or district where the products are delivered. If your business qualifies, consider applying for a resale or exemption certificate. If you provide us with a valid certificate, we’ll adjust how we charge taxes accordingly.

How is VAT applied to my UK orders?

If your order is being delivered to the UK, you’ll be charged UK VAT at 20% on the fulfilment costs. This VAT will apply to the total cost of the order, as per the applicable UK sales tax rate.

What are the sales tax implications for dropshipping in the US?

A dropshipment is a sale where a retailer accepts an order from an end customer, then places the order with a third party (e.g., a print on demand manufacturer or print API platform) and instructs the third party to produce and deliver the item to the end customer.

When it comes to sales taxes, the dropshipping fulfilment model is made particularly complex due to issues of nexus, product sourcing, customer location and the location of our print facilities.

Simplified, our dropshipment sales tax model involves:

1. Retailer (You) taking the end customer’s order and charging appropriate sales taxes
2. Retailer (You) placing the order with the dropshipping platform (Prodigi)
3. Dropshipping platform (Prodigi) charges Retailer (You) with the appropriate sales taxes for that specific order (Prodigi determines these automatically based on each order’s specific delivery criteria)
4. Platform (Prodigi) places the order with the manufacturing facility
5. Manufacturing facility (Partner or Prodigi) charges Platform for order and applies the correct local sales taxes for the order
6. Manufacturing facility (Partner or Prodigi) contracts with a courier partner to deliver the product to the customer
7. Courier company invoices Manufacturing facility (Partner or Prodigi) for shipping service and applies correct local sales taxes to shipment invoice

If the Retailer (You) has nexus in the state where the sale occurs, the Retailer (You) collects sales tax from the end customer, even if the retailer engages a third-party dropshipping platform or print facility to manufacture and deliver the product.

Does Prodigi charge US sales tax?

Prodigi charges US sales tax on all applicable orders being delivered to US addresses, unless you provide proof of a resale/exemption certificate or sell through a marketplace that automatically charges US sales tax to the buyer (see FAQ on Etsy below).

What is sales tax nexus?

Sales tax nexus applies to companies trading in the US.

Sales tax nexus is the connection between a seller and a US state that requires the seller to register, collect and remit tax on sales made in that state.

The term is used when a retailer has a physical presence in a particular state, but also applies to online retailers when they have:

• Employees or sales representatives in a state
• Store inventory or stock in a state
• Pass an individual state’s economic threshold for total revenue or number of transactions in that state

The sales thresholds vary from $10,000 to $500,000 in sales, and some states don’t have a transaction threshold at all. For an excellent guide as to the specifics of sales tax nexus and whether they apply to your business, we recommend referring to TaxJar’s blog post on sales tax by state.

It is the responsibility of all Prodigi clients to ensure they pay any applicable sales taxes to the countries they are transacting in.

How can I figure out which registrations I need for taxes?

Determining whether you need to register for consumption taxes can be complex. Always double-check your findings with a tax advisor, regardless of any guidelines you find online.

As a general rule, whether or not you need to register for consumption taxes in a specific country or state depends on:

• Your total annual sales in that country or state
• Whether your company is considered to have a local presence there. In the US, this is referred to as “Nexus” by state.
• Whether you produce any orders in that location. For example, in the EU, you may be eligible to register for OSS if your orders are produced and shipped within the EU.

Is consumption tax charged on both products and shipping?

Where chargeable, consumption tax is charged on both products and shipping.

How are taxes handled when Prodigi acts as the merchant of record?

When clients use our merchant payment services (e.g., Print Shop, Mobile SDK checkout, or Photo Book platforms), Prodigi becomes the merchant of record and establishes a direct financial relationship with the end consumer.

This means the commercial relationship is between the consumer and Prodigi, and we handle all applicable taxes. When issuing clients their share of profits from any transaction (e.g., Product Selling Price minus the Cost of Goods Supplied), the self-generated VAT invoices we produce will include UK VAT at 20%.

For U.S. transactions, Prodigi follows economic nexus laws once the transaction thresholds for each state have been exceeded.

What are US sales tax holidays and how do they work?

A sales tax holiday is a limited period during which certain US states make specific products tax-exempt.

Sales tax holidays vary from year to year, with some states finalising the exact dates just weeks or even days in advance, making them difficult to track. Here’s a list of sales tax holidays in 2025.

How do resale and exemption certificates work for US consumption taxes?

What is a resale certificate?

A resale certificate is a signed document indicating that the purchaser intends to resell the goods, making the purchase exempt from sales tax.

Resale certificates are typically issued in a “blanket” form, meaning they apply to all items purchased from a vendor.

States that allow resale exemptions accept either a state-issued resale certificate or, in some cases, a multi-state certificate. To find the appropriate resale certificate, visit the state’s Department of Revenue website or search for the state’s resale certificate online.

What is an exemption certificate?

An exemption certificate allows tax-exempt purchases based on the purchaser’s status or circumstances. Eligible entities vary by state but often include:

• Nonprofit organisations
• Religious or educational institutions
• Government entities
• Certain industries

How can I provide my resale or exemption certificate?

Please email tax@prodigi.com, and we’ll provide the necessary links to upload your certificate, along with supporting details, to our online tax platform.

How much sales tax will I be charged on US orders?

Prodigi will charge you based on the value of the items we’re selling to you, and invoices will include the US sales tax rate of each order’s destination state where applicable. We’ve included a complete list of US sales tax rates by state so that you can find out if and how much you’ll be charged.

Should I register for sales tax in the US?

If you’re not currently registered for US sales tax, you might want to take legal/accounting advice on whether you should be.

How is US sales tax applied for marketplace sellers? Doesn’t the platform already charge these taxes?

When merchants use our Etsy integration, Etsy automatically applies the correct US sales taxes. Because the marketplace handles these taxes, we do not charge US sales tax on orders placed through our Etsy integration.

If you’re selling through another marketplace or platform that collects US sales tax, but:

• You’re selling through a channel other than Etsy – You can use our order pausing feature to indicate which orders should be exempt from US sales tax
• You’re using the CSV importer in the Prodigi dashboard – Please indicate for each order whether US sales tax should be excluded and provide the necessary certificates
• You’re using the manual order form in the Prodigi dashboard – Please use the checkbox to indicate whether US sales tax should be excluded and upload the required certificates

We may occasionally request proof of tax collection, as tax authorities may require us to verify that sales tax was properly paid on orders where we did not charge it. Please keep records of all orders, including tax amounts collected from customers, so we can provide this information if requested.

I'm being charged sales tax on orders in the US, but I'm also paying state taxes. Isn't this double taxation? Can I remove one of these taxes?

You may be able to register as exempt from sales tax in the US where you’re being charged taxes if you’re purchasing products for resale only. This means that you’re buying the products with the intention of selling them to your own customers, who will be charged sales tax instead. However, the requirements to register as exempt can vary between states, so you’ll need to check the rules that apply to your business in each state. Keep in mind that if you’re not eligible for exemption, you may still need to pay both taxes.

Should I register for VAT in the EU?

VAT in the EU can be complex. If you’re unsure how to comply with EU tax laws, we strongly recommend consulting a local tax advisor. However, the EU has introduced several laws and initiatives to make tax compliance for ecommerce merchants more manageable.

For exports from the EU

If you’re sending goods produced in the EU to customers outside the EU, these orders are considered exports and will be exempt from EU VAT. However, be aware that local taxes and duties may still apply in the destination country, and these are the responsibility of the merchant or end customer.

For sales within the EU

If you’re selling to consumers in EU member countries, you’ll need to either:

• Register for VAT in each country where you make taxable sales
• Apply for OSS/IOSS registration

If you place orders with us and haven’t provided a valid VAT ID, we’ll assume you’re an individual, and VAT will be applied to your orders as such.

What is IOSS and how do I register?

The Import One Stop Shop (IOSS) is an EU system designed to simplify the collection, declaration and payment of VAT on low-value ecommerce imports (goods valued under €150).

With IOSS, the seller collects VAT from the customer at the point of sale, instead of the customer paying VAT upon importation. This process speeds up customs clearance and delivery times, while simplifying the overall customs process.

While registration for IOSS is optional, businesses that opt out must still collect VAT upon importation for goods valued under €150.

Once registered for IOSS, you’ll be able to:

• Collect, declare and pay VAT on sales to EU customers
• Submit monthly IOSS VAT returns, detailing the VAT due, to a VAT intermediary

If you’re a business in Northern Ireland, you must also register for IOSS to account for VAT on sales into the EU.

To start the registration process, please consult your tax advisor to determine if registration is required for your business.

What is OSS and how do I register?

The One Stop Shop (OSS) is an EU system designed to simplify VAT compliance for businesses based in the EU that sell goods or services online to customers across EU Member States.

With OSS, businesses can register for VAT in just one EU Member State and use that registration to declare and pay VAT on all cross-border sales within the EU via a single electronic portal. This eliminates the need to register for VAT in each EU country where you have customers, saving time and reducing costs.

Under the OSS scheme, VAT on all deliveries is reported quarterly, and payment is made in one go. However, reclaiming VAT is not part of the OSS system.

You are not required to use OSS. If you do not meet the criteria or choose not to use it, you must declare VAT in each country where you deliver products. Please contact the tax authorities in those countries for more details.

What is the difference between OSS and IOSS?

The One Stop Shop (OSS) and Import One Stop Shop (IOSS) both aim to simplify VAT declaration and payment for B2C sales, but they serve different purposes.

• OSS is designed for merchants selling goods produced in the EU to customers within the EU. The €150 threshold does not apply to OSS.
• IOSS, on the other hand, is specifically for goods imported into the EU with a value not exceeding €150, allowing VAT to be collected at the point of sale rather than at import.

Depending on your location and where your goods are supplied, you may need to use either an IOSS or OSS registration number.

How do I use my IOSS/OSS number for orders?

You can inform us of your IOSS or OSS numbers by updating your company details in your Prodigi account. These details will then automatically be used for all applicable orders.

How do I collect the correct VAT if I don’t have an EU VAT/IOSS/OSS number?

If your business is required to collect EU VAT, you’ll need an EU VAT, IOSS or OSS number. If you’re unsure whether you’re obligated to collect these taxes, it’s best to consult your tax advisor to determine whether you need to register for VAT and how much VAT you should charge your customers.

Do I need to have a VAT/IOSS/OSS number to place orders with Prodigi?

No. We supply products to both retail and wholesale customers, some of whom are not VAT-registered. If you’re unsure as to whether or not you should have one, you should consult with your tax advisor.