Some European Union (EU) countries let you sell without registering to collect and pay VAT tax until your sales reach a certain amount. AvaTax assumes that you sell more than the country's economic threshold if you track sales there. If you don't sell enough to collect and pay tax in a country, create a below-threshold setting.
Before you begin
Talk to your tax professional to make sure you don't need to register to collect and pay tax in an EU country. Always check the local laws wherever you do business.
When deciding to create a below-threshold setting, keep these things in mind:
- VAT economic thresholds only apply to physical goods. If you sell digital products, you still need to collect and pay tax within that country.
- If you sell from an EU country into an EU country where you're below the economic threshold, you'll pay tax based on where you ship from.
- If you sell into a country where you're above the economic threshold, you'll pay tax based on where you ship to.
- In AvaTax, go to Settings.
- Next to EU Sales Thresholds, select Manage.
Only a person with administrator access can change EU sales thresholds settings.
- To add a threshold setting, select Add a Below-Threshold Cross-Border Combination.
- Fill out the form with your threshold settings.
- Select the country you're shipping from in Ship-From Country, and the country that you're shipping to in Ship-To Country.
- Choose whether the threshold applies to sales or purchase invoices in Threshold Type.
- Select the starting and ending dates for this threshold combination in the Effective and Expires boxes.
- Select Save.
To delete a below-threshold setting, select the trash can icon beside it on the EU Sales Thresholds page.