Okay, I’m not gonna lie. VAT used to give me hives.
The first time I had to deal with it, I sat at my kitchen table, surrounded by crumpled receipts and tabs open to government websites I didn’t understand. I kept thinking, “Is it really this complicated just to sell a mug?” Spoiler: yes and no.
I sell physical products — handmade stuff — and as soon as I started shipping internationally, especially to the UK and Europe, the VAT (Value-Added Tax) situation got real, real fast. If you’re just starting out and scratching your head over this, trust me, you’re not alone.
Step One: Know Where VAT Applies
So here’s the first thing I learned: VAT isn’t just a UK thing. Tons of countries have it — most of Europe, Australia, parts of Asia. And yeah, the rules change depending on where your customer lives.
I used to think I only had to worry about VAT if I lived in the EU. Nope. If you ship to the EU, you’ve gotta deal with it — even if you’re in the U.S., Canada, or anywhere else. I learned that the hard way when a customer in Germany got slapped with a surprise import fee and left me a spicy review.
Now I use services like IOSS (Import One-Stop Shop) for EU orders under €150. It lets me collect VAT at checkout and file it through a single EU country, instead of trying to register everywhere. Total game changer, and if you want to see how it works in practice, check out this breakdown on how VAT MOSS works for digital sellers the concept is similar for small-scale sellers using IOSS.
Step Two: Register Where You’re Required (Don’t Guess)
The trickiest part? Figuring out where you actually have to register. I thought I could wing it with just one VAT number. Not so fast.
If you’re based in the EU, you need a VAT number in your home country, period. But if you’re outside the EU and selling into it, you might need to register for IOSS or even local VAT numbers if your sales pass certain thresholds.
Same deal with the UK post-Brexit. I had to register for UK VAT separately — and yes, that came with its own login portal, rules, and filing schedule. I cried a little that day.
The rules get even fuzzier when you’re selling to businesses — handling VAT for B2B sales brings in a different set of obligations, including reverse charge mechanisms and checking VAT registration numbers. It’s worth learning the difference early on.
Step Three: Collect VAT at Checkout (Before You Regret It)
Here’s what you don’t want: your customer getting hit with surprise fees on delivery. That’s the kind of stuff that kills repeat sales.
I use Shopify, and thankfully they’ve got built-in tools to calculate VAT based on location. If you’re on Etsy or another platform, check if they handle VAT for you (sometimes they do, sometimes not). Make sure your prices are VAT-inclusive, or at least be super clear if VAT gets added at checkout.
Also: keep records. You’ll need to report how much VAT you collected per country, and it’s not optional. I use Quaderno to track this now — makes filing way easier.
Want to simplify things further? Here’s a solid primer on how Payhip automates VAT collection if you’re using that platform or considering it for selling physical or digital goods.
Step Four: File and Pay (Even If You Hate It)
Filing VAT returns isn’t glamorous, but it’s necessary. Each country has its own deadlines and formats, so I set calendar reminders to avoid late fees.
Here’s my messy-but-true routine:
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End of every month: download my VAT reports
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Cross-check with sales receipts (ugh)
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File through the relevant country’s portal (IOSS, UK VAT, etc.)
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Pay the bill (double-ugh)
I’ve also hired a VAT accountant for peace of mind — just someone to double-check everything. It’s not cheap, but the amount of stress it saves me? Worth every penny.
If you’re still unsure about requirements, take a look at this breakdown of VAT thresholds and exemptions explained. It’ll help you understand when registration is actually needed based on your volume and customer locations.
Final Tip: Don’t Try To DIY Everything Forever
Listen, I love a good spreadsheet as much as the next nerd, but VAT is one of those things where DIY has limits. Once your sales start picking up and you’re shipping across borders regularly, do yourself a favor: hire help.
Whether it’s an accountant, a VAT specialist, or even a tool like SimplyVAT or Avalara, having support means fewer headaches and way less risk of a nasty letter from a tax agency.
And if you’re worried about staying on top of everything as a solopreneur, here’s a great resource on how to stay VAT compliant as a small business. Trust me, it’s better to set it up right than clean up a mess later.
If you’re new to all this, yeah — it’s overwhelming at first. But once you’ve got systems in place, managing VAT becomes just another part of doing business. Not fun, exactly… but manageable. And hey, if I can figure it out without tossing my laptop out the window, so can you.
