Crossing Thresholds: Understanding International Sales Tax Thresholds 

As ecommerce continues to expand across borders, merchants are reaching new markets with an average of 76% year-over-year growth in 2024. With that growth comes increased complexity, especially when it comes to tax compliance. 

Many countries now impose independent foreign sales and revenue tax registration on foreign sellers. These sales tax thresholds define when a business must register, collect, and remit local value added tax (VAT) or goods and services tax (GST), based on the total value of goods sold into a country over time. They aren’t tied to customs or duties, but rather to the merchant’s overall transaction volume. 

For fast-growing brands, these obligations can emerge quickly and without a clear tracking system in place, they’re easy to miss. This post explains what tax thresholds are, how they work, and what they mean for merchants scaling international sales. 

What are threshold-based tax requirements? 

Certain countries require foreign sellers to register for VAT or GST only once their cumulative sales into that country exceed a defined financial threshold—often calculated on a rolling 12-month basis though every country is different. 

Once that sales tax threshold is crossed, the merchant becomes responsible for: 

• Registering with the local tax authority 

• Collecting the appropriate sales tax at checkout 

• Remitting that tax on a recurring basis (monthly or quarterly) 

These sales tax threshold obligations are separate from customs duties and import tariffs. While duties are paid at the border on the physical goods, sales taxes are tied to the transaction itself and typically require formal business registration in the destination country. 

What happens if a merchant doesn’t register? 

Failing to register once a threshold has been crossed can trigger: 

• Late fees or penalties from tax authorities 

• Shipment delays or customs holds 

• Ineligibility to continue selling in-market 

• Exposure to audits and reputational risk 

In some countries, non-established foreign sellers may also be required to appoint an in-country tax representative to handle registration and filings. 

IOR vs MoR: Understanding the Difference 

The way a merchant handles cross border tax obligations often depends on whether they’re working with a provider operating as an Importer/Exporter of Record (IOR/EOR) or a Merchant of Record (MoR). 

Here’s how the two models differ: 

Why this matters:

Under the MoR model, merchants may be taxed on every sale into Australia, Switzerland, New Zealand, or Canada—even before they’ve crossed the country’s legal threshold. This can lead to inflated landed costs (also hurting shopping cart conversion) and higher costs for the merchant. In contrast, the IOR/EOR model aligns tax collection with actual sales thresholds, ensuring taxes are only paid when legally necessary. 

Why Sales Tax Thresholds Matters for Growing Merchants 

Merchants doing high volume into a particular country are far more likely to cross tax thresholds—especially during peak seasons or promotional periods. These thresholds are often easy to reach but hard to track without dedicated tooling. 

Common threshold examples: 

• Australia: AUD $75,000 in the current month plus previous 11 months 

• New Zealand: NZD $60,000 in a rolling 12-month window 

• Canada: CAD $30,000 in a single quarter or any 12 month period.* 

• • Registration required when entity is considered to be “Carrying on Business” in Canada. “Carrying on Business” requires a subjective and in-depth analysis of operating facts such as whether the non-resident has employees, address, holds inventory in Canada, or specific marketing campaigns targeted at the Canadian market. 

• Switzerland: CHF 100,000 in annual global sales, not just in Switzerland. 

See the guide on Independent Foreign Sales & Revenue Tax Registration for Merchants for more.   

For many merchants, these sales tax thresholds may include sales outside of the cross border provider they use, and may require tracking revenue across multiple systems. Once triggered, the merchant—not the provider—is typically responsible for registering and remitting. 

If using FlavorCloud, you are able to track your international sales tax thresholds directly in the FlavorCloud App and download exports of all sales where remittance is due. Learn more in our Knowledge Base Article Managing Tax Thresholds for Country Specific Obligations. 

Best Practices for Managing Threshold-Based Tax 

1. Monitor sales by destination country, not just in aggregate 

1. Understand how your provider handles tax collection: IOR/EOR vs. MoR 

1. Prepare to register for local VAT/GST if approaching thresholds 

1. Coordinate with tax advisors on timing and reporting requirements 

1. Ensure your checkout and reporting tools allow for clear tax visibility and correctly estimated landed costs. 

Threshold-based VAT, GST and other sales tax threshold obligations are now a standard part of cross border ecommerce, and merchants that proactively manage their risk will be in the best position to scale globally without disruption. 

Understanding your exposure, staying ahead of sales tax thresholds, and aligning your compliance model to your business goals is the best path forward in today’s increasingly regulated trade environment. 

If you have any questions, reach out to our team of experts. FlavorCloud is here to help and building integrated features to enable your cross border success.