Who is the importer of record when my supplier ships direct?
It depends on what your contracts and shipping terms say, not on who touched the goods. In a drop-ship chain the goods go from your supplier to your customer while title passes through you, so the customs question and the supply question can have different answers. Whoever is named as importer of record takes on the duty and the import tax, and the obligation to hold the paperwork. Very often the name on the shipping documents is one nobody chose deliberately, because the supplier's forwarder simply put something in the box. Read a recent set of customs entries for your own sales and see whose name appears. That is your current position, whatever the contract says.
Do I owe sales tax if I never handle the goods?
Handling the goods is not the test. You are the party supplying the customer, and most indirect tax systems look at that supply, where it is delivered and who the customer is, rather than at your warehouse arrangements. Your supplier's shipment is a separate leg of the chain with its own treatment. The ordinary outcome in a drop-ship chain is two or more supplies inside one physical movement, each tested on its own rules. The assumption to avoid is that because you have no premises and no stock in a country, that country has no interest in your sale. Test the supply, not the logistics.
Why does customs paperwork name my supplier and not me?
Because the party who arranges the export normally completes the declaration, and in a drop-ship chain that is your supplier. The declaration is a record of the physical movement. It can be entirely accurate about that movement while saying nothing about who made the supply for tax purposes. The problem arrives later, when you need to evidence an export, claim a relief, or answer an authority's question about a shipment, and the documents describe a transaction between parties that are not you and your customer. Agree with your supplier in advance what appears on the documents for your orders, and keep copies of the entries for your own sales.
Does my supplier's country tax the sale I made?
It may tax the leg of the chain that happens there, which is your supplier's sale to you, and it may treat that sale differently depending on where the goods go and what evidence exists that they left. That is why drop-ship arrangements so often turn on documentation rather than on principle. If your supplier cannot evidence that the goods were exported, the supplier's local tax may be charged on the sale to you and passed on in the price you pay. Your own sale to the customer is then tested separately under the destination country's rules. Two systems can each have a claim arising from one movement of goods.
My customer was billed duty on delivery, so who should pay?
Whoever the shipping terms made responsible, which under most default arrangements is the customer as importer. A carrier presenting an unexpected charge at the door is usually the symptom of a chain nobody specified rather than an error. Decide deliberately whether you or the customer imports, put that in the terms of sale, instruct the supplier to ship on that basis, and price accordingly. If you take on the import you take on the duty, the import tax, and often a registration in that country. If the customer imports, say so plainly at checkout, because the commercial damage from a surprise charge is real.
How do I work out where my drop-shipped sale is supplied?
Start by drawing the chain. Who sells to whom, where the goods begin, where they end, and who is named on the customs entry. Then test each leg separately under the rules of the countries it touches. A single answer rarely exists, because the physical route and the contractual route are not the same route, and each rule you apply is looking at one or the other. Once the chain is drawn the questions become answerable one at a time. Redraw it whenever you change supplier, market or shipping terms.
Where does the exclusion go on the return, and does it change my rate?
It is computed on Form 2555 and carried to the return as a negative adjustment to income, so the excluded amount is out of taxable income. It does not, however, pretend you never earned it: the tax on whatever income remains is calculated as though the excluded amount were still there, so the remaining income is taxed at the rates that apply above it. Deductions and credits attributable to excluded income are also disallowed. See the foreign earned income exclusion.
Can an accountant in one country file my return in another?
Yes, where they are authorised to represent you with that tax authority and the filing is done electronically. What matters is not where the adviser sits but whether they can lawfully act for you and are competent in both systems — a return prepared with no knowledge of the other country is where the relief gets missed. We file on both sides, from offices in India, the USA, Canada and the UAE. See how we work.
