Friendly Shipping: Customs Charges Vs Sales Tax for Independent Games Designers

March 23, 2019

Many Kickstarter projects advertise International Friendly shipping, there are two methods to achieve this claim. Firstly, you can use a fulfillment shipping company based in the country in question. This method is safe, however smaller Kickstarter projects may find the logistics required to be expensive or impossible. This is because manufacturers may be unwilling to split a single pallet for delivery to various countries and projects with less than 1,000 backers or that generate small box games will not create a second pallet naturally. Those that will ship to various countries will charge for the privilege. For example if you have only 10 copies going to Australia the price of using an Australian fulfillment company may well be prohibitive, leading many people to attempt the second method.    

 

The second method is to ship units to a country with a price level which will not attract import charges, this method is possible for some countries, inevitable for some but effectively impossible for others. The major problem and source of confusion on this issue seems to be between customs charges and local taxes (such as VAT or sales tax). Customs charges tend to only kick in at quite high levels, £135 in the UK, $800 in the US and AUS$1,000 in Australia, for example. This is because customs charges are intended to target businesses importing stock not private shoppers. However, to suggest how complex this issue can be, it is possible to ship friendly to the UK by this method, inevitable to the US and technically impossible to Australia. The reason for this is local taxes. Taking the UK as an example (partly because with Brexit looming this might be very relevant information in the near future); customs charges kick in on imports to the UK at £135, but VAT is leveled at £15 on a product from a business or £39 on a gift. This means that a Kickstarter reward costing £16 and shipped to the UK will incur charges. What tends to be most annoying for customers at this point is that on top of the VAT charge which might be as little as £3 the Royal Mail will then charge £8 for handling. Customs charges will almost never kick in for a Kickstarter board game reward, but local taxes often will. Going back to our examples, the US has a state based sales tax system which does not appear to level charges on individual imports as an informal but standard practice. Australia has a VAT system which kicks in at AUS$0 on imports which does gets leveled, meaning that any value of reward can attract charges unless shipped from within the country. 

 

As an aside, the EU has a system known as "Low Value Consignment Relief" which adds another level of potential complexity. This is because while the EU has no customs charges from one internal country to the next, it does continue to charge local sales taxes which can vary significantly from one member state to the next. Low Value Consignment Relief can vary from 10-22 Euros, depending on the country, if adopted (countries can choose to have no such relief), allowing goods of such value to be shipped from a lower local tax country to a higher one without further charge. The result of this is that in actuality while shipping a low cost reward from one EU member state to another is highly unlikely to attract charges it is theoretically possible. 

 

In conclusion, consider that international friendly shipping is not a necessity on Kickstarter and it is far more important to ensure that you have it if you promise it than it is to actually promise it. People don't tend to complain if you didn't promise friendly shipping but actually give them it, while the opposite is far from true. Simply checking import or customs charges and providing a reward that comes under them does not guarantee friendly shipping. There are several free and easy to use charges calculators available on-line which take into account both customs charges and local taxes, links to a few are included in my Useful Pages and Blogs blog, use them to check charges from your shipping location to every target country that you intend to offer friendly shipping to.     

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