Hattons to Charge Local Taxes on Overseas Purchases

[Jon Harbour]

Evening everyone,

 

Tonight I received the following e-mail from Hattons:

 

Dear Jonathan

At Hattons, we strive to continuously enhance your shopping experience, and we have an important update to share regarding changes to our shopping cart and taxation system.

 

Within the next couple of weeks, we will implement adjustments to our system to ensure that you are charged the correct tax at the time of purchase. This change is part of our commitment to transparency and compliance with local tax regulations in your region.

 

As a valued international customer, we want to bring this to your attention to ensure a smooth transition. The good news is that if you despatch the items in your trunk within the next week, you will be exempt from any additional tax costs associated with these changes.

 

Please note that local customs duties and courier fees may still be charged, we are working on expanding this system to correctly cover landed fees in the future.

We understand the importance of budgeting for your hobby, and we want to make sure you have the opportunity to make the most of this window.

We appreciate your understanding and continued support as we work to improve our services. If you have any questions or concerns regarding these changes, please don't hesitate to reach out to our customer experience team.

 

Thank you for being a valued member of the Hattons community. We look forward to serving you and providing the best model railway products for your enjoyment.

 

Now no matter how one tries to polish this particular small brown Richard III, this is not an enhancement to my shopping experience! I'm based in Australia, but like most people I am not really 100% across the entire taxation system of the place I call home, but in the back of my mind, I was fairly certain that overseas purchases up to a certain value did not attract the 10% Goods and Sales Tax (GST) charged here. So, after a cursory Google search, I came across this web page:

 

 

https://www.ato.gov.au/businesses-and-organisations/gst-excise-and-indirect-taxes/gst/in-detail/rules-for-specific-transactions/international-transactions/gst-and-imported-goods

 

Item 26 on this page made particularly interesting reading:

 

item 26 – goods, other than tobacco, alcohol and bulk orders, with a value less than an amount prescribed by by-law (currently at or below $1,000)

 

This pretty covers me - provided I keep any shipment I send from my wonderful Hattons trunk to a value of less than roughly £490. The taxable amount includes the cost of shipping and the exchange rate is roughly £1.00 = A$1.91. However, One can't assume - I have visions of Hattons implementing a simple "the GST rate in Australia is 10%, so we'll charge that on everything to Australia and we shall be safe". So, to check withHattons themselves,I have sent them this e-mail:

 

 

 

Good Evening,

Today I received an e-mail concerning the fact that Hattons are to commence charging the local tax amount on overseas sales. Since I am based in Australia, I take this to mean that you will be charging 10% GST on all purchases.

 

Naturally, I am less than thrilled about this development. No matter how you try to dress this up, it isn't good news. As has been said many times in the past, "You can't polish a turd".

 

However, I do have a question concerning this.  Are you going to charge this GST on ALL sales, or simply those that qualify? According to the Australian Tax Office web site (https://www.ato.gov.au/businesses-and-organisations/gst-excise-and-indirect-taxes/gst/in-detail/rules-for-specific-transactions/international-transactions/gst-and-imported-goods) item 26 – GST is not charged  by the ATO on goods, other than tobacco, alcohol and bulk orders, with a value less than an amount prescribed by by-law (currently at or below $1,000) .  That $1,000 includes the cost of shipping said goods according to that web page I have quoted.

 

So, at what point will you charge the GST? Is it at the time of sale, or, in the case of items in my trunk, at the time  of shipping? And if I limit the contents of a shipment from my trunk to less than a value of $1,000, is this GST exempt in your eyes? It should be.

 

By my calculations, allowing for the cost of shipping, provided I keep the value of what I ship out of my trunk to less than £490, I should ensure that whatever is shipped to me remains exempt from GST. The current exchange rate is roughly £1.00 = A$1.91, the cost of DHL shipping is £28.50, which equates to roughly $55.

 

Obviously this will fluctuate with exchanges rates, but it is a reasonable rule of thumb. Whilst I may incur additional shipping costs, I actually work for DHL so I'd rather give my money to my employer than to the Australian Tax Office.

 

Would you kindly confirm that Hattons will indeed observe this threshold when it comes to GST-free purchases please?

 

Thanks and regards,

Jon Harbour

 

It will be very interesting to see how this develops? Up until now I have never been charged GST on an order from Hattons - I hope that Hattons implement a system that caters for this properly and they don't do a half-hearted attempt to protect themselves from any liability. I'll keep everyone posted on this!

 

---

---

[admiles]

What tax are Hattons talking about here though?

 

UK VAT which can be deducted from export orders (though lots of shops don't do this) or local taxes in the countries of destination (GST in Australia to use Jon's example above)? 

 

Big difference which needs clarification.

[RichardT]

Yes, as you say, goods purchased by an overseas buyer below a certain value will be dispatched with your country’s sales tax added (and the domestic sales tax - VAT in the UK) deducted; goods over the value threshold will be dispatched sales tax free but you pay your country’s sales tax when they arrive (plus, probably, a tax payment handling charge - aka “a money for old rope” charge) to the carrier.

 

This is, IIRC, an international reciprocal taxation agreement as all governments don’t want to miss out on a revenue stream. (It’s nothing to do with Brexit, as some have thought, just a coincidence of timing. (And I’m saying that as someone who’s always happy to blame bad news on Brexit and the idiots who voted for it  sorry, fingers slipped there.))

 

But it appears from your post, and online comments I’ve seen elsewhere about sellers in Japan, that some sellers may only just be catching up to this in full? Or the tax authorities are cracking down having allowed a transition period?
 

Hatton’s letter to you is inevitably generic as they’re trying to cover all countries, all order values and all taxation thresholds. You’ve written back with a specific query which they might be able to answer now they know your specific details. But it isn’t Hatton’s policy - it’s the taxation authorities’ which they have to implement under the law - so perhaps it might be worth asking the tax authorities instead? But with them I’d probably avoid phrases such as “polishing a turd”… 😁

 

Richard

Edited December 7, 2023 by RichardT
Clumsy word order

[RichardT]

Second thoughts - is this just an Australian issue? Is the sales tax law only just coming into effect there?

EDIT - see below!

 

RT

Edited December 7, 2023 by RichardT
New info

[jjb1970]

Australia was a front runner in adopting the increasingly normal practice of making overseas sellers register to pay VAT/GST, they did it a while ago. Maybe Hattons have only just gone over the threshold where it kicks in (these arrangements tend to have quite a reasonable threshold to avoid sellers who only send a couple of items a year having to register, it's usually equivalent to several tens of thousands of pounds annual sales. 

[GWR-fan]

This was announced several years ago and the response received at the time was inline with what "jjb1970" stated in that the store did not exceed the minimum amount of exports to register to implement the GST for Australian sales.  Looks like the Australian athorities are finally closing this loophole.

 

International purchases on eBay and from the likes of Alliexpress attract the 10% GST on ALL sales,  irrespective of the $1000.00 limit on imports to Australian purchasers,  thus be aware that no doubt all future sales to Australian customers from the store will include a GST gouge.  Looks like the party has finished.  No doubt it will impact on future sales for the store.  I have had a good run so really cannot complain.

[andyman7]

Generally the lower limit exemptions were not out of any kindness but because it was in the past logistically impossible to get postal authorities  to collect and managed local taxes on lower value items. As @jjb1970 notes above it is becoming increasingly normal for the requirement that the taxation is taken at source if the seller is a business meeting certain thresholds. 
It's affectively closing the loopholes so as to allow tax authorities to treat purchases from another country the same way as domestic purchases 

[GWR-fan]

8 minutes ago, andyman7 said:

Generally the lower limit exemptions were not out of any kindness but because it was in the past logistically impossible to get postal authorities  to collect and managed local taxes on lower value items...........................

 

In Australia in the past any imports between $500.00 - $1000.00 would attract the 10% GST.  Goods uder $500.00 were exempt.  Imports over $500.00 but less than $1000.00,  the purchaser would receive a letter from customs to attend the local post office and pay the GST prior collecting their purchase if the goods arrived using a postal service such as Royal Mail or USPS.  If using a courier company such as UPS or FedEx then the courier company would charge you not just the GST but also a "service/administration" charge.  Any imports over $1000.00 were problematic as the Customs department treated you as an importer and required the services of a customs broker as the paperwork involved was very complicated.  A change of government saw that the cost of implementing this system exceeded the revenue returned and so all "imports" less than $1000.00 were GST exempt,  but apparently not anymore.

 

 

[Quarryscapes]

You'll probably find that this is a service offered by the courier Hattons use for international shipments rather than Hattons registering in several countries for VAT. Getting stuff through customs has become a nightmare for international sales, and many couriers are now offering these brokerage packages where they manage the tax on everyone's behalf, the customer pays it upfront and they just receive their items with no further interruptions to service or fees to pay on landing. 

[The Pilotman]

3 hours ago, Quarryscapes said:

You'll probably find that this is a service offered by the courier Hattons use for international shipments rather than Hattons registering in several countries for VAT. Getting stuff through customs has become a nightmare for international sales, and many couriers are now offering these brokerage packages where they manage the tax on everyone's behalf, the customer pays it upfront and they just receive their items with no further interruptions to service or fees to pay on landing. 

I think you’re right. Whenever possible now I opt for DPD for purchases from UK suppliers. After an order has been placed, DPD email me with a link to pay the local tax (plus their fee). Parcels arrive quicker than the traditional Royal Mail/Deutsche Post combination too. 

Edited December 7, 2023 by The Pilotman

[45568]

I will be interested to see the reply Jon receives, as I am in exactly the same situation. I currently have many pre-orders with Hattons simply because of their very useful trunk system. This allows me to save on postage and I can always despatch trunk before it hits the magic limit. I am very disappointed to see this, EBay did the same some years ago and completely ruined sales from Oz to the UK due to the massive charges imposed, they don't even deduct local VAT/GST so take a double dip. Cynical me often wonders how much of this tax take actually ends up with the government.

From memory the original idea to tax incoming goods was a sop to big retail here, (Harvey Norman), by a liberal government when the billionaire owner cried poor because people were using the internet to order identical goods from overseas cheaper than he was gouging them for domestically.

I personally will review my orders with Hattons, it will still be worth trunking individual small items like wagons until a sufficient value has been reached to save on postage, but larger items such as locos will probably go to other traders, one in Yorkshire and one in Kernow.

Very sad to see this happen.

From West OZ,

Peter C.

[GWR-fan]

57 minutes ago, 45568 said:

...................................................................................

I personally will review my orders with Hattons, it will still be worth trunking individual small items like wagons until a sufficient value has been reached to save on postage, but larger items such as locos will probably go to other traders, one in Yorkshire and one in Kernow.

Very sad to see this happen.

From West OZ,

Peter C.

 

I personally agree with your comments regarding local big retailers refusing to discount to compete with international online orders and lobbying a willing government to agree with their demands,  however,  this situation will not be limited to Hattons only.  No doubt the ATO will stretch its arm out to other UK retailers, regardless of the value of their international exports to Australia.  If I was to purchase on eBay from a private UK resident then the eBay software will automatically add the 10% GST,  as will Alliexpress and other online overseas stores,  so why would this situation be peculiar to the Hattons' store alone?    With the states pressuring for a bigger slice of the pie,  will the current government cave in and increase the GST or will a possible (but not likely) change of government in two years time see a GST increase as a golden goose to appease the states demands?

 

Edit:  as stated earlier,  this is not new news and in reality could have been implemented several years ago,  however,  from previous correspondence with Hattons I believe that possibly they did not meet the export threshhold,  however, as one of the largest online stores in the UK and Australia being a popular market,  then I am curious as to how the criteria for the threshhold was interpreted.  I am not complaining as over the past few years I have made hay while the sun shines,  but it now seems that cloudy days are ahead.

Edited December 7, 2023 by GWR-fan
Additional comment

[jjb1970]

9 hours ago, Quarryscapes said:

You'll probably find that this is a service offered by the courier Hattons use for international shipments rather than Hattons registering in several countries for VAT. Getting stuff through customs has become a nightmare for international sales, and many couriers are now offering these brokerage packages where they manage the tax on everyone's behalf, the customer pays it upfront and they just receive their items with no further interruptions to service or fees to pay on landing. 

 

It's not just a courier package, many countries now require overseas sellers who sell more than £/$/€(etc)X worth of goods per annum to their country to register for local VAT/GST. It is becoming the normal rather than the exception, at least in developed countries.

 

There are generally two thresholds, total sales to trigger registration, and on value of a package to determine whether the seller collects VAT/GST or whether it is handled by the post office or shipper in the traditional way.

 

The rules are pretty pragmatic in avoiding making companies/platforms who have trivial sales register which would only mean they stopped doing any business with the country. The rules are seen as a win-win by governments as it is an effective way to collect VAT/GST and it helps local sellers. 

 

A company doesn't have to register, as governments have pointed out it's a  commercial decision - how much are sales to our market worth to you?

[Andy Mac]

Thanks for posting about this…. I missed the Hattons Email…..  please post their response…. I had a quick look at my pre orders, so I have some that if I cancel, I can’t order elsewhere (sold out), but the rest I can cancel and order elsewhere if Hattons are going to start charging me Australian GST for orders under S1000.

[Jon Harbour]

I got an almost immediate response from Hattons last night pointing out that although one ATO web page says under $1000 no GST, another one says that retailers have to pay the ATO the GST anyway up to $1000 and if the shipment is over $1000 then the GST is collected upon entering Australia. Hattons said they have been paying the GST since 2018 when the Australian government introduced this rule but 'subsidising the customer' is no longer sustainable. I'm taking that to mean that the ATO has caught up with them, but I may be wrong.

 

I followed up my initial enquiry to clarify the situation regarding the trunk (which I use extensively) and the over / under $1,000 question. Hattons response was that GST will be charged at the time of payment (so anything you order immediately will be charged GST but anything you pre-order won't be hit with GST until it arrives and you are charged). Then if you ship over $1,000 they refund the GST charged and leave it for the shipper to organise upon arrival in the destination country. 

 

My own take on this is that if you keep the shipment to under $1,000, you pay the GST at Hattons but no additional fees with couriers. It means that my shipping costs will possibly increase, as I may need to send more individual shipments (depending upon what I order from Hattons) but I think that approach minimises my costs. 

 

I had to chuckle when the original e-mail said that Hattons are "constantly trying to enhance your shopping experience"! No matter how hard you try Hattons - you can't polish that particular Richard III!

[Jon Harbour]

Here's the original Hattons response:

 

_______________________________________________________________________________

 

 

Hello Jon,

 

Thank you for getting in touch.

 

There appears to be a slight misunderstanding regarding when GST should and should not be charged.

 

For orders under $1000, the merchant is responsible for collecting GST and paying it to the Australian Government.

For orders over $1000, the merchant is NOT required to collect the GST as this will be done at the border.

 

https://www.ato.gov.au/businesses-and-organisations/international-tax-for-business/gst-on-imported-goods-and-services/gst-on-low-value-imported-goods

 

We have been required to collect GST since 2018 and have effectively subsidised customers up to this point as we have not been charging it, this is no longer sustainable for us to do so.

 

I hope this clarifies the situation for you but please don't hesitate to get back in touch if you have any further questions.

 

_______________________________________________________________________________

 

This is correct, as you delve into it a bit more on the ATO web site, it does say that sellers are expected to collect GST on orders less than $1000. However, there do appear to be two conflicting statements on the web site, but if you try for a ruling with the ATO you know which way that will end up...

 

Here's my response back to Hattons

_______________________________________________________________________________

 

Thanks for the prompt response Tom.

 

I came across that information on another page of the ATO website shortly after I found the first page and sent that e-mail, so my fault for not doing more thorough research before shooting my mouth off. I apologise. The information on the ATO website does appear a little contradictory though. On one page it says no GST on items under $1,000 an on the other it says the seller has to charge it. Hardly seems fair...

 

So, are Hattons going to charge GST at the time of purchase, or the time of shipping and how does this impact items in my trunk?

 

For example, planned for my trunk, I currently have (amongst many other pre-orders):

 

4S-009-004S Class 28xx/ 2884 2-8-0 2884 in GWR green with shirt button emblem - digital sound fitted £254.99

6x various GWR Toplight Main Line City coaches @ £51 each - total £306.00

The coaches and the locomotive are on separate orders. Individually, each order is under the $1,000 price point, so Hattons are required to charge the GST. However, if they were shipped together which might be a valid scenario if the combined weight was under 2kg (not sure about the weight at this stage to be honest), then the combined value at today's exchange rate comes out at roughly $1,075, which means that GST is charged at port of entry. Will the Hattons system cope with such complexities and ensure I don't pay GST twice?

 

One other thing - does this new GST policy apply to goods ordered before Christmas, or shipped before Christmas? How do pre-orders fit into the equation?

 

I'm sure that a lot of people will have many questions for Hattons over the coming weeks and there will be many clarifications sought. I don't envy you guys having to deal with them all! It probably won't really impact what I order from now on that much, but it will factor into my purchasing considerations. You guys are still much cheaper than the Australian model shops for British outline rolling stock.

 

Regards,

Jon Harbour

 

_______________________________________________________________________________

 

[Andy Mac]

John,

 

thanks for the quick update….

 

It’ll be interesting to see if any other retailers start charging us GST for posting to Australia… particularly for orders below the GST threshold….

 

Andrew

[Jon Harbour]

Finally, here is the last e-mail response from Hattons

 

_______________________________________________________________________________

 

Hi Jon,

 

Thanks for getting back in touch.

 

There will be a calculation at the time of purchase and at the time of shipping, assuming that the trunk is used and they are separate occurrences.

 

If the GST was already paid at the time of ordering and no other details have changed (shipping address now in the UK for example) then nothing further would be needed.

 

If an existing item in the trunk was shipped after the change then the calculation would be done and the GST charged at the point of shipping.

 

If a particularly large trunk dispatch occurred which exceeded the GST threshold for collection at the border then the GST we have collected would be refunded back to you.

 

Once implemented, the new system will apply to all orders, whether new or existing pre-orders.

 

I hope this helps.

 

_______________________________________________________________________________

 

My impression is that they are not exactly thrilled about the situation either, but they are doing their best to minimise costs to their customers.

 

Personally, I don't think it will change much for me, even with the 10% GST purchasing from Hattons is still way cheaper than buying locally. I happened to be in a model shop local to my office at lunchtime today and they had a Peckett 0-6-0-T on offer at $295.95.  I can't remember the exact price, but I believe Hattons were offernng them for around $125 which with the GST charged instead of 20% VAT equates to around $218.00.

[45568]

Thanks, Jon, for sharing the information. It will be interesting to see whether other suppliers take the same approach, I was certainly unaware that Hattons had been paying the GST and therefore subsidising us. Would be interesting to hear from other suppliers, although I feel that Hattons trade value probably is greater than the next two put together. At the moment I will play it by ear as and when items are released.

 Will miss the trunk though, very useful.

Cheers from WestOz,

Peter C.

[St Enodoc]

1 hour ago, 45568 said:

Thanks, Jon, for sharing the information. It will be interesting to see whether other suppliers take the same approach, I was certainly unaware that Hattons had been paying the GST and therefore subsidising us. Would be interesting to hear from other suppliers, although I feel that Hattons trade value probably is greater than the next two put together. At the moment I will play it by ear as and when items are released.

 Will miss the trunk though, very useful.

Cheers from WestOz,

Peter C.

I think you are on the mark, Peter. I seem to recall from a few years ago that only suppliers who do business with Australia above a certain value ($75,000 pa?) have to charge GST.

 

Presumably this is what Hattons are referring to in the sentence "We have been required to collect GST since 2018 and have effectively subsidised customers up to this point as we have not been charging it, this is no longer sustainable for us to do so".

[Faulconbridge]

Hatton's tell me they have been subsiding us since 2018 as if you would believe that 

[Faulconbridge]

Re RAILS THEY DONT  ,IT JUST PRESSURE BY THE AUSSIE GOVERNMENT  TO GET THEM TO COLLECT TAX ,LIKE THEY DID WITH EBAY  

[AY Mod]

29 minutes ago, Faulconbridge said:

Hatton's tell me they have been subsiding us since 2018 as if you would believe that 

 

27 minutes ago, Faulconbridge said:

Re RAILS THEY DONT  ,IT JUST PRESSURE BY THE AUSSIE GOVERNMENT  TO GET THEM TO COLLECT TAX ,LIKE THEY DID WITH EBAY  

 

Wind it in please and don't shout in block caps.

 

[jjb1970]

I am really not sure why people seem to see this as a problem on the part of Hattons. They're complying with Australian law, not only is that the socially responsible thing to do it is a mandatory demand. If people in Australia aren't happy they should complain to their MP.

[Jon Harbour]

7 minutes ago, jjb1970 said:

I am really not sure why people seem to see this as a problem on the part of Hattons. They're complying with Australian law, not only is that the socially responsible thing to do it is a mandatory demand.

 

It's not necessarily seen as  problem. It's a change in the status quo which impacts one of Hattons unique selling points over its competitors (but they still have the trunk advantage over other model railway retailers). It means that buying from Hattons, which is significantly cheaper than buying in Australia has suddenly taken a 10% price hit. I started the thread simply to let others know this is coming in case they did not get the mail from Hattons about it. 

 

11 minutes ago, jjb1970 said:

If people in Australia aren't happy they should complain to their MP.

 

I haven't written to them about this, but I have written to both Federal and State MPs about other matters and they have actually been really helpful. This affects government revenue, so they are unlikely to assist in this case.