The place of supply determines in which country a transaction is taxable. For goods, where your sale is taxable will depend on two factors:
- Who your customer is
- Whether your goods cross an international border
When your customer is an individual (B2C):
If your goods are not dispatched to a customer when they’re sold (sold in a retail store, for example), then the place of supply is where the goods were when they’re sold. For example, you sell a handbag to a customer in a store in Berlin. The place of supply for that sale is Germany, and German VAT applies.
If you store goods in the same country as your customer is established and have to ship them to them, then the place of supply is where your goods are stored. For example, a German customer orders something from your Amazon store. You’re using Amazon FBA, so you ship them their order from the goods stored in Germany. The place of supply for this transaction is Germany.
If your goods have to cross an international border to reach your customer, then the place of supply is where your customer is based. For example, your customer in Germany orders goods from your online store. You ship them their order from your warehouse in the USA. The place of supply is Germany, and German VAT is due on that sale.
When your customer is another business (B2B):
If your goods aren’t transported or dispatched, VAT may or may not be due at the point of sale, depending on the country where the sale was made. See relevant national legislation regarding applicability of potential domestic reverse charge rules.
If your goods are dispatched to the customer from an EU Member State, the place of supply is the state where the transport began. If your customer can provide a valid VAT ID number from a Member State (not from the country where the goods are being dispatched from), you can exempt the transaction (not charge VAT on the sale).
When your goods are dispatched from outside the EU, whether VAT applies depends on who is the Importer of Record. If you - the supplier - are listed as the importer, the place of supply is the EU Member State where the goods are being imported to. If your customer is the importer of record, then the transaction is outside the scope of EU VAT.