Shopify invoicing & dropshipping

Dropshipping is a very popular business model among sole traders looking to get into e-commerce. While the micro-entrepreneur status offers simplified accounting, dropshipping invoicing becomes more complex, because you have to account for the taxes applied between the different countries involved and whether or not they should be passed on to the consumer.

Dropshipping in the service of sole traders

Dropshipping consists of selling goods that are stored and shipped directly from the supplier (manufacturer, wholesaler, or online shop) to the customer, without physically passing through the hands of the seller (or dropshipper).

The advantages of dropshipping

Dropshipping offers the dropshipper a number of advantages:

• no stock, which would require an investment and the rental of a space or warehouse;
• no inventory or stock management;
• positive cash flow, since there is no money to advance;
• no delivery logistics to manage;
• easy to expand the range of products offered;
• freely set selling prices.

That said, you need to make sure your supplier is trustworthy, since you have no control over delivery times or product quality.

Moreover, even if you are merely the intermediary between the consumer and the supplier, you remain your customer’s sole point of contact. You must therefore handle after-sales service yourself. In particular, you need to look into the procedures for returning defective or damaged products, as well as the guarantees that apply when a package is never delivered.

Dropshipping suppliers

Dropshipping suppliers operate from every country in the world. You are free to turn to French or foreign companies, depending on your goals.

Dropshipping covers every sector of activity. It is not limited to cheap trinkets and gadgets — it can just as easily involve high-tech or luxury products, from the smallest items to bulky goods.

You can choose very general-purpose wholesalers. The best known of them is the Chinese platform AliExpress, which supplies the entire world. Other well-known suppliers include Octopia Products, Bigbuy, Vless, Brands Distribution, Griffati, Nova Engel, Webdrop Market, Emuca Online, Zentrada.network, Bimago, VidaXL, and Gatito.pl. This list is not exhaustive, and it is regularly enriched with new suppliers.

You can also approach companies that don’t specialize in dropshipping but that may offer it as a way to diversify. For example, some furniture manufacturers, in France or elsewhere, are willing to use your skills as an intermediary in order to reach a wider audience.

Taxes related to dropshipping invoicing

Since July 1, 2021, accounting rules have changed considerably for dropshipping e-commerce sites, including for sole traders. With a few exceptions, dropshipping involves products coming from abroad, which means customs duties, VAT, and other sales taxes on goods.

Your shop operates on an import basis, and you must comply with the tax rules of the countries you work with.

Sales taxes

Every European country applies consumption taxes that the end consumer must pay. They apply to products and services, and each country chooses its own model.

Sales within the European Union and VAT collection

If your supplier is based in the European Union, VAT between your business and theirs is handled through the reverse-charge mechanism.

General rules for all online shops, dropshipping or not

A one-stop-shop system has been set up for distance sales taking place within the European Union: the OSS (One Stop Shop). Its purpose is to allow businesses to pay VAT in a single country, even when VAT is due in a country other than their own. This lets you pay VAT in France, even if your customer is located in another EU member state.

• If your annual revenue in Europe remains below €10,000, your sales are subject to 20% VAT, since they are considered to be located in France. This only applies to packages shipped from France. If you are VAT-exempt, you do not need to apply VAT and therefore do not need to file an OSS return for these sales.
• Once your annual revenue exceeds €10,000, distance sales are considered to be located in the country where your customer resides. They then become subject to the VAT rate applied in their own country. If you are VAT-exempt, you are still liable for VAT in the destination country.

Rules specific to dropshipping invoicing

Under the 2020 finance law, applicable since July 1, 2021, the rules governing import VAT and customs duties have changed.

As a dropshipper established in France, you must apply to the tax authorities for an IOSS VAT number (Import One Stop Shop). If you do not have an IOSS number, when your customer receives a package from abroad, they will be asked to pay import duties, which significantly increases their bill.

You must also keep a register listing all your transactions, including the invoices that prove each purchase and debit in your accounts. The authorities can audit you at any time and ask you to produce this record. To stay compliant, you must keep it for 10 years, starting from December 31 of the year in which the transaction took place.

In addition, you become liable for VAT when your customer is in Europe and the selling price does not exceed €150 excluding tax, delivery costs not included. To learn more, see our article on VAT for sole traders.

VAT related to dropshipping for goods valued at €150 or less

When the value of the goods remains below €150, you use the IOSS one-stop shop. It allows you to be exempt from import VAT and customs duties, while also letting you declare all the VAT collected across Europe on a single interface, without having to register in each country.

If you are VAT-exempt, you will not need to file an IOSS return for sales made in France.

Reminder of VAT thresholds for sole traders

Sole traders benefit from a VAT exemption on transactions in France. Below the thresholds, they do not charge VAT and do not need to declare it.

1 — For merchants:

• the revenue cap is €176,200;
• the VAT exemption threshold is €85,800;
• the increased VAT threshold is €94,300.

2 — For craftspeople and liberal professions:

• the revenue cap is €72,600;
• the VAT exemption threshold is €34,400;
• the increased VAT threshold is €36,500.

Customs duties in dropshipping

When your packages come from a country outside Europe, they go through customs. Customs will not charge you any fees if the value of the goods is below €150 and the package carries an IOSS number. Beyond that, customs duties are owed by the consumer — that is, your customer.

Many packages coming from China, particularly from the giant AliExpress, are not inspected. They are often quite small, which does not draw the attention of customs officers. In addition, the sender often declares a lower price on the package label or states that it is a gift, which is not legal. The introduction of the IOSS now gives customs services better traceability of packages in transit, and therefore lets them recover the amounts owed.

The EORI number

The EORI number (Economic Operator Registration and Identification) is useful for communicating with customs authorities when you import goods as part of your dropshipping business.

Specifically, thanks to this EORI number, your company’s identity is linked to packages when they arrive at customs.

Go to the official French customs website to apply for registration and receive your EORI number. It is free and provides a number specific to your business. It follows the structure of your SIRET number according to the pattern: FR + SIRET. You simply need to provide a Kbis extract or its equivalent, for example an extract from a trade register proving the company’s legal existence, and your EORI number is issued within 24 hours.

To more easily track your package as it passes through customs, you can ask your shipper to mention it on the package. If your shipment is delayed even slightly, it is easier to locate thanks to a simple scan of the label by customs officers.

Shopify invoicing and other online shops

When you create your dropshipping online shop, it is very much in your interest to use ready-made CMS platforms. You pay a monthly fee and get access to a site already configured for e-commerce, which you just need to customize before adding your products for sale.

The best-known CMS platforms are Shopify, PrestaShop, Wizishop, and WooCommerce. The advantage of these specialized providers is that they are relatively easy to configure and offer a wide range of tools to help you manage your shop and improve your sales strategy.

However, you absolutely must set up an accounting and invoicing system that is as automated as possible. To do this, you need sole trader accounting software that is compatible with your site.

Save time and stay compliant

Syncing your dropshipping shop with dedicated software lets you save a considerable amount of time. It is better to spend that time finding new products and refining your sales strategies.

In addition, you can be sure not to forget anything, to check that all your payments went through without issue, and to stay compliant with the authorities in the event of a tax audit.

If you don’t have software from the moment your shop opens, you should be able to import your entire history to get a full overview. It is also essential that you be able to sync an unlimited number of shops.

Once you have mastered the dropshipping system, you may want to explore other sectors, other products, and other target audiences. With flexible software, you centralize all of your accounting.

Shopify, WooCommerce, and Wizishop invoicing

With the right software, Shopify invoicing and invoicing for other dropshipping shops becomes child’s play, since you automate your operations. Every time an order is placed on your site, the invoice is issued automatically, and the software accounts for all the particularities of dropshipping invoicing.

You customize your documents with your colors and logo, and you set up how they are sent exactly as you want. If you have several shops, each one has its own customized invoice template.

You then have settings that let you adapt your way of working. You may have quotes to issue upfront, delivery notes to produce, and so on. With dropshipping, you will also sometimes need to issue credit notes. In the event of an issue, a customer may request a partial or full refund. With your software, a few clicks are all it takes to produce any document related to Shopify invoicing.

This gives you the certainty that your accounts are always up to date.

Currencies and languages for dropshipping

If you sell your dropshipping products abroad, the invoicing software handles languages and currencies outside the eurozone.

Even more automation

You should choose agile software that constantly adapts to new tools, allowing you in particular to fine-tune your automation.

Tools like Zapier, for example, let you optimize the management of your dropshipping shop. The more time you save on the technical management of your site, the more you free up to work on the business side.