I remember standing in the back of our primary fulfillment center in mid-January 2024, staring at a literal mountain of cardboard. We’d just survived a 5.3x return spike during the BFCM rush, and our floor space was physically running out. But that wasn't the worst part. The worst part was the stack of customs invoices sitting on my desk for international shipments that had "bounced" back to us from Europe. We were getting hit with double taxation, unexpected brokerage fees, and a flurry of emails from confused customers. It was a wake-up call. When you’re scaling a brand, you think about marketing and product-market fit, but you rarely think about tax identifiers until a pallet is stuck in a German warehouse. That’s when I realized I needed to know exactly what is a vat number and how it dictates the flow of global trade.
Quick overview
The Global Identifier: What is a VAT Number in the US?
If you’re a US-based founder, the first thing you probably searched was "what is a vat number in the us." The short, somewhat confusing answer is: it doesn't exist natively. In the USA, we use Sales Tax, which is collected at the point of sale and managed at the state level. However, if you're a US company selling into the European Union or the UK, you are required to have a vat number usa businesses use to comply with foreign laws.
Here’s where ops breaks: brands often assume that because they have a US EIN (Employer Identification Number), they’re good to go. They ship a $200 jacket to London, and then the customer gets a notification that they owe another $40 in taxes before the courier will release the package. That’s a fast way to kill your Net Promoter Score. If you don't have a company vat number, you can't participate in schemes like IOSS (Import One-Stop Shop), which allows you to collect tax at checkout and speed up customs clearance.
Now the logistics math that matters: when an international package is refused because of tax confusion, it costs you twice. You pay the outbound shipping, the return shipping, and often a "return to sender" fee. In 2024, one apparel brand we worked with was losing $4,500 a month just on "tax-rejected" international returns. (Honestly, I'm still uncertain why more 3PLs don't make this a mandatory onboarding step for new international brands).
Managing the Tax Trail: What is a VAT Registration Number?
So, what is a vat registration number versus just a standard tax ID? It is a specific number assigned by a tax authority in a VAT-compliant country to a business. It allows you to "reclaim" the VAT you pay on business expenses, like manufacturing costs or warehouse storage in that country.
But wait, there’s a difference between vat identification number formats across borders. A UK VAT number starts with "GB," while a French one starts with "FR." If you're using a tool like ShipBob to fulfill from a warehouse in Poland, you need a Polish VAT number to avoid being taxed on the storage fees themselves.
Now the tricky part regarding carrier rates: if your paperwork is missing the company vat number, carriers like UPS or FedEx will often charge a "disbursement fee" to pay the tax on your behalf at the border. These fees are usually $15 to $20 per package. If you’re shipping 100 packages a month, you’re lighting $2,000 on fire simply because you didn't fill out a registration form.
The Cross-Border Headache: What is a VAT Number in USA Operations?
When operators ask me, "what is a vat number in usa logistics circles," they’re usually asking how to display it on their commercial invoices. Even though the US doesn't have a VAT, your commercial invoice must show your UK or EU vat numbers so the customs officials know who is responsible for the tax.
I recall an honest failure case from early 2025. A wellness brand tried to "wing it" on their first UK shipment of 500 units. They didn't have a vat registration number, so they shipped DDU (Delivered Duty Unpaid). Every single one of those 500 customers got a text message asking for tax money. Within 48 hours, their customer support was flooded, and they had a 30% refund request rate.
And let’s be real—nothing is more expensive than a "slow" refund. When you have a warehouse backlog because of international confusion, it ripples through your entire operation. This is where you need enterprise tools like Loop or Narvar to manage the customer expectations, but you also need a physical strategy to handle the inventory when it comes back.
How Closo Works and Solves Returns
This is where the conversation shifts from tax to physical logistics. This is how Closo works to fix the mess that international (and domestic) returns create. Traditionally, if an international customer returns an item, you’re paying to ship it back across an ocean. It’s a logistics nightmare that often results in the brand just telling the customer to "keep it" because the return shipping is more expensive than the product.
But how Closo solves returns is by decentralizing the "Source of Truth." Instead of sending everything back to your main DC, Closo uses localized hubs. If a customer in the UK needs to return something, it doesn't need to come back to the US. It goes to a local UK hub.
We route eligible returns locally instead of sending everything back to the warehouse — cutting return cost from ~$35 to ~$5 and speeding refunds.
By utilizing return hubs, you keep that inventory in the region. If you have your vat identification number sorted, that local hub can even restock and reship that item to another customer in the same tax zone, completely bypassing the need for a second round of import duties. This is a massive win for your unit economics. For a deeper look at these workflows, check out our brand hub
Why "Wait and See" is a Failed Tax Strategy
Many founders I talk to adopt a "wait and see" approach to vat identification number registration. They wait until their sales in a specific region hit a certain threshold. While this makes sense for some taxes, VAT is an "indirect" tax, meaning you are technically just the middleman for the government's money. If you don't collect it at the time of sale, you are still liable for it later.
I've seen brands get hit with back-tax bills in the UK that exceeded their total profit for the year. (Yes, I've had to walk CFOs through those balance sheets, and it isn't pretty). The vat identification number is your shield against these retroactive audits. It proves you are part of the system and participating in good faith.
Now the logistics math that matters: if you are shipping 1,000 units a month into the EU, you are likely paying around $2.50 per unit in "customs handling fees" to carriers if you don't have your own VAT sorted. That's $2,500 a month in pure waste. Over a year, that's $30,000. You could hire a part-time ops manager for that, or you could spend it on a registration that costs about $1,000 one-time.
The Anatomy of a VAT Number: Decoding the Digits
To the uninitiated, vat numbers look like a random string of characters. But there is a logic to them. Usually, they start with a two-letter country code followed by 8 to 12 digits. For example, a UK vat registration number is typically 9 digits long.
When you're filling out commercial invoices in a tool like ShipBob or NetSuite, you have to be careful. A single typo in the company vat number will cause the customs AI to flag the shipment. In 2024, we saw a brand have 200 units sit in a "pending" status at an airport in Ireland for two weeks because they forgot the "IE" prefix on their paperwork. The customer experience was ruined before the product even landed.
How Closo Solves the "Double Tax" of Returns
Here is the secret nightmare of international e-commerce: when a customer returns an item, you've already paid the VAT. If you ship that item back to the US, you are technically exporting it from the EU. To get your VAT back, you have to file a complex "drawback" claim. Most brands just give up and lose the money.
But how Closo solves returns is by keeping the asset in the tax zone. If an item is returned in Germany, it goes to a Closo hub in Germany. It is inspected, verified, and placed back in a local "A-stock" pool. When a new customer in Germany or France buys that item, it's shipped from the local hub. No new import VAT is due because the item never left the EU. You've effectively turned a "tax loss" into a "logistics win."
Comparison: Centralized vs. Localized Hub Costs
Operators always ask me: Do I need a VAT number for every country?
Common question I see: "If I sell to 27 EU countries, do I need 27 numbers?" The short answer: Not since the 2021 One-Stop Shop (OSS) rules. You can register for a single vat identification number in one EU country (like the Netherlands or Ireland) and use that to report and pay VAT for sales across the entire EU. It's a massive relief for DTC brands.
However, the UK is now separate. You need a specific UK vat registration number if your sales exceed £70,000, or if you are storing goods in a UK warehouse. I'm of the opinion that you should get it sorted the moment you decide to take the UK market seriously. (Parenthetically, I’ve seen brands try to use their EU OSS number for UK shipments, and those packages were seized at the border within 24 hours).
The Invisible Cost of "Tax-Refused" Shipments
We have to talk about the "Ghost Logistics" of international sales. When a customer sees a surprise tax bill at their door and says "no thanks," that package doesn't just disappear. It enters a slow, expensive loop back to you.
I recall a failure case where a brand had a 15% refusal rate on international orders. Because they didn't have their vat numbers properly integrated into their checkout (DDP - Delivered Duty Paid), they were essentially paying for 1,150 shipments just to get 850 successful sales. When we factored in the return freight and the damaged packaging, their international "profit" was actually a $20,000 loss for the quarter.
This is where the logistics math that matters becomes undeniable. If you spend $10,000 on a high-end tax consultant to get your company vat number and IOSS/OSS strategy correct, you'll make that money back in six months just from reduced return freight.
How Closo Works with Your Tech Stack
You might be using Loop or Happy Returns for your US customers, and they are great tools. But they often struggle with the "Tax Boundary" of international returns. How Closo works is by acting as a routing engine that understands these boundaries.
When a return is initiated, Closo's software checks the location of the customer against your local hub network. If the customer is in a region where you have a vat identification number and a local hub, the system automatically generates a local label. This prevents the "Tax-Trap" of shipping across borders unnecessarily.
And let's be real—nothing makes a customer happier than a fast refund. By inspecting at the local hub, you can trigger the refund the moment the local agent scans the item. This reduces your "Refund Delay Impact" from 21 days to under 48 hours. That's how you build a brand that people actually recommend.
Common question I see: Can I use my EIN as a VAT number?
Operators always ask me this when they're rushing to fill out a DHL or FedEx form. The answer: Absolutely not. An EIN and a vat identification number are as different as a passport and a library card. If you put an EIN in a VAT field, the customs AI will flag it as an error immediately. Your package will be diverted to a "Manual Review" pile, which is basically a black hole where packages go to die for 5 to 7 days.
I'm still uncertain why more shipping platforms don't have a "Validation" step for this, but until they do, the responsibility is on the Ops Director. Double-check your commercial invoice templates. If they don't have a specific field for your vat numbers, you're asking for a warehouse bottleneck.
The Forward-Looking Strategy: 2026 and Beyond
As we move into 2026, the tax laws are only getting stricter. Governments want their money, and they are using increasingly sophisticated AI to find brands that aren't compliant. The "scrappy" way of shipping internationally without a vat registration number is coming to an end.
If you want to scale, you have to professionalize your tax and logistics stack. This means:
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DDP Checkout: Use a tool like Zonos or Global-E to collect tax at the point of sale.
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Proper Tax ID: Have your company vat number clearly displayed on every document.
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Localized Returns: Use Closo to keep your assets within the tax zone.
Honest Failure: The "VAT Recovery" Nightmare
I want to share an honest failure case that still haunts me. A brand I advised was storing inventory in three different EU countries to "speed up delivery." They had the sales, but they didn't have the vat numbers for all three locations. When the tax authorities finally caught up, they realized the brand had been paying VAT on the import but wasn't authorized to reclaim it because their registration was in the wrong country.
They lost $45,000 in "lost credits" that could have been avoided with a 10-minute conversation with a tax pro. They were so focused on the "Atoms" (moving the boxes) that they forgot the "Data" (the tax identifiers). Don't let your ops team make the same mistake.
Conclusion: Turning Tax into a Competitive Advantage
Mastering international trade is a requirement for any DTC brand that wants to hit eight figures. Understanding what is a vat number is the first step in that journey. It isn't just a compliance hurdle; it's a tool for protecting your margins and your customer experience. While the US doesn't have a native vat number usa system, we operate in a global marketplace where these identifiers are the law of the land.
By professionalizing your tax identifiers and utilizing decentralized routing through Closo, you can turn a complex headache into a streamlined engine for growth. While the centralized warehouse model will always have its place for deep storage, the "speed" of international growth happens in the local hubs.
We route eligible returns locally instead of sending everything back to the warehouse — cutting return cost from ~$35 to ~$5 and speeding refunds. Would you like me to run a "Logistics Stress Test" on your current international shipping to see where you're losing margin to unnecessary tax and freight fees?
FAQ
Operators always ask me: How long does it take to get a VAT number? It varies by country. The UK is currently taking about 4 to 6 weeks. Some EU countries, like Italy, can take longer. It is best to start the process at least 3 months before you plan to launch a major international push.
Common question I see: Does VAT apply to digital goods? Yes. In many jurisdictions, if you are selling digital products (like a subscription or an ebook) to customers in the UK or EU, you are still required to register for a vat registration number and pay tax in their home country.
