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Little-Known but Vital Online Import Tax Rules

The online shopper is questioning what happens to the GST and customs duty, charged on purchases from overseas when goods are returned. Barb bought two items of clothing from the US, she understood she had to pay the GST and customs duty, fair enough, but wasn’t so pleased to learn that when the items didn’t fit and she returned them, she wouldn’t get the GST back.

So what’s the story? In a moment we’ll hear what customs has to say, but first Barb told me about her purchases and how much she paid.

$332.50. The cardigan was about 245, and the top was 87. This is US dollars.

Yeah. And then when you got the actual invoice, GST had been added right? Taxes had been added?

That’s exactly right, yeah. I got an invoice with the package when it arrived on Tuesday I think. Which went from the price that I saw when I clicked yes, paying sort of thing on the side. It went from 332 to 443, so that’s over $100 difference and that’s just GST and duties in that difference. And that’s US dollars too.

And that’s a separate conversation right? You don’t object to paying that per se, but it’s what happened next that’s problematic.

Yeah, well that’s right. It’s all part of the procedure. So then my daughter and I, she tried the cardigan, it was far too big on her. And then I tried the top, and it was just a bit shoddy. I thought it looked a bit cheap for what it was, and so I sent them back straight away, the next day on DHL to the site that I’ve bought many a thing off. And then they came back and said to me that I’d be getting 441 dollars back – that’s New Zealand dollars – even though they took 703 dollars out of my Mastercard when the whole purchase went through.

And then they came back and said to me that I’d be getting 441 dollars back – that’s New Zealand dollars – even though they took 703 dollars out of my Mastercard when the whole purchase went through.

Wow, so you’ve lost 300 bucks by.

Nearly 300 dollars, yup.

So you’re getting a refund on the actual cost of the items but no refund of course, on the tax you’ve paid?

No. Not at all. I mean I don’t mind paying obviously the amount that I’m not getting back is the courier charges. And that’s fair enough. You expect that. You pay that, and that’s gone. But then I went back to them and said, “Hey, 15% GST back, thanks.”; And they said, “No, you’re not getting that back.” And I said, “But I haven’t got any goods or services for that GST you’ve taken off me.” And they said, “Well, I’m sorry, this is how it goes.”

And I thought, “Okay, that’s two lots of 15% – I forget what that ends at – it’s about 150 New Zealand dollars anyway, that I’ve just lost.”

Okay, so, who’s that gone to? If it’s been collected as GST, it should legally and in the normal course of events go to the IRD, right?

Yeah, so that’s right. Well, I rang customs, they said, “Oh, ring the IRD.” So, I rang the IRD, and a lovely lady there told me that I need to ring the customs because the customs collect the money from these offshore internet sites. So, I rang customs back, and I said, “Well, actually you’re the ones I’m supposed to speak to.” And they said, “Oh well, yes, we keep it.” And I said, “Well, how do you justify that?” Because isn’t that against the law.

So, I rang customs back, and I said, “Well, actually you’re the ones I’m supposed to speak to.” And they said, “Oh well, yes, we keep it.” And I said, “Well, how do you justify that?” Because isn’t that against sort of, I don’t know, all sorts of things to keep GST for services that you haven’t actually or goods you haven’t actually received, and he said,”No.” It’s in the fine print apparently, unless it’s got a fault with the product or it’s the wrong sizing though they said it’s you know, these little details. Well, anyway. Because that’s what they said, and they keep it, the customs.

It’s in the fine print apparently, unless it’s got a fault with the product or it’s the wrong sizing though they said it’s you know, these little details. Well, anyway. Because that’s what they said, and they keep it, the customs.

So, this is interesting isn’t it, because had you bought exactly the same items from the store in New Zealand, and taken them home and you and your daughter had tried them on and thought, “Nah,” and took them back, you would’ve got the GST refund, wouldn’t you? You would’ve got the whole lot back?

Absolutely, yeah. I mean, obviously they’re trying to stop people buying offshore, and they’re probably trying to get people to buy the local product, but at the same time, you should be getting your GST back. I just feel no matter where you’ve bought the product and how you’ve bought it, you still should get GST back because GST is about paying for goods and services, isn’t it? I don’t know.

Well, it is. It’s what it’s called, the Goods and Services Tax.

Yeah, I know.

And you didn’t get goods, you didn’t get a service. You say, on the face of it, you’ve got nothing to pay GST on, right?

No, exactly. And I just don’t know how they’re getting away with this for no matter where you buy the goods or get the services from. I do believe it should come back to you if you don’t receive any goods or services.

Barb – so should she get her money back? The situation’s complicated and customs tell us GST registered importers may apply for a GST drawback if the goods are faulty or if the wrong goods were sent. It gives us an example which sounds very similar to the maths problems I can no longer help my children with.

A woman orders a size ten dress in the design and colour of the product being advertised. The size ten dress is received, but the woman importer finds that she doesn’t like the style or it doesn’t appear to fit.

Customs will not refund the GST as the importer received what they ordered and the goods are not faulty. So if you get the wrong size, you’re out of luck.

However, if that dress was faulty, e.g., was torn, or a size 12 was sent instead of the size 10 ordered, then customs will refund the GST.

So faulty, GST back. You just don’t like it, or it’s the wrong size, GST not back.

The customs duty is a separate matter to GST. Customs will refund this, regardless if the wrong size is sent or if the goods are damaged. The Customs Import Entry Transaction Fee, however, is not refundable.

That was a PhD thesis given to us by customs a short time ago we appreciate it. I have no idea what it meant, but the moral of the story is, don’t buy the goods unless you’re 100% sure they’re going to fit you.

 

Source: RADIO NZ

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