Themen

U.S. Sales Tax Explained for both U.S. and Non-U.S. Sellers

Most sellers in the United States find U.S. sales tax difficult to understand, so it stands to reason that international sellers would find it even more perplexing! Since Sellics works with customers who are based in the U.S. and around the world, we’re going to start by giving you an overview of how the U.S. Sales tax system works. After that, we’ll provide some sales compliance options for international sellers doing business in the U.S. Let’s dive in!

The Basics of U.S. Sales Tax

The United States has no national sales tax. This means that each individual state decides how sales tax is governed. Forty-five individual states and the U.S. Capital, Washington D.C., have a sales tax. (Washington D.C. is not a state, but it operates like a state for the purposes of sales tax compliance.) Five U.S. states do not have a sales tax at all.

States use tax revenues pay for state budget items like schools, roads, and public safety. These items are governed at the individual state level and can vary widely between states. Because of this, sales tax rules, rates, and regulations are different in each state that collects sales tax.

A good example of this variance is with groceries—some U.S. states consider groceries to be subject to tax, while others consider groceries to be non-taxable.

As an online seller, you will notice that some states will also tax shipping charges that you charge to your customers to ship products. Other states do not tax shipping.

The main thing to keep in mind is that your company might have a relationship with one or more individual state governments for purposes of sales tax compliance. For more information on specific states, here’s a guide to find out more about sales tax in each U.S. state.

Does Your Business Need to Collect U.S. Sales Tax?

Sales Tax Nexus

U.S. states can only require sellers to charge sales taxes if that seller has “sales tax nexus” in that state. Nexus simply means that your business has significant presence in that state. Here are some of the factors that can establish nexus in a state:

  • A Physical Presence – Such as a home office, warehouse, store, or other location
  • Affiliates – Someone who sends customers to your online store for a percentage of the profits from a sale
  • Personnel – Employees, salespeople, and even some contractors can establish nexus
  • Drop Shipping – A situation where you have a relationship with a supplier to ship inventory to your customers
  • Selling items at a trade or craft show
  • Inventory – If you store goods for sale in a state, sales tax nexus is usually created. If you’re a seller who makes use of third-party fulfillment services like Amazon FBA you’ll generally have sales tax nexus in states where your products are stored for sale

Click here to view what each state’s tax law says about sales tax nexus.

When Do International Sellers Need to Collect U.S. Sales Tax?

The short answer is that a state will consider you liable to collect sales tax if your business has sales tax nexus in that state. There are a few different scenarios where non-U.S. sellers may have nexus in the United States.

  • If you live and run your business inside the U.S. but are not a U.S. Citizen – Non-U.S. citizens who are running a business in the U.S. are still considered to have sales tax nexus and are required to abide by sales tax laws as if they were U.S. citizens.
  • If you live outside the U.S. but have sales tax nexus in a U.S. state – If your business meets any of the criteria for nexus in a U.S. state, that state will require that you register for a state sales tax permit and collect sales tax from all buyers in that state. It is important to note that you should never collect sales tax from U.S. buyers without a sales tax permit. This is considered unlawful! Make sure you keep in mind that five U.S. states do not have a sales tax—Alaska, Delaware, Montana, New Hampshire, and Oregon. This means that you won’t be required to collect sales tax in those states, even if you have a location, employees or inventory there.
  • If you live outside the U.S. and have no sales tax nexus in the U.S. – In this case you won’t have to worry about registering for a sales tax permit and collecting taxes. You might still make sales to customers in the U.S., but if you do not have sales tax nexus in any U.S. states then you do not have to collect U.S. sales tax. Congratulations!

How can U.S. Sellers Become Sales Tax Compliant?

Having sales tax nexus in one or more states means that state requires you to register for a sales tax permit with the tax department for that state (generally called the State’s “Department of Revenue”). Once you receive your sales tax permit, you’ll need to collect sales taxes on from all of your customers in those states when taxable sales are made.

When you receive your state sales tax permit you’ll also be assigned a sales tax filing frequency—generally monthly, quarterly, or annually. Most states will make your business file more frequently if you have a large sales volume.

When you file you’ll need to figure out how much sales tax you’ve collected from your customers in each individual state. Most states will also require you to break down your sales by local areas within each state and usually categorized into cities, counties, and other special taxing districts. This can be daunting, but sales tax automation technology can connect to your marketplaces and online shopping carts to simplify this process.

These are the basics of how sales tax works in the U.S. If you’d like to go on a deep dive in the topic, check out our Sales Tax 101 for Online Sellers guide.

How can Non-U.S. Sellers Become Sales Tax Compliant in the U.S.?

To be honest, becoming compliant with U.S. sales tax is quite complex for international sellers. You’ll most likely want to work with an accounting firm who specializes in helping non-U.S. sellers get compliant, but before you get to that point here are a few actions you can take:

  • Determine where you have nexus – Use the ground rules posted above to determine the states where you have nexus. If you sell via Amazon’s FBA program you can view your Inventory Event Detail report to see which states have Amazon warehouses that store your inventory. You can also sign up for a 30-day free trial of TaxJar that will display the states from which your products have recently shipped.
  • Register for a sales tax permit in your nexus state(s) – Here’s where most international sellers hit their first roadblock. Most states require that you have an Individual Taxpayer Identification Number (ITIN) to register for a permit. In addition, many states have online systems that cannot handle sales tax permit applications from outside the U.S. and you may be required to call the state to register or fill out a paper sales tax form and mail it to the state.
  • Open a U.S. bank account – Most states only accept sales tax payments using Automated Clearing House (ACH) transfers from a U.S. bank, which means you may be required to open a U.S. bank account. Opening a U.S. bank account will normally require either you or a business representative to be physically present when opening the account.

Fortunately there are multiple sales tax experts who have years of experience in helping international online sellers get sales tax compliant in the U.S.

Here are two U.S.-based tax firms that we have vetted and currently recommend:

You could also look for a sales tax firm in your country that can assist your business with becoming sales tax compliant in the U.S.

Our goal is to help point you in the right direction when it comes to U.S. sales tax compliance no matter where you’re located. If you have any questions or any comments about your experience with dealing with U.S. sales tax, go ahead and start the conversation in the comments!

TaxJar is a service that makes sales tax reporting and filing simple for more than 7,000 online sellers. Try a 30-day-free trial of TaxJar today and eliminate sales tax compliance headaches from your life!

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