Do international sellers have to deal with sales tax in the US?
by March 10, 2024
Since many e-commerce sellers are doing business internationally, we thought we would take a look at the various scenarios that they face, and try to determine when and how international sellers have to deal with sales tax in the US.
For the purposes of this article, we are not going to go into customs duties, import taxes or any of the other many taxes that an international seller might face doing business in the United States.
You are an international seller, with no physical presence or sales into the United States
Congratulations! If you do not have a physical presence in the US, nor make sales into the US, then you are not required to collect US sales tax.
You are an international seller who has no physical presence in the US, but who makes sales into the US.
In this case, you may have economic nexus. A June 21, 2018 Supreme Court of the United States case allowed states to require online sellers with “economic nexus” in their state to comply with that state’s sales tax requirements.
This simply means that if a seller – no matter where they are located – makes a certain dollar amount of sales in a state, or a a certain number of transactions with buyers in that state, then they are required to collect sales tax in that state.
For example, in Kentucky, any seller (US based or international) who makes more than $100,000 in sales in the state in the previous or current calendar year, or who made more than 200 sales transactions in the state in the previous or current calendar year, is required to comply with Kentucky’s sales tax laws. Compliance means registering for a Kentucky sales tax permit and collecting sales tax from any buyers in Kentucky.
About half the states in the US currently have economic nexus laws. You can read more about each US state’s economic nexus laws here.
You are an international seller, who warehouses items in the US, such as in an FBA warehouse
Even though you may live outside the United States, if you sell on FBA or have established any other type of sales tax nexus in the United States (such as an employee, office, a satellite branch of your business, or a warehouse where you store inventory), then you must comply by the sales tax laws of the state where you have nexus.
You can find out more about sales tax laws in various US states on TaxJar.
You are a non-US Citizen, but you live in and have “nexus” in the United States
As with the example above, you must comply with state sales tax laws, no matter your legal status. We have talked to customers who live in the US but who’s citizenship status is “non-resident alien.” That type of legal status, though, which is a person’s legal standing in the country, shouldn’t be confused with “nexus.”
Even though our customers are not necessarily citizens of the United States, if they run their businesses from and store inventory in a US state, that means that they have sales tax nexus in that state (or states) and must collect and remit sales tax.
You have tax responsibilities outside of the US.
Sales tax is only one type of indirect tax compliance. Other countries and regions have different types of consumption taxes, similar to sales tax. For example, Canada has a Goods and Services tax that operates similarly to sales tax.
While TaxJar does not offer international calculations, Stripe Tax might be a good fit for your business. TaxJar was acquired by Stripe in 2021 to to accelerate the future of commerce and compliance. Available in over 50 countries, Stripe Tax enables you to automatically calculate and collect the right amount of tax based on where you are registered, where your customers are located, and what you are selling. Stripe Tax also helps you monitor your obligations and provides reporting for filing and remittance. Learn more about Stripe Tax here.
