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One of the best things about our Sales Tax for eCommerce Sellers Facebook group is that we get a cross-section of online sellers. That includes some sellers who aren’t based in the United States at all.
Inspired by our international members, 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 United States.
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 U.S., nor make sales into the U.S., then you are not required to collect U.S. sales tax. Cheers!
You are an international seller who has no physical presence in the U.S., but who makes sales into the U.S.
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 (U.S. 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 U.S. currently have economic nexus laws. You can read more about each U.S. state’s economic nexus laws here.
You are an international seller, who warehouses items in the U.S., 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 may even still be required to file sales tax returns in the states of Washington and Pennsylvania, where Amazon currently handles sales tax collection. You can read more about sales tax developments in Washington here, and more about sales tax developments in Pennsylvania here. (Amazon also collects sales tax on behalf of 3rd party sellers in the state of Oklahoma, but Oklahoma is not yet home to an Amazon fulfillment center. Still, if you want to know more, read about Amazon collecting sales tax in Oklahoma here.)
You can find out more about sales tax laws in various U.S. states on TaxJar.com.
You are a non-U.S. 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 U.S. 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 U.S. state, that means that they have sales tax nexus in that state (or states) and must collect and remit sales tax.
Sales Tax Resources for International Sellers
So you think you may need to get sales tax compliant in the U.S. We highly recommend that international sellers contact an expert. Depending on what part of the world you are from and what your business activities in the U.S. entail, you may have complex tax requirements.
We recommend these CPA firms for international sellers:
Are you an internationally-based online seller who sells in the U.S.? Do you deal with sales tax nexus? Start a discussion in the comments below.