US sales tax guide for international sellers
A few things have changed recently regarding US sales tax laws. As an international seller, we know you have questions. Need information on nexus? Registration? Exemptions? Read through our simple US sales tax guide for international sellers.
What is nexus?
When someone refers to nexus, they refer to a link or a connection with a state that stands as a prerequisite for any tax-related activities.
Only when one has nexus can a state require you to collect or pay its taxes. This could include sales or use tax collections, and income, franchise, or use tax payments.
Any activity helping to establish or maintain a market can create nexus, such as the existence of inventory, sales, and transactions. Third-party activities include installations, implementations, training, performance or services, sales, customer service, collection, and credit checking.
How do the new sales tax laws affect me?
International sellers should note that US states are becoming more aggressive in their search for tax evaders. The penalties and interests you can incur can exceed 50%.
This aggression has been partially spurred on by Amazonโs provision of seller information to US states, making it easier for these bodies to pursue foreign sellers.
Do I need to collect sales tax?
Before concluding whether or not to collect sales tax, you must take certain steps forward to further your understanding.
Firstly, make sure to analyze your nexus and your taxability. No nexus means no responsibilities!
Once youโve done so, quantify your materiality (what is most important to you depending on your situation). Then, if you determine you do have nexus, register where you need to, then collect and remit your tax.
If so, when, where, and how should I register?
There are three ways that you could consider registering for sales tax collection.
Registering prospectively entails registering from the current date going forward, on all future sales.
Registering historically (how the state wants you to) entails registering from the date at which your nexus began.
And registering through a VDA (Voluntary Disclosure Agreement) grants you access to a reward for stepping forward and announcing yourself freely. Instead of the state looking back 7-10 years into your sales history, the state looks back 3-4 years and it waives certain penalties.
Frequently Asked Questions
Due to recent economic nexus changes, an international seller doesnโt require a physical presence to create nexus. Nexus can be generated by inventory or if your number of sales or transactions exceeds a certain amount per state.
Another change that has been made since the 1950s-1970s is that interstate commerce can now be taxed. Other states, apart from your own, now have the right to tax you for transactions across states and countries.
If you, as an international seller selling to US customers, have a physical presence or inventory in a warehouse in the US, you are required to collect sales tax.
Or, if your number of sales in the US exceeds a certain number (depending on the state to which youโre selling), you will need to collect sales tax.
However, if none of the above criteria apply to you, you are not required to collect sales tax as an international seller.
In order to register for sales tax as an international seller, youโll need a Federal EIN (Employer Identification Number) and other business-related information.
As an international seller to US customers, it is necessary to register through your foreign entity within each US state you are operating in or have economic nexus. Visit each stateโs Department of Revenue website for guidance on the appropriate registration process.
Compliance requirements for international sellers regarding US sales tax depend on myriad factors. These include your (the sellerโs) location, the location of your customers, your product type, and the volume of your sales.
But the general rules are as follows.
As an international seller, youโre required to register for a US sales tax permit. Maintenance of your compliance requirements includes the remittance of sales tax on taxable transactions and the filing of regular sales tax returns.
Your sales tax returns need to be filed with the appropriate state and local tax authorities or government agencies. Regulations may differ according to state.
Read U.S. Sales Tax, Demystified for more information.
Common FBA exemptions include dietary supplements, clothing, and groceries. However, it is important to be knowledgeable about which state acknowledges which exemptions and exclusions (based on your particular product).
Tax jurisdictions change frequently, which can make it difficult to remain compliant. But, if you get your tax rates wrong, you could get audited. These rates apply to both products and customers, so keep up to date with any changes.
Other common mistakes include misdeclarations, missing payment dates, and both missing and invalid exemptions. Once again, keep a very detailed updated record of these to avoid auditing.
And donโt forget your consumer use tax. International sellers often focus primarily on their sales tax and forget their other tax requirements.
Related resources
How SMEs Can Leverage Singaporeโs Free Trade Agreements (FTAs) to Minimize Tariff Costs and Expand Globally
Singaporeโs network of 27 Free Trade Agreements (FTAs) is one of the most powerfulโand underutilizedโgrowth tools available to SMEs.
A comprehensive guide to cross-border payments
Outsourcing is a great way to grow your business. But the relationship depends on smooth, secure, on time payments. You also need to pay using local currency and payment methods. This guide shares best practices for B2B payment providers. The right payment provider helps work with the best, anywhere!
No Ports, No Tariffs: How Pakistanโs Online Service Exporters Stay Resilientย
Pakistanโs IT and digital service exports are thriving at $3.2B in FY24; immune to tariffs, port delays, and customs costs. From BPO to game dev to freelancing, talent and forex billing give exporters a double edge. See how Payoneer powers fast, low-cost global payments for this tariff-proof economy.
Why Now Is the Time for Global E-Commerce Sellers to Diversify Beyond the USย
With its high levels of consumer spend, the US has long been a cornerstone market for global e-commerce sellers. Itโs also home to some of the worldโs most established online retail platforms, making it an attractive territory for sellers aiming for rapid growth.ย ย
eSellers Guide โ what is lead time and how to reduce it
What is lead time? It is the amount of time between when an order is placed and when it is fulfilled.Some businesses call this processing, while others refer to it as handling.ย For online merchants, this includes tasks such as storage, stock maintenance, order processing, and shipments.ย
How do I get paid from PropellerAds using Payoneer?
Payoneer delivers a frictionless way to withdraw your PropellerAds revenue with low fees, quick access to funds, and global support.
How to use ACoS marketing for your business
ACoS โ What is ACoS marketing and how is it calculated? Navigating the ecommerce world can sometimes feel like decoding a complex secret language. One term that frequently surfaces is Advertising Cost of Sales, commonly known as ACoS. If you’ve found yourself puzzled by what it means and why it matters, you’ve landed at the…
Best Digital Products to Sell Online: 10 Best Marketplaces for Digital Products
Digital products like eBooks, music, and software are in high demand. Hereโs a quick guide to the top marketplaces to sell themโand how Payoneer helps you get paid globally.
Payoneerโs practical guide to selling on eBay
Looking to start or grow your eBay business? This guide covers everything you need to knowโfrom listing products and understanding seller fees to managing shipping and scaling your store. Plus, discover how linking Payoneer to your eBay account can simplify cross-border payments, save on fees, and give you more control over your earnings.
How to sell more and boost your revenues on Wish
The article offers a guide to selling on Wish, a mobile-first platform known for personalized, low-cost shopping. It outlines best-selling product categories, fulfillment options, and how sellers can grow globally using Payoneer for seamless cross-border payments.
Latest articles
-
Planning to hire employees in France? Hereโs a quick guide
Looking to hire employees in France for your U.S. company? Learn about employment in France and how Payoneer Workforce Management makes it simple to hire in France.
-
Planning to hire employees in Spain? Hereโs a quick guide
Are you looking to hire employees in Spain? Learn about employment in Spain and how Payoneer Workforce Management can help American companies hiring in Spain.
-
How to hire employees in the Netherlands
Looking to hire employees in the Netherlands for your U.S. company? Learn about employment in the Netherlands and how Payoneer Workforce Management can help hire in the Netherlands.
-
How to hire employees in Australia
Looking to hire employees in Australia for your US company? Learn about employment in Australia and how Payoneer Workforce Management makes it easy to hire in Australia.
-
Planning to hire employees in Germany? Hereโs a quick guide
Are you looking to hire employees in Germany? Learn about hiring in Germany and how Payoneer Workforce Management can help U.S. companies hiring in Germany.
-
Planning to hire employees in the Philippines? Hereโs a quick guide
Wondering how an American company hires employees in the Philippines? Our guide covers how to hire employees in the Philippines and how we can help.
Disclaimer
Nothing herein should be construed as if Payoneer Inc. or its affiliates are soliciting or inviting any person outside the jurisdiction where it operates/is licensed to engage in payment services provided by Payoneer Inc. or its affiliates, unless permitted by applicable laws. Any products/services availability are subject to customerโs eligibility. Not all products/services are available in all jurisdictions in the same manner. Depending on your eligibility, you may be offered with the Corporate Purchasing Mastercard, issued by First Century Bank, N.A., under a license by Mastercardยฎ and provided to you by Payoneer Inc., or the Payoneer Business Premium Debit Mastercardยฎ, issued and provided from Ireland by Payoneer Europe Limited under a license by Mastercard. The Payoneer Business Premium Debit Mastercardยฎ cannot be used at merchants or ATMs in Hong Kong or for HKD payments. If you are located in the EEA, all Payoneer Services will be provided to you by Payoneer Europe Limited, trading as Payoneer and regulated by the Central Bank of Ireland.
The information in this document is intended to be of a general nature and does not constitute legal advice. While we have endeavored to ensure that the information is up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability or suitability of the information. In no event will we be liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever incurred in connection with the information provided.
