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International Sellers and U.S. Sales Tax Registration: 3 Key Issues

author photo of Sylvia F. Dion

If you’ve made your way to this blog post, you’re probably an international seller that has begun to sell (or will soon be selling) to customers in the U.S. Or perhaps you’re an international seller that is wondering whether you’ll have to collect sales tax if you sell to U.S. customers. Or maybe you are using (or plan to use) a third party order fulfillment service, such as Amazon’s FBA service, to manage your inventory and fulfill your orders and you’re wondering what sales tax requirements this will create for your international business.

Whatever the situation is – you’re an international seller that is concerned with U.S. sales tax and wants to know more about your potential sales tax obligations. So today I’ll be explaining the requirement to register for sales tax collection purposes and some important concepts that an international seller should be aware of.

But before I launch into today’s post, it's important to quickly revisit my last post where I wrote about U.S. Sales Tax for Amazon FBA International Sellers. In that post I explained that using Amazon’s Fulfillment by Amazon (FBA) service creates a connection to those states where an FBA seller’s inventory is located and from which orders are fulfilled. In that post, I also explained that this connection (referred to as “nexus”) means that the Amazon FBA seller has a requirement to charge and collect sales tax on sales to customers in the “nexus” state. (In a way, today's post is the second installment of a 3- part series which addresses the sales tax registration requirements of international sellers of goods, such as those that sell on Amazon's U.S. marketplace. If you are an international seller of goods and sell to U.S. consumers, then I encourage you to read the first installment post in this 3-part series.)

In addition to my last post, I also wrote another related post (which was actually my first post in this "U.S. Sales Tax for Foreign Sellers" blog). In that post, I explained how each of the States has its own sales tax rules and that even though a seller may be from a country that enters into a tax treaty with the United States, a bi-lateral tax treaty does not protect an international seller from the various states' sales tax laws. (Since that post is a good basic primer on this issue, I also encourage you to read my June 18, 2013 post, "Tax Treaties and U.S. Sales Tax: What Foreign Sellers Need to Know")

Once an international seller realizes they have a requirement to register to collect tax, this often leads to more questions, such as what it means to “register”, whether they must create a company in the U.S. in order to register, or how to go about registering.

1. What Does It Mean to Register?

For many international sellers, the term “register” means to form or incorporate a new business entity. However, in the United States, the term “register” is not used to describe the formation or incorporation of an entity – here we simply say we are “forming” or “incorporating” a business entity (such as a partnership, Limited Liability Company, or a corporation).

If a seller has nexus to a state the seller has an obligation to collect tax on sales to customers in that state (this same obligation would apply whether the seller is an international seller or a U.S. seller). However, a seller cannot collect sales tax until they apply for (i.e., “register”) and have obtained a sales tax permit from the state in which they have nexus. Therefore "registering" means that the business entity has filed an application to obtain a sales tax permit which allows the seller to collect tax on sales to customer ins the state. Here's another thing to note - in some states a seller is registering for a sales tax permit, in others states they are registering for a use tax permit, and yet in another state they may be registering for a business license - however, in this post, I use the phrase "sales tax permit" to mean any type of permit or license that allows a seller to collect tax.

In general, a seller has to register with each state separately. You see, our states are individual, sovereign governmental bodies. Each state has its own sales tax laws and rules and its own registration process. This can create confusion for many international sellers since the different state agencies that a seller needs to register with may be called by different names. For instance, in some states, the agency that a seller registers with is called the Department of Revenue, in other states the agency is called the Department of Taxation, and yet in other states, the agency could be called something entirely different (for instance in California, a seller would register with the Board of Equalization and in Texas, a seller would register with the Comptroller of Public Accounts).

2. Does an international seller need to form or incorporate a business entity in the U.S. in order to register with the various states?

Often I’m asked whether an international seller must form or incorporate in the U.S. in order to register with the various states. The answer is "no" - forming a U.S. entity is not required. However, although a non-U.S. entity can register for a sales tax permit, there are often special steps that must be taken. For instance, almost every state requires the registering entity to have a Federal Employer Identification Number (often referred to as an FEIN or an EIN) issued by the U.S. Internal Revenue Service (IRS). Note that I’ll be writing a much more detailed post explaining what an EIN is and how to apply for one, as well as explaining other Taxpayer Identification Numbers and when they are required. What’s important for this post is to know that an international seller does not have to form or create a U.S. entity to register for sales tax collection purposes. However, if the foreign entity does not have an EIN it will be difficult to apply for a sales tax permit as most states require this number.

3. Is there anything else an international seller should know about registering?

Once again, an international seller must register with each state separately if they have nexus in a state. Registration is often accomplished through the state's online registration system. However, the online registration system in some states is not available to international sellers. Even though U.S. sellers can easily access these online systems and enter all the required information, in order for an international seller to use these same online registration systems, the international must generally meet all of the following requirements. The seller must have: 1) an IRS issued EIN, 2) a U.S. address, and, 3) an officer or owner with a U.S. Social Security Number or an IRS issued Individual Taxpayer Identification Number (ITIN). While an international seller can apply for and obtain an EIN , if the international seller’s only address is in their home country and/or the officers or owners of the registering entity are all non-U.S. nationals (citizens of their home country), then the foreign entity must generally complete and submit a paper registration form. Often other documents are also required - for instance, if the officers/owners are non-U.S. citizens, a copy of the officer’s/owner’s foreign passport may be required in order to process the registration application.

Conclusion

Selling goods to customers in the U.S. can present an obligation to register, collect and remit sales tax on sales to customers in states where an international seller has nexus (such as where their inventory is warehoused and fulfilled from). In the context of sales tax obligations, we use the term “registering” to mean applying for a tax permit. A seller cannot collect sales tax until the seller is properly registered with the state for which they are collecting tax. International sellers must consider the need to obtain an IRS issued EIN (as most states will not process a sales tax registration if the registering entity does not have an EIN) and the need to apply by submitting a paper registration form. This is a complex process – and there is certainly much more to know. I’ll be covering other aspects of these topics in more detail in future posts. In the meantime, if you have questions or comments please feel to post them below.

About the Author: Sylvia F. Dion, MPA, CPA, is the Founder and Managing Partner of SALT Consulting firm, PrietoDion Consulting Partners LLC. Sylvia has been covering Internet Sales Tax developments for SalesTaxSupport’s Issues blog since 2011. Sylvia is also the “U.S. Sales Tax for Foreign Sellers” contributor for SalesTaxSupport’s Industry blog and the “Massachusetts Sales Tax” contributor for SalesTaxSupport’s State blog. You can follow Sylvia on twitter and on Google+ and can contact Sylvia via e-mail at sylviadion@prietodiontax.com or at 978-846-1641.

Comments or questions may be submitted by using the on-page "Comment" feature, subject to disclaimer at bottom of page. Other contact options (and Consultation Requests) are also available on Sylvia's associated Firm Profile page.

Other recent “U.S. Sales Tax for Foreign Sellers” posts by Sylvia F. Dion, CPA:

NOTE: All blog content, comments, and participation subject to disclaimer at bottom of page.

Comments

50 Responses to International Sellers and U.S. Sales Tax Registration: 3 Key Issues

  • Posted by Alejandra on April 21, 2017 10:05am:

    Hello,

    I have a case which I'm not sure if a USA company should charge sales Tax.

    I work for a mexican trading company and we are purchasing material from a US company but the material is manufactured in Mexico. The US company is charging us sales tax and as far as I understand for foreign sales the sales tax does not apply but I'm having doubts since it is manufactured in Mexico,

    Can you please advise?

    Thank you

    • Posted by Author photo of Sylvia F. DionSylvia Dion on May 6, 2017 7:02pm:

      Alejandra,
      Thank you for reading my article and for your comment/question.

      I am afraid that your facts are not sufficient to provide an exact answer but here is what I can explain. If the US company is shipping materials outside of the country, then this is considered a foreign sale and there would no sales tax. But if the US company is shipping the materials to a location INSIDE a state and THEN the materials are shipped to Mexico, then the US company IS required to charge sales tax unless your company (the purchaser company) provide the US company (the supplier of the material) a valid resale certificate. As you can see, this is quite complex. In addition to blogging here at SalesTaxSupport.com, I am also a tax advisor that advises clients on issues such as the one you present. If you are in need of professional services, please feel free to contact me at my services page here:
      http://www.salestaxsupport.com/sales-tax-directory/services-and-consultants/prietodion-consulting-partners-llc/

      Thank you again for your comment/questions.

  • Posted by Mandy on March 27, 2017 7:23pm:

    Hi Sylvia!

    Thank you for the detailed explanation! We are an ecommerce site registered in DE with a warehouse in CA, most of our suppliers are from China and we store/ship their inventory at our CA warehouse as they make sells to U.S buyers only, so we are like the "Amazon" role in this case where we provide warehouse storage and secure payments. How should we as a platform/service provider do our taxes? and how should our Chinese suppliers do their taxes?

    Thank you so much!

  • Posted by Denis on March 27, 2017 9:55am:

    Hi, Sylvia
    Thank you very much for your posts. They definitely make taxation more understandable for foreign companies.
    We are a Chilean company planning to sell using the fulfillment service in the US. Do we need to pay taxes if we use fulfillment in the state without sales tax, for example in Oregon?
    Thanks
    Den

  • Posted by JESS on January 8, 2017 10:07am:

    Hi Sylvia!

    I'm a Canadian craftsperson who just got accepted to a craft show in New Jersey, a state which requires all vendors to be registered to collect sales tax. I am not a registered business in Canada as my annual sales aren't high enough to require me to have an HST number. I am only doing the one day event, do I need to register for an EIN and also get a NJ Tax ID number? I have looked on the State of NJ website and there does not seem to be a clear answer. Any tips?

    • Posted by Author photo of Sylvia F. DionSylvia Dion on January 11, 2017 9:24pm:

      Jess,
      Thank your reading my post and your comment/question.

      Most states do require that anyone selling at a venue such as a craft show, trade show, expo, etc., register to collect sales tax. New Jersey (NJ) specifically addresses this and says, "persons regularly engaged in the business of selling taxable tangible property, .... are considered to be sellers under the New Jersey sales tax law and are required to register and collect and remit sales tax. Registration is required even if the sales are only made on a seasonal basis (e.g., Christmas trees) or if they are only made occasionally (e.g., by an artist or craftsman who periodically sells handmade items at shows) during the year." Often the states have additional requirements they impose on the event organizer such as requiring the organizer to collect the sales tax permit from each seller who sells at their event and providing the information to the state taxing agency. Usually an EIN is needed for the NJ registration - but it is possible that you may be able to register for a NJ transient vendor / temporary sales tax permit/license without the EIN. This would require calling the New Jersey registration unit and explaining your situation - that you need to register to collect NJ sales tax but have no need otherwise to obtain an EIN and asking if they will process your registration without an EIN. I would stress that you are participating in this one craft show and want to comply with the NJ sales tax laws, but it simply doesn't make sense for your, a Canadian citizen, to obtain an EIN. That would be the main tip I have. But you would want to speak directly to the registration unit. Another option is sending inquiry through their system (you'll see the link at this page: http://www.state.nj.us/treasury/taxation/email.shtml) I often use this option when sending inquiries to the states as this way I can provide more details in my inquiry. Again, you would want to explain that you have no other need for an EIN other than to register with NJ for this one day event. They may make an exception for you.

      Hope this helps.

  • Posted by Rafał on November 9, 2016 2:04pm:

    Hi,
    in your post you covered example of having nexus due to the location of warehouse. I wonder: can my foreign (non US) company register for sales tax in case we do not have nexus in any state (we are dropshipping company with no offices, employers nor warehouses in the US)?

    • Posted by Author photo of Sylvia F. DionSylvia Dion on November 26, 2016 1:09pm:

      Rafal,

      Thank you for your question/comment.

      To answer your question, YES, a company can voluntarily register for sales tax purposes (i.e., register for a sales tax permit) in any state even if the company does not have nexus in the state they are registering in. One reason for registering even if the company does not have nexus could be for the convenience of customers who wish to be charged sales tax or where the selling company (the retailer) is having product "drop-shipped" to a customer in a state and the manufacturer/drop-shipper is requiring the retailer to provide the manufacturer with a resale certificate. (I explain how drop shipments work and why a seller might want to register for sales tax in this post here: http://www.salestaxsupport.com/blogs/state/massachusetts/ma-exemption-certificates-drop-shipper-catch-22/)

      I hope this was helpful.
      Sylvia

  • Posted by Jessie on August 23, 2016 12:28pm:

    I'm a United States citizen and our company is trying to sell internationally. For example: We are trying to sell product to the country Jordan for Michigan, U.S.A., do we need to apply Jordan's sales tax to our quote/invoice? What kind of tax rate as a seller do we need to apply?

    • Posted by Author photo of Sylvia F. DionSylvia Dion on October 2, 2016 7:28pm:

      Jessie,

      Thank you for question/comment.

      If I understand your question, you have a U.S. company based in Michigan and will be making EXPORT sales to the Country of Jordan. My focus here at his blog is to help readers from other countries understand U.S. sales tax. Since your question deals with the application of the taxes of a different country (Jordan), I am not able to provide any guidance.

      Sylvia

  • Posted by Angela on July 22, 2016 8:20pm:

    Hi Sylvia,

    Thanks for your informative posts! You have definitely helped me answer a lot of questions regarding taxes as an international seller.

    I have an off-topic question am wondering if you'd be able to shed some light, or direct me to the correct answer. As a Canadian seller selling through Amazon FBA US, I was told by a US customs officer that I would not be legally allowed to deposit US money (from Amazon) to a US bank. In other words, from a US source to another US source. Is this true, or does it only apply to opening a US business bank account? Thanks in advance!

    • Posted by Author photo of Sylvia F. DionSylvia Dion on July 30, 2016 9:09pm:

      Angela,
      Thank you for reading my post and your kind comment.

      Regarding your question - this is not a question that I can give you a 100% answer to. What I can tell you is that I have many foreign clients that sell on Amazon and I've not heard of any legal issue or any issue at all with Amazon depositing money into their U.S. bank account (or their foreign bank account). I would suggest reading through the Amazon seller policies or contacting Amazon Seller Support through your Seller Central with you question.

      Hope this helps.

    • Posted by Author photo of Sylvia F. DionSylvia Dion on July 30, 2016 9:09pm:

      Angela,
      Thank you for reading my post and your kind comment.

      Regarding your question - this is not a question that I can give you a 100% answer to. What I can tell you is that I have many foreign clients that sell on Amazon and I've not heard of any legal issue or any issue at all with Amazon depositing money into their U.S. bank account (or their foreign bank account). I would suggest reading through the Amazon seller policies or contacting Amazon Seller Support through your Seller Central with you question.

      Hope this helps.

  • Posted by Angela on July 22, 2016 8:20pm:

    Hi Sylvia,

    Thanks for your informative posts! You have definitely helped me answer a lot of questions regarding taxes as an international seller.

    I have an off-topic question am wondering if you'd be able to shed some light, or direct me to the correct answer. As a Canadian seller selling through Amazon FBA US, I was told by a US customs officer that I would not be legally allowed to deposit US money (from Amazon) to a US bank. In other words, from a US source to another US source. Is this true, or does it only apply to opening a US business bank account? Thanks in advance!

  • Posted by Lil on May 12, 2016 10:20pm:

    Hi Silvia,

    First of all, congratulations for your blog! I found all the information accurate and smart. I would be glad if you could help me to reply to this question:

    I am a New Zealand business and plan to sell on Amazon.com. All products will be fulfilled in NZ and sent at the point of purchase through the mail channel. I believe we don't need to pay sales taxes here as there is no nexus.

    However, Amazon requires international sellers to provide a US address for returns or pay the shipping back. We have a partner in the US and can use their warehouse in Portland. Are we creating a nexus in this case? There warehouse would only be used in case of returns. I also understand that Portland is a tax free zone so we wouldn't need to pay for the sales tax?

    Many thanks for your help!

    Kind regards,

    • Posted by Author photo of Sylvia F. DionSylvia Dion on June 8, 2016 7:56pm:

      Lil,
      Thank you for reading my post, for your kind comment and for your comment/question.

      If you are fulfilling your sales to U.S. consumers from New Zealand and only storing inventory temporarily in Oregon, then most likely you have no obligation to register for, collect or remit (pay) sales tax to any state. The main thing is that it appears (based on the facts given) that you are not creating nexus in any state other than Oregon - but as Oregon does not impose a sales tax, there is no sales tax concern. Hope this helps.

  • Posted by Evan on April 25, 2016 12:04am:

    Hi, we've been looking for info on this and are so glad to finally come across this article!

    Our brand is non-US based, but are outsourcing the production of our product to an US-based manufacturer, in OEM manner. And they ship to our US customers on-demand.

    We're fully aware of sales taxes when nexus occurs, but there's something beyond our understanding, that is:

    1. Do we need fill W8-BEN form and pay ECI taxes to IRS? (We hope not, because that may force us to abandon outsourcing in the US)

    2. And also, are we allowed to attend trade shows held in the U.S without generating ECI? (Also a concern for our branding)

    Thank you for your time!

    Evan

    • Posted by Author photo of Sylvia F. Dionsylviadion on May 9, 2016 7:34pm:

      Evan,
      Thank you for reading my blog post and your kind comment. Thank you also for the question/comment.

      Before commenting on our question, you should be aware that outsourcing your product to a U.S. based manufacturer could create sales tax nexus for your business. See my prior post on this topic: http://www.salestaxsupport.com/blogs/industry/us-sales-tax-for-foreign-sellers/toll-manufacturers-sales-tax-nexus/

      Whether you have Effectively Connected Income (ECI) is a complex topic - but if you are actively selling to U.S. consumers and this is your trade or business, then you most likely have ECI. However, whether you have to pay U.S. taxes depends on factors such as whether you are from treaty country and whether your activities in the U.S. rise to the level of creating a Permanent Establishment (PE) in the U.S. Preparing and submitting form W-8BEN-E (an entity prepares a W-8BEN-E, an individual prepares a W-8BEN) will not prevent you from having to file/pay U.S. taxes. Participating in the trade shows also could subject your entity to U.S. taxation - but here again, there are factors that impact this such as whether you are entering into contracts at the trade shows. So I must advise that this is a complex topic and I would suggest working with a tax advisor that can carefully review your situation and properly advise you.

      Sylvia

  • Posted by Dan on March 5, 2016 11:29am:

    Hello, our company located in Europe (no US presence). We are buying helmets from Ohio company and ship to Florida customer and issue electronically invoice to him. Do we have to pay any taxes, if our company has no presence in US, Ohio supplier has no nexus in Florida?

    • Posted by Author photo of Sylvia F. DionSylvia Dion on March 22, 2016 5:52pm:

      Dan,
      Thank you for reading my post and for your comment.

      Based on what you are describing - your company conducts all business from Europe, is not importing and storing your product inventory in the U.S. and is having the Ohio supplier drop-ship the helmet to your Florida customer - this would suggest that you have no requirement to charge and collect Florida sales tax on the sale to the Florida customer. (Note that your company could not charge Florida sales tax because it is not registered to do so, but it appears the company is not required to be registered - so a good result.) If you have any other questions, please let me know.

  • Posted by Toni on February 4, 2016 11:22am:

    Dear Sylvia,
    Thank you for your all your brilliant posts. I wondered if you can give some advise. I am a foreign seller (UK resident) selling in US (Amazon FBA).

    My suppliers are based in the US and they ship my products to Amazon's warehouses (various states). I have applied to the IRS for an EIN (as an individual not a company). Do this mean, that I will need to submit income taxes to the US? I also completed a W-8BEN form at the time of setting up my Amazon account - although I'm beginning to believe this does not "exempt" you from anything.

    I have since formed a company (LTD) but have not applied for an EIN, will I need to? Many thanks in advance!

    Best wishes, Toni

    • Posted by Author photo of Sylvia F. Dionsylviadion on February 5, 2016 8:44pm:

      Toni,
      Thank you for reading my post and your kind comment. You are correct that the W-8BEN does not exempt you from U.S. taxation. The purpose of the W-8BEN (or W-8BEN-E for an entity) that Amazon has you complete (as part of the Amazon Tax interview) is so that Amazon can be in compliance with its own IRS reporting requirements. You see, Amazon, as payor, is required to withhold on payments it makes to foreign sellers UNLESS Amazon has a W-8-BEN (or W-8-BEN-E) on file. So yes, the W-8-BEN is not an “exemption” certificate from U.S. taxes. Whether or not your U.S. profits are subject to U.S. taxation is a complex question - and as you are a UK citizen - impacted by whether you have treaty protection (in accordance with the provisions of the U.S. - UK Tax Treaty). If you plan to sell through your UK Ltd and use Amazon's FBA service, then the Ltd will need to register for sales tax purposes and that will require that the Ltd apply for an EIN. (By the way, I consult on these issues if your are in need of a tax advisor.) I hope this helps.
      Thanks again!

  • Posted by Sandhya on January 20, 2016 10:31pm:

    Hi Sylvia
    All your blog posts are really very informative. Great job!!
    My question is regarding collection of tax and payment

    Should our price in Amazon be inclusive of tax amount?
    Who is responsible to pay the collected tax- Amazon OR the foreign seller?

    Please advise

    Thank you

    • Posted by Author photo of Sylvia F. Dionsylviadion on January 22, 2016 8:23pm:

      Sandhya,
      Thank you for reading my post and for your nice comment. Your price on Amazon should not include tax. Once you register to collect sales tax and "switch on" your tax collection setting in your Amazon.com seller account, Amazon will then calculate and add the proper amount of sales tax to the customer's order. The total amount the customer pays will then include the tax. However, Amazon only collects the tax, but it is the marketplace seller that is responsible for remitting (paying) the tax to the states. I hope this helps. Thanks again!

  • Posted by Stavros on January 14, 2016 8:10am:

    Hello Sylvia, outstanding work! It's refreshing to read articles that actually have added value in a sea of internet junk!

    I would like to ask about a matter that may have only been touched upon tangentially in your articles, namely, dropshipping.

    UK company, selling consumer goods to US consumers, through a US dropshipper, to all States, with total annual sales less than 1 million. No US incorporation, no US employees, no physical presence in the US whatsoever.

    - Are there sales tax and registration requirements for the UK company?
    - Does the UK company need a EIN?
    - Does this fall under a uniform Federal regime, or is it different on a State-by-State basis?

    Thank you,

    Stavros

    • Posted by Author photo of Sylvia F. Dionsylviadion on January 22, 2016 8:48pm:

      Stavros,
      Hello and thank you for your very kind comment! Now onto your question. First, the requirement to register to collect sales tax is based on whether you have "nexus" to a state (yes, the state's each have their own set of rules). And in general, having sales tax nexus is based on having a physical presence in a state. (But a physical presence can be based on activity that isn't obvious, like storing data on a server located in a state). Although I can't give legal or tax advice in a comment - you seem to say you have no physical presence which would seem to indicate no nexus/no requirement to register to collect tax. But using a supplier who drop ships goods to your U.S. customers presents another issue for you - which is that the drop shipper may need to charge you sales tax. You see if the U.S. dropshipper has nexus in the state where your customer is located, the dropshipper has to collect sales tax on the sale - but since you are the dropshipper's customer, the dropshipper will charge you the sales tax. Here's another blog post I wrote here at SalesTaxSupport that illustrates the complexity of dropping: http://www.salestaxsupport.com/blogs/state/massachusetts/ma-exemption-certificates-drop-shipper-catch-22/

      On your question about the EIN, it is generally needed to register for sales tax. So in general, if you are not registering for sales tax you do not need the EIN.

      Thanks again!
      Sylvia

      • Posted by Stavros on January 25, 2016 4:00am:

        Thank you Sylvia,

        My concern is with the paperwork that may be required - not the sales tax cost per se, so if I have to pay sales tax to the dropshipper, even if I cannot recoup it, that's fine as long the economics of my business support it.

        If, on the other hand, I have to get into a paperwork nightmare with each State, that's a totally different ballgame.

        So the question really is, if I have to pay sales tax to the dropshipper, is it only a matter of paying it, or does it entail complicated corporate actions vis-a-vis each State Tax Authority?

        I know there's a fine line between replying to comments and providing free advice, so I thank you anyway!

        Stavros

        • Posted by Author photo of Sylvia F. DionSylvia Dion on February 6, 2016 7:33am:

          Stavros,
          Hello again. The dropshipper will charge you sales tax on their invoice to you IF the dropshipper is required to do so (as explained in y first comment and in my Massachusetts blog post on drop shipping and sales tax that I linked to above). There is no additional paperwork you'll see or be required to complete. Hope this helps.

  • Posted by LyLy on December 4, 2015 11:23am:

    Hi Sylvia, I did post my question and I was recommended to ask u about my case. I hope u can help me solve it. I am an Asian American and I am plainning to buy stuffs here (from Macys, Walmart) to my friend in my original country (Vietnam). My friend will first receive oders from customer in Vietnam, collect money, send the money to a woman to bring to US for me, then that woman will put money into my bank account in SC. I will use that money for payment and keep the rest for my profit. Finally, I have forwarder send products to my country to my friend. So I am concerned if I will pay sales tax? or will I pay tax on the sum of money I receive in my bank account, or just the profit I get? Could you help me please! I just wanna make sure what type of taxes do I have to pay and my selling internationally is legal. Thanks and Best Regards

  • Posted by Kate on November 27, 2015 5:44am:

    Hi Sylvia,

    Thank you for sharing your intelligent studies on the state taxation over Amazon FBA. If possible, could you also share your understanding of "Small Seller Exception" conjunct with MFA?

    Does this clause mean that a small seller less than $1M annual sales nationwide does NOT have to collect sales tax or what?

    Thank you for your professional input.

    Sincerely yours,
    Kate

    • Posted by Author photo of Sylvia F. Dionsylviadion on December 15, 2015 7:48am:

      Kate
      Kate, Thank you for reading my blog article and your comment. In addition to writing on “U.S. Sales Tax for Foreign Sellers”, I also blog on “Internet Sales Tax” issues here at SalesTaxSupport. You can find all my blog articles on U.S. Internet Sales Tax developments at this link: http://www.salestaxsupport.com/blogs/issues/internet-tax-ecommerce/ Also, please see this blog article that I wrote recently called “Remote Transactions Parity Act: Comparing RTPA to MFA” http://www.salestaxsupport.com/blogs/issues/internet-tax-ecommerce/remote-transactions-parity-act-comparing-rtpa-mfa/ where I explain the small seller threshold.
      I will also soon be writing a blog article about the RTPA and MFA here in the “U.S. Sales Tax for Foreign Sellers” blog because I am finding that many foreign sellers are either unaware of the federal proposals or they are confused on how they will be impacted if a federal law, like the Marketplace Fairness Act, is passed. To answer your question, under the MFA, a seller (U.S. seller or foreign seller) would no longer need to have a physical presence (like inventory in an Amazon FBA warehouse) to be required by a state’s sales tax laws to collect their sales tax. Instead, if the state complied with the MFA, then that state could require any seller that does not meet the $1M annual remote sales threshold to collect their sales tax even if the seller does not have a physical presence in their state. SO, let’s say you are an Amazon FBA seller and your sales are more the $1M. Now let’s say that a state like Oklahoma complies with the MFA (there is no Amazon warehouse in Oklahoma). Now, Oklahoma would have the authority to require you to collect Oklahoma sales tax even if you had no presence in Oklahoma at all. So the $1M threshold is only in states that adopt and comply with the MFA. Even if your sales are less than $1M you will still be required to register, collection and pay sales tax in those state where you have physical presence (such as in the Amazon FBA states). Hope this helps. Stayed tuned for my next post.

  • Posted by Do on May 22, 2015 5:21am:

    […] Then because many international sellers wanted to know how to “register” with the states so that they could operate in accordance with the U.S. sales tax laws, I wrote a blog post on 3 key issues that International Sellers should know about the U.S. sales tax registration process. […]

  • Posted by Utsav on May 14, 2015 2:59pm:

    Hi Sylvia,
    Thanks for the great post . Its one of the most useful post I have come across regarding the tax requirements for a foreign seller in USA.
    I am a manufacturer of handicraft metal products in India and want to start selling on amazon USA using their FBA services. It would be a pilot for me as I am not familiar with the response that I would be getting in USA, so do you advice me to go for all the registrations in the start or see the potential of my products and then go ahead with incurring all these costs of registering with the US Sales Tax.
    Also can you advice me with time and cost that I will have to incur in this process.
    Thanks

    • Posted by Sylvia on May 19, 2015 12:00pm:

      Utsav,
      Thank you for your kind words. I work with many international (non-U.S.) Amazon FBA sellers and the question you present is a question that many sellers have. In general, the U.S. sales tax laws say that having inventory in a state creates "nexus" and this means you have the requirement to register to collect tax. However, you have to decide if the cost to be registered and to comply with the different state laws is greater than the cost of not being in compliance. As a tax advisor I help clients to evaluate this decision. If you would like to know more, please feel free to contact me at sylviadion@verizon.net.

  • Posted by Azem on May 6, 2015 9:44pm:

    Hello Sylvia, Thank you and I have a question.
    I am from Turkey and will be using FBA (Amazon). So using their warehouses. I am an individual (no company). I don't know about states of Amazon. Do I pay tax to IRS or not? If so what do I need to do?
    regards

    • Posted by Sylvia on May 19, 2015 12:09pm:

      Azem,
      Hello and thank you for your comment. There is much to know about the various tax requirements once you begin selling in the USA via Amazon.com. If you use Amazon's FBA service and have inventory in the various states, then you have nexus in the various states (you have to comply with the laws of each individual state - are states are like separate governments). You mention the IRS, which is the federal Internal Revenue Service (IRS), and ask whether you have to pay tax to the IRS. This is a complex question because it really depends on many things - but, yes, there is a possibility that you will have to file and pay taxes to the IRS too. There is much to consider.

  • Posted by matt on April 6, 2015 11:42pm:

    Hi Sylvia,
    Thank you so much for your posts on sales tax for Amazon FBA sellers. It is the best and most clear information I have read about it.
    Have you written any articles regarding federal tax requirements for foreign Amazon FBA sellers?
    For example if I am selling on Amazon FBA in the US through my foreign entity and my country has a tax treaty with the US do I have to file any kind of return?
    I know this can depend on the country but any kind of general advice you can give would be appreciated.

    • Posted by Sylvia on April 8, 2015 12:34pm:

      Matt,
      Thanks for your kind words and for your question. You bring up a great question - as complying with the U.S. sales tax requirements often creates federal reporting requirements for foreign companies. As I mention in my post, having sales tax nexus means 0that, technically, a company has a requirement to register to collect sales tax. However, most states require the registering company to first obtain an Employer Identification Number (EIN) from the U.S. Internal Revenue Service (IRS). Once the foreign company has applied for and obtained the EIN, the company is subject to the U.S. filing requirements - even if the foreign company is from a country that has a tax treaty with the U.S. In my next post (which I hope to have ready for publication in the next few days) I'll be writing about obtaining an EIN and the federal filing/reporting requirements it can create for foreign seller. (So please check back in soon!)

  • Posted by Brian on March 3, 2015 1:24am:

    Hi Sylvia, thanks for the great post ! I am an overseas seller, wanting to sell in the U.S.. I plan on using a third party fulfillment center(but not Amazon) to fulfill the order. I understand that this will create a nexus and thus I am (my company) required to collect sales tax for the state (Florida) where the fulfillment center is. My question is that how can I, as an overseas seller, register with the state in order to get a tax collection ID. I presume I will need to apply an EIN from the federal gov't and do I also need to get an ITIN # as well ? (as the social security number seems to be a requirement)
    If so, it seems to be a lot of work and time. Please advise !! thanks.

    • Posted by Sylvia on April 8, 2015 12:08pm:

      Brian,
      Thank you for reading my article and for your question. You are correct that having your inventory stored and fulfilled by the fulfillment company in Florida will give your non-U.S. company nexus in Florida. This mean that, technically, your company will have a requirement to register to collect Florida sales tax on sales to Florida customers. Most states (including Florida) require that the registering company have a U.S. EIN to register for a sales tax permit. This can all be handled from overseas over the phone via the IRS' international taxpayer unit. (In my next post here at SalesTaxSupport, I will explain this process - so please check back soon.) However, you do not need to obtain and ITIN. Most states will register a foreign entity (that has an EIN) even if the officers do not have an SSN or an ITIN. And actually, the IRS has become quite strict about assigning ITINs to foreign individuals and will only assign the ITIN if the foreign individual meets the U.S. requirements for obtaining one. I have many international clients that sell on Amazon.com and I have registered them in almost every state even though the officers did not have an SSN or ITIN. Hope this helps!

  • Posted by Gerardine on January 29, 2015 8:16am:

    I am selling on Amazon but making the product here in Australia plus sending the orders directly from Australia to the customers in the US, which is classified as Merchant fulfilled Stock. Amazon deduct their commission and just send me the money into my AUS bank account. Is this an issue with Sales tax in US?

    • Posted by Sylvia on February 5, 2015 1:57pm:

      Geraldine,
      Hello! This is a very good question as other international sellers that fulfill their own orders might possibly be wondering the same thing. Basically, if you are fulfilling the orders directly from Australia, you do not have a sales tax collection requirement in the U.S. Your situation differs from international Amazon sellers who use Amazon's FBA service as those sellers are having their inventory placed and fulfilled from an Amazon distribution center and that is what is creating the requirement to collect sales tax.

  • Posted by Denise on January 23, 2015 2:33pm:

    Thanks so much for the explanation - I am at last starting to understand what appears to be a complex subject. I too am from Australia and sell through FBA. Is there a certain level of sales that is required before sales tax is collected or do you need to set up from day one?
    thanks
    Denise

    • Posted by Sylvia on February 5, 2015 2:08pm:

      Denise,
      Thank you for reading my post and for the question. Technically, if you are using Amazon's FBA service to fulfill orders you have created sales tax nexus and a requirement to register, collect and remit the taxes collected. In general, the various states do not provide a dollar figure that must be exceeded before sales tax collection is required, however, when my own clients ask me this question, I caution that they need to weigh the cost of compliance (registering, collecting, filing, remitting, etc.) against the risk that a state could discover that they should have been registered and collecting and assess them for the taxes that should have been collected (if a seller is found to not be in compliance with the sales tax laws, the state could then assess the seller for whatever tax amounts should have been collected). If you feel like you need more guidance, please feel free to reach out to me directly at sylviadion@verizon.net.

  • Posted by Stephen on January 8, 2015 8:01pm:

    Hi Sylvia - You refer to inventory in your article. Do these US sales tax registration requirements only apply to sales of goods, or do they extend to the provision of services also?

    • Posted by Sylvia on January 14, 2015 11:55am:

      Stephen,
      Thank you for reading my post and for your comment.
      To answer your question - yes, technically, the U.S. sales tax registration requirements could apply to an international business that provides services. However, the international seller (provider of the services) would need to create nexus in a state through some means other than having inventory in the state. So if the international business, for instance, decided to hire an employee in the U.S. to meet with prospective customers, negotiate contracts, or conduct other business on behalf of the international business - the presence of this one single employee could create nexus and a registration requirement But here's another important point - even with nexus existing, the services being provided might not be subject to sales tax in the nexus state. Hope this helps - please feel free to contact me directly with other questions.

  • Posted by David on January 8, 2015 11:13am:

    Hi Sylvia,
    I've been following your blog posts relating to international sellers, in particular the FBA platform which I am looking to enter into shortly from Australia.
    First let me congratulate you on providing this information. I can't tell you how much research I have done to find a lot of what you have provided. Well done!
    I have a question relating to the State sales tax applications - Do you, or do you know of anyone, who can provide a service for international sellers to register in required states? In my case these would be the states where Amazon has a warehouse.
    Thanks,
    David Muller

    • Posted by Sylvia on January 14, 2015 11:33am:

      David,
      Thank you so much for your kind comment! I am very glad to hear that my posts related to international sellers are helpful. To answer your question - yes, I do provide sales tax registration services to international sellers (such as those that sell on Amazon and use Amazon's FBA service). So in addition to blogging on U.S. sales tax for international sellers I also advise clients on their U.S. sales tax issues and assist them with becoming compliant with the U.S. sales tax laws. Please feel free to contact me directly - you can find my contact information above.

  • Posted by Doug on January 8, 2015 10:45am:

    Very good edification piece

    • Posted by Sylvia on January 14, 2015 11:57am:

      Doug, Thank you!

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