European online sellers selling goods to final consumers in the US should be aware of the Sales Tax obligations.
Sales Tax generally applies to the sale of goods to final customers (B2C sales). It does not apply to sales carried out between businesses. Hence B2B sales fall out of the scope of Sales Tax.
Each State can decide whether or not to apply the Sales Tax and how to apply it (e.g. tax rates, exemptions, etc.). Delaware, Montana, New Hampshire and Oregon do not levy Sales Tax at all. The Sales Tax rates can range between 3 and 8%.
When do European online sellers have to pay Sales Tax in the US?
If you are a European business selling goods to final customers in the US through your e-commerce or an online marketplace, you could be subject to Sales Tax if you fall under the nexus tests described below.
- Physical presence Nexus
Holding inventory in the US, whether at a retail shop, an office, a rented warehouse, a third-party logistics or a fulfillment center, would trigger Sales Tax obligations.
- Economic Nexus
This test is met if any of the following thresholds are exceeded: (i) total sales in USD or (ii) total number of transactions.
Each State establishes different thresholds in USD or number of transactions. Broadly, they range between 100k-500k USD and 100-200 transactions, respectively.
Notice this is like VAT in Europe, because when a certain threshold is exceeded, the business must comply with its VAT obligations in that jurisdiction.
- Employee Nexus
Having employees in the US can also trigger Sales Tax.
Next steps
If your business carries out online sales to US final customers, we recommend carrying out a detailed analysis to determine if any of the nexus tests are met and, if so, comply with any tax obligations in the US.
