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 Amazon’s 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 you’ve 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.
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