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Do U.S. non-resident sellers need to collect sales taxes?

Even if you are a U.S. non-resident seller you may be required to collect sales taxes in the United States. Sales taxes are the closest thing the United States has to VAT, but functions differently in that it is only charged to the end buyer. The retail seller is not technically the party paying the tax but can be required to collect it.

Sales taxes are imposed at the state level. The IRS has no part in the sales tax process. Before June 21, 2018, a state could not impose its sales tax laws on a seller that did not have a physical presence in the state, though most states asserted that simply storing inventory in their state constituted sufficient presence, therefore Amazon sellers already had to collect sales taxes in every state that Amazon held their inventory.

Physical nexus still exists. If you have a physical connection with a state, you must collect sales taxes in that state, but there is also a new system. The new system is called economic nexus. Economic nexus means that you have enough sales measured by dollar value or the number of transactions that the state is allowed to require you to collect sales taxes.

The specific thresholds vary by state, but the most common threshold is $100,000 or 200 transactions. Some states are different though, for example, the California rule is $500,000 in sales and no transaction limit.

You can read summaries of the rules for each state on the following two links:

If you do meet the threshold for a state I recommend you use a service like TaxJar or Avalera TrustFile to calculate what is due and to file. Stripe owns TaxJar and there is some sales tax functionality built into Stripe. TaxJar can also integrate with Shopify.

These same rules do apply to Amazon sellers, but for almost all states Amazon is required to collect the sales taxes and submit them. You can read more about marketplace facilitator laws here:

It is true that many non-resident sellers do not comply with these laws, but it is clear that these laws do in fact apply to non-resident sellers.