U.S. Sales Tax for Non-U.S. Companies
In most of the world, indirect taxes (what we call sales tax in the US) are one system from country to country. In the United States, it varies state by state, as there is no national sales tax or other indirect tax.
Instead, the 45 states and the District of Columbia that impose a sales tax each run their own, with their own rules about who owes, what’s taxable, when you have to register, and how you file, and thousands of local jurisdictions layer on top of that. For a company used to a single VAT registration that covers an entire country, this comes as a genuine surprise: there’s no one place in the US to sign up, and no single setup that works everywhere. Almost everything that catches international companies off guard traces back to that one difference.
Related Ways We Help
- Figuring out where in the U.S. you actually have obligations - Learn More
- Sorting out whether your SaaS or digital product is taxable here - Learn More
- Setting up software to handle U.S. states - Learn More
- Cleaning up U.S. exposure that already built up - Learn More
- U.S. sales tax surfacing in a transaction - Learn More
U.S. Sales Tax for Companies Based Abroad
If you are headquartered outside the U.S. and selling to American customers, this one is for you. Monika and Bill on how U.S. sales tax differs from VAT and GST, and where foreign companies most often get caught.
The U.S. Catches Foreign Companies Off Guard
The instinct is to treat the United States as one market with one tax rule, the way most countries work. It isn’t. Each state decides for itself what creates an obligation, whether your specific product or service is taxable, the sales threshold at which you have to register, and how often you file.
You Don’t Need a U.S. Presence to Owe U.S. Tax
This is the part that surprises international sellers the most. You can owe sales tax in a U.S. state with no office there, no employees there, and in many cases no U.S. entity at all, just customers and enough sales to cross that state’s threshold. After the Supreme Court’s 2018 Wayfair decision, most states adopted an economic-nexus standard, and it applies to foreign sellers the same way it applies to domestic ones. A company running entirely from outside the U.S. can quietly accumulate obligations in a dozen states simply by selling to American customers.
It’s Not VAT, and the Difference Matters
Foreign finance teams naturally reach for their VAT mental model, and it leads them astray, because U.S. sales tax works differently in ways that matter. It’s generally charged once, at the point of retail sale, rather than at each stage of the supply chain. It’s based on where the customer is, not where you are. There are no input credits to reclaim the way there are with VAT. And exemptions work through certificates you have to collect and keep, not through a registration number. Applying VAT habits to U.S. sales tax is one of the more common ways exposure builds up without anyone realizing.
The Work We Actually Do
We’re the U.S.-side guide. We help international companies figure out where in the country they actually have obligations, get registered where they need to be, including the practical hurdles like the U.S. tax ID a foreign seller often needs to register in a state, and set up software and compliance that can handle the state-by-state reality. We work through the SaaS and digital taxability questions that affect so many technology companies, and we clean up any exposure that built up before the company understood the rules.
We’re comfortable working alongside your existing advisors at home, handling the U.S. piece while they keep the rest. For many international clients, simply having someone who knows the American system to answer their questions in plain terms is the relief they were looking for.
Common Questions From International Companies
You can, yes. All states use an economic-nexus standard, which means selling enough into a state can create an obligation on its own, with no physical presence required. It applies to companies based outside the U.S. just as it does to domestic ones.
No, and the differences trip people up. U.S. sales tax is generally charged once at retail rather than at each stage of the sales process, it’s based on the customer’s location, and there are no input credits to reclaim. The VAT mental model is the wrong one to apply here, even though they are both indirect taxes.
There isn’t. Because there’s no federal sales tax, you register state by state, in each state where you have an obligation, and each has its own process, threshold, and filing schedule.
Sometimes, and it depends on the state. Around 20 states tax SaaS, and they don’t do it the same way. Because so many of our international clients are software companies, this is one of the first things we help sort out, state by state.
Selling Into the U.S.?
Most international companies reach out once they suspect the U.S. is more complicated than they planned for, often after a customer, an investor, or an acquirer raises the question. That’s the right time to talk. A first conversation usually clarifies where you likely have obligations, what’s taxable, and what to do about anything that’s already built up.
Where do you have international clients?
Our clients include companies in Poland, Israel, Cyprus, Australia, United Kingdom, Italy, New Zealand, Canada, Ireland, Ukraine, and Switzerland, among others
