US sales tax for UK brands: when you have to collect it

US sales tax is charged once, on the sale to the final customer, by the state the order is delivered to. There is no federal sales tax and no VAT, and sales tax is not part of the import: duty is paid at customs, and sales tax comes later, on each sale.

45 states and Washington DC charge sales tax. Alaska, Delaware, Montana, New Hampshire and Oregon have no statewide sales tax, although Alaska lets its local governments charge their own.

Counties and cities add their own rates to the state’s, so the tax on an order depends on the delivery address. New York’s state rate is 4%, and the average combined rate there is 8.54%. US prices are usually shown before tax, which is added at checkout, so a UK price that includes 20% VAT should not be carried across as it is.

A state can make you collect its sales tax once your sales delivered there pass its threshold, even with no presence there. Most states set it at $100,000 of sales a year; California, New York and Texas set $500,000, and Alabama and Mississippi $250,000.

Some states also treat 200 orders in a year as passing the threshold, whatever their value, though a growing number have dropped that test. New York needs both: more than $500,000 and more than 100 sales, over the previous four sales tax quarters.

Count each state separately, over the period that state uses: the calendar year in most, the previous twelve months in Texas, four quarters in New York. A brand with $400,000 of US sales spread across the country may pass no threshold at all; the same sales concentrated in two states could pass both.

Amazon and the other large marketplaces collect and pay the sales tax on orders placed through them, in every state with a sales tax, so you do not charge it again on those orders.

They do not cover your own store or your wholesale orders. Those are yours to tax in the states where you are registered.

Marketplace sales can still count towards your threshold. New York counts them: if your Amazon and own store sales into New York together pass its threshold, you register there and collect on your own store sales. If all your New York sales go through marketplaces, New York’s tax department has said you do not need to register. Other states set their own rules on both points.

Owning stock that is stored in a state can give you a physical presence there, and with it a duty to register however little you sell. Texas, for example, treats owning or using goods in the state as being engaged in business there.

New York has a narrower rule for fulfilment centres. Your stock at an unaffiliated fulfilment centre in New York does not create that presence on its own, as long as the centre’s services are limited to accepting orders, answering customer correspondence, billing and collection, and shipping orders from your stock.

Warehouse Box is a third-party fulfilment provider that stores your stock and ships your orders in New York. Before your stock moves, ask your US sales tax adviser to check the services you will use, such as Amazon prep or retail orders, against that rule, and to check every other state where your stock will sit, including any Amazon fulfilment centres.

• USA fulfilment from New York →

Register with a state’s tax department before you charge its sales tax. In New York you cannot legally make taxable sales until you hold a Certificate of Authority.

New York gives a business that passes its threshold 30 days to register, and collection starts 20 days after that. Each state has its own form and timing; New York’s registration is online, through New York Business Express.

If you need to register in several states, the Streamlined Sales Tax Registration System registers you in its 24 member states in one application, at no charge, and some sellers qualify for free calculation and filing through its certified service providers. California, New York and Texas are not members, so you register with them directly.

Once registered, charge tax at checkout only in the states where you are registered, file a return on each state’s schedule, and keep your records.

New York expects every return on time, even when you made no taxable sales. Texas asks sellers to keep records of their marketplace sales for at least four years.

Wholesale orders work differently: a US retailer buying your goods to resell gives you a resale certificate, and you do not charge it sales tax. In New York the certificate is Form ST-120, and it must reach you, properly completed, within 90 days.

• How to start selling in the USA →