US Sales & Use tax

USA – second biggest online marketplace in the world

The USA is the second biggest online marketplace in the world. With a 2020 projected revenue in the eCommerce market of US$410,891m and expected to grow up to US$523,677m by 2024, online sellers should consider entering the US market.

Sales tax in the USA
One of the biggest issues Online sellers encounter when entering the US eCommerce marketplaces is Sales tax.
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Nexus for online sellers
Sales Tax must be charged when a nexus (or connection) between a business and a state exists.
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Registering for sales tax
With so many states having their own set of rules, and with the obligation to register in every states where an economic nexus exists
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Sales tax filing
Filing frequency is commonly based on the taxpayer’s sales volume and the amount of tax that the taxpayer collects during the period.
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Introducing Marketplace Tax Collection in the USA

Depending which marketplace platform online sellers are using, it is important to know if they are considered a “Marketplace Facilitator”.
For example, Amazon enters in the Marketplace facilitator definition, as a result, the obligation for sales tax collection and remittance shifts from the seller to Amazon.
At the moment, marketplaces such as Amazon, Etsy, Walmart, Rakuten and eBay, are required to collect sales taxes in 45 states.
For those marketplaces that are not considered Marketplaces Facilitators, like a Shopify websites, accounting and filing sales taxes returns is still the sellers obligation.

Sales tax in the USA

One of the biggest issues online sellers encounter when entering the US eCommerce marketplaces is sales tax. Each state has its own state or local rate or both. In addition, sales registration thresholds and number of transaction differs from state to state.

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Physical nexus for online sellers

Sales Tax must be charged when a nexus (or connection) between a business and a state exists. Traditionally, a nexus occurs when there is physical presence in a state, such a store or employees, but since June 2018, a new rule was enforced and now online sellers with out a physical presence in any state will need to collect Sales Tax based on the volume or value of transaction within a state.

Registering for sales tax

With so many states having their own set of rules, and with the obligation to register in every states where an economic nexus exists, sales tax registration can be difficult to cope with. To make it even more complicated, selling on both Amazon and Shopify for example, will create the need to only report sales coming from Shopify but not Amazon’s.
The best recommendation is to consult with US state tax authorities or a tax professional. GVC is well equipped to assist you monitoring your sales and apply for a sales tax registration when required. Do not hesitate to contact our tax experts.

 

Sales tax filing

Sales tax return filing frequencies can vary depending on each state requirements and can go from annually, semi-annually, quarterly, monthly, semi-monthly to monthly. Filing frequency is commonly based on the taxpayer’s sales volume and the amount of tax that the taxpayer collects during the period.

REGISTRATION THRESHOLDS IN US STATES

STATE EFFECTIVE DATE ANNUAL ECONOMIC THRESHOLD ANNUAL TRANSACTION THRESHOLD
Alabama 01 October 2018 250,000 N/A
Alaska 100,000 200
Arizona 30 September 2019 150,000 N/A
Arkansas 01 July 2019 100,000 200
California 01 April 2019 500,000 N/A
Colorado 01 June 2019 100,000 N/A
Connecticut 01 December 2018 100,000 200
Florida 01 July 2021 100,000 N/A
Georgia 01 January 2019 250,000 200
Hawaii 01 July 2018 100,000 200
Idaho 01 June 2019 100,000 N/A
Illinois 01 October 2018 100,000 200
Indiana 01 October 2018 100,000 200
Iowa 01 January 2019 100,000 200
Kansas 01 October 2018 N/A N/A
Kentucky 01 July 2018 100,000 200
Louisiana 01 January 2019 100,000 200
Maine 01 July 2018 100,000 200
Maryland 01 October 2018 100,000 200
Massachusetts 01 October 2017 100,000
Michigan 01 October 2018 100,000 200
Minnesota 01 October 2018 100,000 200
Mississippi 01 September 2018 250,000
Missouri
Montana
Nebraska 01 January 2019 100,000 200
Nevada 01 October 2018 100,000 200
New Hampshire
New Jersey 01 November 2018 100,000 200
New Mexico 01 July 2018 100,000 N/A
New York 21 June 2018 500,000 100
North Carolina 01 November 2018 100,000 200
North Dakota 01 January 2019 100,000 N/A
Ohio 01 August 2019 100,000 200
Oklahoma 01 July 2018 10,000 N/A
Oregon
Pennsylvania 01 July 2018 100,000 N/A
Rhode Island 07 July 2019 100,000 200
South Carolina 01 November 2018 100,000 N/A
South Dakota 21 June 2017 100,000 200
Tennessee 01 October 2018 500,000 N/A
Texas 01 October 2019 500,000 N/A
Utah 01 January 2019 100,000 200
Vermont 01 July 2018 100,000 200
Virginia 01 July 2019 100,000 200
Washington 01 October 2018 100,000 N/A
Washington DC 01 January 2019 100,000 200
West Virginia 01 January 2019 100,000 200
Wisconsin 01 October 2018 100,000 200
Wyoming 01 February 2019 100,000 200

Source credit: taxconnex

*The above information is only indicative. This table is updated regularly but please contact GVC in order to ensure that it is correct at the date you are using it.