Is there a VAT threshold for drop shipping into the USA

[Scott TC]

As question suggests. If drop shipping from UK (we hold no stock, only ship from factories after orders come in) to EU states, once individual state thresholds are reached, you have to register in individual states for VAT.

Is the same true in the USA? If drop shipping from the UK? Is it on a state by state basis, or does the US have a VAT threshold that once exceeded, you have to register with the IRS centrally?

Puzzled.

Any advice?

 

[Mr D]

US doesn't have VAT.

It does have sales taxes. Is that what you are thinking?

 

[Scott TC]

yes, so for example, if we sell widget A for £100 or $135, because its bought in the UK from a UK website but by a person in the USA, we do not have to levy UK VAT on that purchase, as its been bought by US money from a US person, with a US credit card.

I think I am right in saying that up to a threshold in the US, you do not have to levy their version of VAT or (Sales Tax as you rightly call it). However, I do not know how high the thresholds are for registering for Sales Tax?

If we are exceeding these, which I doubt at the minute, is it a case of registering for sales tax in the lowest sales tax area in the US and continuing to ship product over the pond but ensure that the correct amount of sales tax is paid in the State in which we are registered for that tax?

I dont want to become an LLC with all the hassle and legal framework that goes with that, but if we have to pay VAT in the US, same as we do in the UK, its not the end of the world. I just need to know if this is ok to remain a UK business but how to pay this US sales tax? and where?? Delaware keeps rearing its head in some forums as the Switzerland of the US for sales tax, anybody know about this?

So to sum up:

Sales Tax - thresholds for exporting - yes/no
If have to register in US to pay sales tax - Where is best?
Can we remain just a UK company?
Does registering for US sales tax complete our obligations to the US?

Thx

Scott

 

[Mr D]

Are you selling on a US site or EU site to a US buyer?

 

[Scott TC]

We are a UK site, selling to US customers

 

[Raw Rob]

My understanding (but I could be wrong): as long as you are posting the physical items from the UK, you don't have to do anything. Although I think they are trying to change this, so keep yourself up to date.

 

[Mr D]

There's customs duties and watch out for the trade war.
Customs duties payable by the importer (that's the buyer in this case) - but if they don't pay customs then expect a return. Its considerably higher customs threshold than UK last I looked.

 

[Scott TC]

Thanks Raw Rob. This is what I want the truth to be, just difficult to check. My worry was that we do so much shipped from UK, that a sales tax threshold is hit somewhere along the line. Our very own DTI has no idea, I also get very differing opinions from US advisors...mainly I am finding that everyone has an agenda or service to sell and guides you towards this...frustrating.

Mr D, I thought the customs threshold was around $2000 for the import duty to kick in? Our average price to the USA for product is $400, never had anything held by US customs yet, according to our customers, who would let us know, as everyone hates a charge.

 

[Andy777]

This will vary from State to State but yes, some States now have distance selling thresholds in place that triggers the need for Sales tax registration. You will have to go through the list to see which States has this rule in place and what are the thresholds:

https://www.taxjar.com/states/

 

[Dan Kav]

As Andy777 said, you need to be aware of the new 'economic nexus' rulings being imposed following the court decision of South Dakota vs Wayfair. In South Dakota for example this 'economic nexus' is $100,000 or 200 orders into the State. At which point you would need to start charging State Tax. Most States are duplicating this 'limit' although not all.

TaxJar also has a Sales-tax-calculator (which I can't link as I'm new) which is really handy.