Top 3 Sales Tax Challenges for International Businesses (and how to fix them)
Summary: For foreign businesses, paying sales tax in the United States is particularly challenging. Businesses typically face significant issues registering for a sales tax permits and making payments directly to the states. The good new is TaxValet can help.
As an American, I’m puzzled why the states would make it so challenging for someone to give them money. You’d think the states would be thrilled at any opportunity to raise revenues. It is anyone’s guess if this is due to incompetence, malice, or something else altogether.
The good news is that TaxValet can eliminate the hassle and stress of paying U.S. sales tax for your international business. Over the years, we’ve streamlined our processes to help foreign business owners get set up with USA sales tax with as little stress as possible.
If you want someone to take over your U.S. sales tax, check out our Done-for-You Service and consider scheduling a free initial consultation with us. You can also send us an email if we need to accommodate your time zone.
The Top 3 Sales Tax Challenges for International Businesses
1. No United States Bank Account for Sales Tax Payments
The Problem: Foreign businesses must have a U.S. bank account to make sales tax payments.
The Ideal Solution: The business opens up its own U.S. bank account. Many banks require that you are available in person to open the account. Banks will also typically require that your business is incorporated in the United States and can provide Articles of Incorporation, among other things.
TaxValet’s Solution: We can open a bank account under our name exclusively for sales tax purposes. You can deposit money in the bank account, which is solely for payments to states. This can be a great interim solution while you are pursuing acquiring your own U.S. bank account. An additional fee applies for this service.
2. No Social Security Number or ITIN for Permit Registrations
The Problem: Some states require an owner or officer of the company to have either an SSN or ITIN. Sales tax permit registration is impossible in these states.
The Ideal solution: You acquire an ITIN through an online service. This process can take upwards of six months to complete. Some of our clients have successfully applied for an ITIN through ITIN express.
TaxValet’s Solution: We will only register you for sales tax permits where we know they will approve the application without you having an ITIN. If you owe sales tax in a state requiring an ITIN to register, you should start the process of getting an ITIN at once. See our chart here for which states foreign businesses can expect to experience sales tax permit registration issues.
3. No Domestic Address for Sales Tax Permit Registration
The Problem: Many states have delayed sales tax permit processing time for foreign businesses that do not have a U.S. business address. This is because the state requires us to follow additional steps, such as filing paper applications.
The Ideal Solution: You have a physical (or virtual) address that can be your “headquarters” within the United States. There are various online services that can help you attain this.
TaxValet’s Solution: If you do not have a U.S. business address, we will submit your sales tax permits with paper applications in some states. Delays can be expected, but we’ll be following up with states to get you across the finish line quickly. See our chart here to see which states foreign businesses can expect issues with sales tax permit registration.
An Overview of the U.S. Sales Tax Setup Process for Foreign Businesses.
Step 1: Identify Which States Your Foreign Business Needs Sales Tax Permits In.
Before registering for sales tax permits, you need to understand which states you have sales tax nexus in. You only need to register in states where you have a sufficient presence. The most common way to have a sufficient presence is by crossing economic nexus thresholds or having a physical presence within the state. We can help you identify these states when you sign up for our Done-for-You Service.
Step 2: Register for Sales Tax Permits.
Typically, the sales tax permit registration process is straightforward and a matter of completing a bunch of paperwork and following up with states (although it is time-consuming). Unfortunately, he process can be much less straightforward for international businesses.
Typically, foreign businesses run into problems in the sales tax permit registration process due to the lack of a domestic address or lack of a business owner (or officer) with a Social Security Number (SSN) or International Taxpayer Identification Number (ITIN). This is because some states require this information to create a sales tax account.
We have identified a workaround in some of these states (such as bypassing online systems by mailing-in paperwork). But there are still some states where it is currently impossible to open a sales tax account (see our chart here for which states foreign businesses can expect to experience sales tax permit registration issues).
Step 3: File and Pay Sales Tax.
The biggest issue foreign businesses will face with paying sales tax is having access to an American bank account. The state governments require a US bank account to draft ACH payments. An international bank account setup with a USD currency will not work. For most of the states, you will need a bona fide U.S. bank account with a U.S. account and routing number. The good news is that we can open a limited-use bank account for you.
Introducing TaxValet’s Sales Tax Service for Foreign Businesses
TaxValet’s Done-for-You service includes everything you need to eliminate the hassle and stress of U.S. sales tax. You can think of it like having a miniature sales tax department, at a fraction of the cost.
Learn more about everything that’s included on our features page.
Disclaimer: Our attorney wanted you to know that no financial, tax, legal advice or opinion is given through this post. All information provided is general in nature and may not apply to your specific situation and is intended for informational and educational purposes only. Information is provided “as is” and without warranty.