Unlike many countries with one unified VAT system, the United States has many sales tax systems. There’s no central registration, no fixed rate, and no single authority running it. For businesses outside the country, it can feel like entering a maze with new rules at every turn.
Still, selling in the U.S. is worth it. The market is huge, diverse, and full of promise for companies ready to thrive.
This guide covers how U.S. sales tax works, how it differs from VAT, and what foreign sellers need to stay compliant to keep operations smooth.
A Value Added Tax, or VAT, is a tax charged at each step of production and distribution. Businesses collect VAT on sales and get credit for the VAT they pay on supplies. Only the difference goes to the government.
That chain keeps the tax steady and stops it from stacking up before a product reaches the consumer.
In the U.S., sales tax works differently. Sales tax is meant to apply only at the final sale to the customer. Resellers can avoid paying tax by using a valid resale certificate, but businesses cannot get back the tax they pay on their own expenses or supplies.
Sales tax rules in the U.S. do not link to VAT systems in other countries. Each state runs its own sales tax rules, and those rules do not connect to any foreign tax credits or offsets.
U.S. sales tax doesn’t stop at the state level. It covers thousands of local areas.
In the U.S., 45 states and the District of Columbia all levy their own statewide sales tax.
When you add county, city, and district taxes, there are more than 13,000 tax jurisdictions in the U.S.
When over 13,000 tax areas set their own rates, your total tax rates vary. Some states land above ten percent. Others barely reach two.
Here’s how combined state and local rates compare:
Highest Combined Average Rates |
Lowest Combined Average Rates |
|
Puerto Rico – 11.50% |
Alaska – 1.82% |
|
Louisiana – 10.11% |
Hawaii – 4.50% |
|
Tennessee – 9.61% |
Maine – 5.50% |
|
Arkansas – 9.48% |
Wyoming – 5.56% |
|
Washington – 9.47% |
Wisconsin – 5.72% |
|
Alabama – 9.44% |
Virginia – 5.77% |
|
Oklahoma – 9.05% |
Maryland – 6.00% |
|
Illinois – 8.92% |
D.C. – 6.00% |
|
New York – 8.54% |
Kentucky – 6.00% |
|
Arizona – 8.52% |
Michigan – 6.00% |
The next tricky part is dealing with a tax system that wasn't built with the user in mind. While U.S. businesses certainly struggle with the complexity, foreign sellers face an additional layer of friction because many state systems assume you are physically located in the U.S.
For foreign sellers, that means dealing with challenges like:
The good news is that each of these hurdles has a simple solution.
Once your business is registered, the focus shifts to staying organized. These practical steps keep your sales tax filings clear and accurate across every state.
A good way to track where you need to register is to have your finance team assess where your business already has nexus. They should also track where sales are approaching each state’s economic nexus threshold.
To do this, keep a shared record listing each state, the reason for registration, the filing frequency, and your direct and marketplace sales totals.
Those insights help you act early without over-registering.
Use a master calendar that gives you and your team a clear view of what’s due and when.
Include due dates, submission deadlines, and payment reminders.
Marketplaces like Amazon or Etsy collect and send in sales tax for your marketplace sales. Still, many states want those marketplace sales reported on the return. This often surprises sellers, because the tax itself has already been handled.
Your finance team should check whether each state requires marketplace sales to be listed on the return. Some states want totals. Others want both marketplace and direct sales shown separately.
International sellers often run into payment issues when sending sales tax to U.S. states. Many states only accept payments from U.S. bank accounts, which can be a roadblock if your business is based abroad.
To solve the cross-border payment hurdle, set up a U.S. bank account or use a payment partner. Not all third-party providers work everywhere. For example, some regions cannot use services like Wise for state tax transfers.
When wire transfers are needed, schedule them early, so funds clear before the deadline.
Keep payment receipts together with the return files if questions come up later.
Resale certificates let buyers purchase goods without paying sales tax, but they only work when the certificate is valid. The seller must check that the certificate is complete and acceptable for the state. If a certificate is missing required details or is not valid during an audit, the seller may owe the tax instead of the buyer.
To stay organized, store certificates in a digital folder by state and renewal date. Review them on a set rhythm, and confirm a certificate before you ship an exempt order. A certificate management tool, such as CereTax, available via TaxValet, can handle much of this work and lower the risk of errors.
Set a reminder to check for expired or missing certificates each quarter. Always confirm an exemption before shipping to an exempt buyer.
Partnering with a U.S.–based sales tax company can make a big difference.
Expert sales-tax teams, like TaxValet, know state systems, filing methods, and rule changes.
They can handle registrations, manage returns, and help your finance team stay ahead of new requirements.
If you need a team to handle registrations and filings across states, TaxValet can run the process end-to-end, so you don’t have to.
Selling into the U.S. opens the door to a huge market, but it also brings a tax system that takes time to master.
At TaxValet, we help foreign sellers build a solid sales tax process. Our team manages registrations, filings, and payments so your business stays compliant.
Ready to simplify your U.S. sales tax compliance? Schedule a consultation with TaxValet today.
Many states let foreign businesses register with their international info or a U.S. rep. Still, some require a local address or an Employer Identification Number (EIN).
If a state finds you have nexus but haven’t registered, you may owe back taxes, interest, or penalties. A state may also run an audit to review your past sales.
Yes. Many sellers register early when sales are close to the limit. However, while many states allow for proactive registration, there are a few exceptions that require you to wait until the threshold has been reached.
States frequently change rules, sometimes several times a year.
It depends on the state. Some tax software or downloads, others don’t. States have also been paying closer attention to these products in recent years, so rules can change.
Yes. A foreign seller can apply for a U.S. EIN through the IRS, even without a U.S. office or employees. In some cases, an owner or officer may also need an ITIN to complete the application. An ITIN is a tax identification number for individuals who are not eligible for a U.S. Social Security Number. You can apply for an ITIN through the IRS by submitting Form W-7 with the required documents.
It depends on how many states you register in. Online applications can take days. Paper filings can take weeks.
Sales tax applies at the state level. Income tax only applies if you have a U.S. office or employees.
Some buyers and products qualify, like resellers, nonprofits, or groceries.
No. The U.S. doesn’t use VAT.