Sales Tax & Nexus
State Returns, Treaty, Form W-8BEN-E
US state sales tax registration and filing for UK sellers with economic nexus, set against the UK VAT position on the same sales.
What does Sales Tax & Nexus involve?
The US has no federal sales tax or VAT. Each state that levies sales tax sets its own rules on which sellers must collect it, and since 2018 many reach sellers with no physical presence at all. A UK business selling into the US can owe registrations in several states while the UK VAT treatment of the same sales stays entirely separate.
Forms and filings involved
- State Returns
Why a move to the UK does not always end a US state tax obligation, and how states decide who remains a resident.
- Treaty
How the US-UK income tax treaty allocates taxing rights, and where its saving clause limits what US citizens can claim.
- Form W-8BEN-E
The certificate a non-US entity gives a US payer to confirm its foreign status, FATCA classification and any treaty claim.
Selling into US states from the UK
In South Dakota v. Wayfair, decided in 2018, the Supreme Court allowed states to require remote sellers to collect sales tax once their sales into the state pass a set level.
Nearly every state with a sales tax has since adopted an economic nexus rule. The thresholds vary by state, some measure revenue alone while others also count transactions, and the tests apply to the seller's sales into the state wherever the seller is based. A UK seller is not outside them.
Sales tax works differently from VAT. It is generally charged once, on the final sale to the customer, with no chain of input credits, and rates can differ between a state, its counties and its cities. Whether a product is taxable at all also varies: digital products and software are taxable in some states and not in others. Marketplaces commonly collect the tax on sales made through them, though stock held in a US warehouse can create physical nexus in that state.
The UK VAT position is a separate calculation. Goods exported from the UK to US customers can generally be zero-rated with evidence of export, and digital services supplied to US consumers generally fall outside the scope of UK VAT because they are treated as supplied where the customer belongs. Neither result has any bearing on US sales tax. The income tax treaty does not cover sales tax either, so having no US permanent establishment does not settle the state question.
What a nexus review covers
- 01
- US sales measured by destination state against each economic nexus test
- 02
- Product taxability checked for physical goods, digital products and software
- 03
- Marketplace sales separated from direct sales for each state
- 04
- Registration, collection set-up and periodic returns in each nexus state
- 05
- UK VAT treatment of the same sales confirmed alongside
Who this is for
UK online retailers shipping goods direct to US consumers
- UK software and digital businesses with US customers
- Sellers holding stock in US fulfilment warehouses
- UK businesses that have passed state thresholds without registering
Why US UK Tax Returns
Each return is prepared with the other country's return open beside it, so a credit, election or disclosure on one is supported by the other.
One File
US and UK returns prepared in the same engagement and reconciled line by line.
Primary Sources
Every position traced to the Code, the treaty, IRS instructions or HMRC guidance.
Scope First
Returns, forms, years and fee agreed in writing before work begins.
The Same People
The team that files this year carries the elections and credits into the next.
Questions we are asked
We have no office or staff in the US. Can a state still make us collect sales tax?
Yes. Since the Wayfair decision, states can base the obligation on the value or number of sales into the state, with no physical presence needed. Each state sets its own threshold and measurement period, so a seller can be required to register in one state and not in its neighbour. Being based outside the US gives no exemption. The first step is measuring your sales by destination state.
Does charging UK VAT on a sale mean we do not charge US sales tax on it?
No. The two taxes are unconnected, and neither gives credit for the other. A sale to a US customer is taxed under UK VAT rules according to what is supplied and where, and separately under the sales tax rules of the state the customer is in. Often the UK treatment of an export, or of a digital supply to a US consumer, is zero-rating or outside scope, while the state may still expect tax.
We passed a state threshold two years ago and did not register. What now?
The exposure is the tax that should have been collected, usually with interest and penalties, even though it was never charged to customers. Many states offer voluntary disclosure agreements that can limit the look-back period and reduce penalties for sellers who come forward before the state contacts them. Terms differ by state. We quantify the position state by state before deciding whether to approach each one.
Primary sources
What this page says is drawn from the official material below. Read it yourself; we would rather be checked than trusted.
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