US Sales Tax Nexus for Foreign Sellers: 2026 Guide

Sales tax nexus for foreign sellers is a state-by-state question, not a test of where your company was incorporated. A UAE, UK or EU business selling goods or services to US customers may need to register, collect tax and file returns even when every employee works abroad. The practical starting point is a destination-state sales report, not your worldwide turnover.

Sales tax is not VAT: the operating differences

US sales and use taxes are imposed by states and local jurisdictions; there is no federal sales tax. Sales tax generally targets the retail transaction. Use tax is the complementary tax on taxable use when sales tax was not collected. A remote seller's permit may therefore be described as a seller's use tax permit rather than a sales tax registration. That wording does not make the obligation optional.

Do not treat every US business customer as exempt simply because it provides an EIN. Obtain the relevant exemption or resale documentation and check its validity. If you also sell into Europe, keep that analysis separate: our OSS and IOSS guide for non-EU sellers explains why US nexus rules cannot answer EU VAT questions.

What Wayfair changed, and what it did not

In South Dakota v. Wayfair, Inc., No. 17-494, decided 21 June 2018, the US Supreme Court overruled the physical-presence rule associated with Quill and National Bellas Hess. A state was no longer barred from requiring collection merely because the seller lacked an office or employees there. States can impose collection duties based on economic connections, commonly measured by sales into the state.

The decision did not create one federal registration threshold. The South Dakota law considered in the case used sales exceeding USD 100,000 or 200 or more transactions. Those historical figures are often repeated as if they apply everywhere today. They do not: South Dakota itself removed its transaction test under SB30 from 1 July 2023. Physical presence remains a separate route to nexus and can trigger obligations below an economic threshold.

Verified state thresholds and the changing count tests

Use the following examples to understand the variables, not to clear every state in which you sell. All dollar thresholds are in USD and apply to the relevant state's sales, not your total US revenue. Read 'exceeds', 'at least' and 'and' literally. Also check aggregation with related businesses, marketplace exclusions, exempt sales and the date collection must begin.

The New York quarters run March–May, June–August, September–November and December–February. They are not the standard financial quarters. Texas includes separately stated transportation and handling charges in its revenue calculation. California's tangible-property test should not be transplanted to a state whose test also counts services.

No US entity does not mean no nexus

California expressly includes foreign sellers located outside the United States in its AB 147 guidance. Texas provides a registration route specifically for remote sellers outside the US. You should therefore not wait to form an LLC before checking collection obligations, and forming one does not replace state permits. A payment processor or a US bank account is not a substitute for a nexus review.

Check physical connections first: stock in a fulfilment warehouse, an office, sales representatives, installation work or other in-state activity may matter. Inventory held by a third-party platform can create issues before your sales reach an economic threshold. Request warehouse-location records instead of assuming goods remain at the first receiving location. Review historical movements as well as today's stock.

Keep sales tax separate from federal income-tax and entity reporting. A conclusion about a permanent establishment does not, by itself, settle a state's sales tax collection rules. A foreign-owned US LLC may also have reporting duties even when it has no sales tax nexus: see Form 5472 for foreign-owned LLCs. These reviews use different triggers and deadlines.

What marketplace facilitators collect for you

A marketplace facilitator may be responsible for collecting and remitting tax on sales it facilitates under a state's law. Platforms such as Amazon or Etsy can provide tax and settlement reports showing that treatment. But a platform's role must be checked for each jurisdiction and transaction. Merely hosting your website or processing a payment does not establish that someone else has taken over your statutory collection duty.

Texas says a remote seller selling only through a marketplace provider that certifies collection and reporting on its behalf does not need a Texas permit. Required marketplace records must still be kept for at least 4 years. South Dakota takes a different approach: sellers exceeding its threshold, including marketplace sellers, must register, although those selling entirely through a registered collecting provider may qualify for non-filing status.

For a mixed-channel business, retain gross marketplace sales separately from direct website sales. New York includes marketplace sales when testing its threshold. Do not assume the marketplace's collection means those sales disappear from the calculation. Equally, do not charge the customer again for tax already collected by the facilitator. Preserve the provider's certification, transaction reports and the reconciliation showing which party remitted the tax.

SaaS and digital products need a taxability review

Economic nexus and taxability are two different decisions. A state can count a sale towards its threshold even where that particular sale is exempt. South Dakota's revenue guidance says remote sellers meeting its gross-sales threshold must register even without taxable sales. This is why measuring only the tax charged by your checkout can miss an obligation.

For SaaS, downloads, subscriptions and bundled support, document what the customer actually receives. Is there software access, a downloaded product, data processing, professional advice or a bundle? Where are users located, and can the contract allocate usage between states? Avoid a universal 'digital services are exempt' setting. Build a product-by-state taxability matrix with the governing guidance and effective date; obtain written clarification where the classification is uncertain.

Worked example: one seller, three different answers

Assume a Dubai furniture retailer has no physical presence, no related sellers and only direct US sales. Its California tangible-property sales are USD 480,000 in both the preceding and current calendar years. Its Texas gross revenue for the preceding 12 calendar months is USD 510,000, comprising USD 460,000 of retail goods, USD 30,000 of resale sales and USD 20,000 of delivery charges. Its New York sales are USD 520,000 across 90 invoices during the immediately preceding four sales tax quarters.

If the Texas amount was first exceeded in June, the Comptroller's rule requires a permit and collection to start no later than 1 October, the first day of the fourth month after June. Do not apply that lead time to California or New York. New York's guidance requires registration within 30 days after meeting its thresholds and collection 20 days thereafter. A new warehouse connection could also change this example without another dollar of sales.

Registering, collecting and filing: the workflow

1. 1Map and date the exposureExport sales by destination state and channel. Add inventory, staff and contractor connections. Apply each state's measurement window and sales definition, then record the first trigger date and required collection date.
2. 2Resolve past periods before choosing a start dateIf a trigger occurred earlier, quantify uncollected tax and obtain advice on disclosure or available relief before submitting an application. Starting with today's date does not settle earlier exposure.
3. 3Prepare the registration packageUse the state's revenue authority, not a generic formation service. Gather legal name, foreign address, ownership and responsible-person details, business description, sales history and identification requested by that state. Texas directs sellers outside the US to email or fax Form AP-201; do not invent an SSN to bypass an online field.
4. 4Configure collection and exemptionsRecord the permit and effective date. Map products to current taxability rules and destination sourcing, retain certificates and test taxable, exempt, refunded and marketplace orders. Confirm any simplified-rate election before using it.
5. 5Calendar returns and payments separatelyRecord the assigned filing frequency, first return period, due date and payment method. File required zero returns: South Dakota expressly requires returns even with no sales, and New York requires returns for each period while registered. A submitted return is not proof that payment succeeded.
6. 6Retain evidence and review changesSave acknowledgements, payment confirmations, tax calculations and marketplace reports. Reassess when channels, products or warehouse locations change. Close permits through the state's process rather than simply switching off collection.

Time-sensitive, as of October 2026: Illinois's remote retailer amnesty runs from 1 August to 31 October 2026 for eligible reporting periods from 1 January 2021 to 30 June 2026. IDOR requires registration, an active MyTax Illinois account and compliance with programme-specific payment and filing instructions. Eligibility and relief are not automatic. Check the programme before relying on it for historical liabilities.

Build a monthly exposure report, not an annual surprise

Track order date, destination address, state, product category, gross sale, refunds, shipping, channel, tax collected and collecting party. Keep threshold calculations separate from return calculations: a state may count exempt or marketplace sales even though you do not remit tax on them. Reconcile platform gross sales to the ledger, not just net bank deposits after fees.

In your books, customer tax collected should sit in a tax-payable liability account rather than inflate sales revenue. Suppose taxable direct sales are USD 10,000 and the correctly determined combined rate is 8% for this hypothetical transaction set. The customer pays USD 10,800: USD 10,000 is sales and USD 800 is tax payable before any refunds or adjustments. A facilitator-collected amount needs separate reconciliation so it is not paid twice.

Assign an owner to the exposure report and keep dated copies of the rules used. Review faster than monthly when sales are approaching a trigger. Incorporate tax balances and filing acknowledgements into your month-end close checklist. HOF Partners can help organise this reporting and coordinate the records through its global VAT, GST and corporate tax services.