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5 Comments

US Taxes for sales originating from EU Company

Hello all!

I'd like to know the tax implications of opening a US based LLC (e.g. in Wyoming) for a company selling goods all over the united states. I read that the sales tax for sales made in Wyoming are 4-6%.

How does this work for online sales to anywhere in the US?
Does the 4-6% rate get applied on all sales regardless of where the customer is?

Thank you!

  1. 4

    Hi Yasser,
    (Assuming you are an online-only operation)

    • If you are registered in Wyoming, you will charge sales tax to all products sold to Wyoming shipping addresses.
    • You will not charge sales tax to customers from other states.
    • If you have a warehouse/distribution facility/retail store in a separate state, you will charge sales tax on all sales made in that state too (charged at the rate for that state)
    • Now this changes a bit as you grow bigger. Many states have sales/transaction threshold, beyond which it becomes an economic nexus for you. For example, if you have more than $500,000 in sale transactions in California, it becomes a nexus for you. Check thresholds for other states here: https://www.avalara.com/us/en/learn/guides/state-by-state-guide-economic-nexus-laws.html

    This would apply to most ecom businesses. Hope this helps.

    1. 1

      Thanks very much! Very helpful :-)

  2. 3

    I'm not a accountant/lawyer but I think this is how it is:

    1. You will have nexus in your state of incorporation and have to collect sales tax for sales to customers in that state.
    2. You also have to collect sales tax in other states where you have economic nexus. Every state is different in terms of what types of products are taxed, and what the sales threshold is before sales tax is required. The sales tax is based on where your customer is, not where your LLC is incorporated.
    3. Separate from sales tax, you will probably have to pay LLC taxes/fees. In California where I live, it is $800 per year starting out, and it increases after $250,000 of income.

    Here's an example of sales taxes for saas:
    https://blog.taxjar.com/saas-sales-tax/

    Thresholds:
    https://www.quaderno.io/resources/us-economic-nexus-guide

    More info:
    https://www.chargebee.com/blog/saas-sales-tax/
    https://www.quaderno.io/resources/sales-tax-for-digital-goods

    When you are starting out, you are probably under all thresholds so you probably don't have to worry about sales tax until you get bigger.

    To manage sales tax, you should either use a service like Quaderno (which handles tax calculations for VAT and US sales tax, but you have to handle tax registration, filings and payments), or you can use a merchant of record like Paddle that will resell your products and handle all EU VAT and US sales tax for you.

    Here's a recent post on Stripe vs. Paddle:
    https://www.indiehackers.com/post/stripe-vs-paddle-89161b0d5c

    Why Wyoming? That seems like an unusual state to incorporate an LLC. Delaware is more common if you don't live in the U.S. If you do live in the U.S., then it's usually easier to create an LLC in the state in which you live.

    Hope this helps!

    1. 1

      Thanks so much Steven this is super helpful!
      This is for an online only business. I thought of Wyoming almost arbitrarily (I stumbled upon services that open LLCs in Delaware and Wyoming.) I'm trying to minimise sales + corp taxes given that the company is already registered in Europe and pays corp taxes there (for now. we may need to close up shop in the EU and have it US based for other reasons).

      1. 2

        I think Delaware is the most common option, I have never heard of anyone opening a Wyoming LLC. Also, I think the state sales tax for Delaware is 0%. But as I mentioned above, you will still have to pay taxes in other states when you exceed the threshold for those states. Good luck!

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