Zero income tax on your US LLC profits is achievable — but that doesn't mean zero tax obligations. E-commerce sellers face a separate layer of consumption taxes: US sales tax and EU VAT. Here's what you actually owe, and when.
EU VAT: THE RULE MOST ONLINE SELLERS GET WRONG
If you sell digital products or services to private consumers (B2C) in the EU, VAT is due in the customer's country — regardless of where your business is based. This applies even if your LLC is in Wyoming and you are physically located outside the EU.
Example: You sell an online course for $100 to a customer in Germany. You must collect and remit 19% German VAT ($19) to the German tax authorities — even though you have no presence in Germany and your LLC is a US entity.
The solution: Register for the EU's One-Stop-Shop (OSS) procedure through any EU member state (Ireland is a popular choice for English-language businesses). Through OSS, you file and pay all EU VAT quarterly through a single portal, covering all 27 EU countries.
B2B sales: When selling to other businesses in the EU that have a valid VAT number, the reverse-charge mechanism typically applies — the customer accounts for VAT, and you invoice without VAT. Always verify your customer's VAT number and include it on the invoice.
US SALES TAX: THE ECONOMIC NEXUS TRAP
Even though your LLC pays no US federal income tax, you may be obligated to collect US sales tax in certain states. This happens when you trigger an “economic nexus” — typically by exceeding $100,000 in sales or 200 transactions with customers in a single state within a calendar year.
The complexity: each of the 45 states with sales tax has different rules, rates, and exemptions. Many digital services are taxed differently than physical goods. Some states exempt SaaS; others tax it at full rate. This is one of the most complex areas of US tax law.
For most small service providers: The economic nexus threshold is high enough that the risk is initially low. But as your business grows, this becomes a real compliance obligation. Services like TaxJar or Avalara can automate sales tax calculation and filing.
THE PRACTICAL APPROACH
Track your sales by customer location. If you are approaching the economic nexus threshold in any US state, consult a US tax advisor before you cross it. For EU VAT, register for OSS as soon as you have any B2C EU customers — the penalties for non-compliance are significant.
Not legal or tax advice
This article is for educational purposes only. Tax and legal rules are highly fact-specific. Always consult a qualified US tax attorney or CPA before making decisions based on this information.
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