US SALES TAX & EU VAT FOR YOUR LLC

The United States does not have a federal sales tax. Instead, sales tax is levied at the state and local level, and the rules vary significantly between states. There are over 10,000 different sales tax jurisdictions in the US.

For a US LLC owned by a non-resident, the key question is whether the LLC has 'nexus' in a particular state. Nexus is a sufficient connection to a state that triggers a sales tax collection obligation.

Since the Supreme Court's 2018 Wayfair decision, most states have adopted 'economic nexus' rules. This means that even if your LLC has no physical presence in a state, you may be required to collect sales tax if you exceed certain sales thresholds in that state.

The most common threshold is $100,000 in sales or 200 transactions in a state in a calendar year. If your LLC's US sales are below these thresholds in a given state, you generally do not need to collect sales tax there.

The sales tax treatment of digital services (software, subscriptions, digital downloads, consulting) varies significantly by state. Some states tax digital services; others do not. This is a complex and evolving area.

For most non-resident LLC owners who sell primarily to non-US customers, US sales tax is not a significant concern. The issue becomes relevant when you have substantial US sales.

If your US LLC sells digital services to EU consumers (B2C), you may be required to register for and collect EU VAT under the EU's digital services rules. This applies regardless of where your business is incorporated.

The EU's One Stop Shop (OSS) scheme allows businesses to register for VAT in a single EU member state and report all EU VAT through that registration. If your LLC's EU B2C digital service sales exceed €10,000 per year, you should consider OSS registration.

For most ZeroTax LLC owners who provide digital services to international clients, US sales tax is not a significant issue — particularly if their US sales are below the economic nexus thresholds.

EU VAT is more likely to be relevant for businesses with significant EU consumer sales. We recommend consulting a VAT specialist if your EU B2C sales exceed €10,000 per year.