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Tax Treaties and U.S. Sales Tax Nexus: What Foreign Sellers Need to Know

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Sylvia F. Dion, MPA, CPA
Sylvia F. Dion, MPA, CPA

"How the U.S. sales tax rules apply to foreign (non-U.S.) companies that sell to customers in the United States can be complex and confusing!  For some foreign sellers, the U.S. transaction based sales tax is very different from the consumption based model followed in many countries.  Additionally, some foreign sellers may not realize that 45 of the 50 U.S. states, and the District of Columbia, impose their own state sales tax.  Foreign sellers may also be surprised to find out that the definitions, rules and rates are not the same in all of the states or that many local governments, such as the individual cities within the states, can also impose a sales tax.

But for many foreign sellers – in particular those that are familiar with international tax concepts and U.S. federal tax treaty protection – it may come as an even bigger surprise to discover that in general, the U.S. states do not recognize tax treaties that have been entered into between the United States and a foreign country (bi-lateral tax treaties).  That’s right!  Because U.S. states are not a “party to” bi-lateral tax treaties, even if a foreign seller is not subject to U.S. Federal income tax, the foreign seller could be subject to the sales tax laws of the various U.S. state and local governments."

If you work with foreign companies that sell into the U.S., or just want to know more about this topic, I invite you to read my recent post: Tax Treaties and U.S. Sales Tax Nexus: What Foreign Sellers Need to Know



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