You run a Shopify store from the UK, the orders from America have started landing, and now you're staring at the words "sales tax" and "economic nexus" wondering whether you've just walked into a 50-state compliance problem.
Here's the short version. US sales tax is nothing like UK VAT, it is set by individual states rather than the federal government, and being based in the UK does not get you out of it. What decides whether you have to collect it is something called nexus, a connection to a state strong enough that the state can make you register.
This guide explains when a UK Shopify seller crosses that line, how it differs from the VAT system you already know, and what to do once you have an obligation. We'll work through an illustrative multi-state example with current thresholds so you can see how it plays out in practice.
It's written for UK-based Shopify sellers shipping direct to US customers from their own store, rather than through a marketplace like Amazon.
Do UK Shopify sellers have to pay US sales tax?
You don't pay US sales tax yourself, but once you have nexus in a state you must register there, collect the tax from your US customers at checkout, and remit it to that state. Being a UK business does not exempt you. Nexus, not your location, is what creates the obligation.
That last point trips up a lot of people. The rules are set state by state, they apply to "remote sellers" regardless of country, and there is no UK-wide treaty that switches them off. We'll come back to why the UK-US tax treaty doesn't help here.
How is US sales tax different from UK VAT?
If you already handle VAT, your instinct will be to map US sales tax onto it. Resist that. The two systems behave differently in ways that matter for your pricing and your cash flow.
Three differences do most of the damage.
It is added on top, not baked in. UK VAT is included in the advertised price. US sales tax is added at checkout, and the rate depends on where the customer is. Two American customers can pay different totals for the same product because their states (and sometimes their cities) charge different rates.
It is destination-based. The tax follows the customer's delivery address, not your location. So your obligation is shaped by where your buyers are, not where you sit.
It is not recoverable. There is no input-tax equivalent. You cannot reclaim US sales tax the way you reclaim input VAT on a UK return. What you collect, you remit.
There is also no single national rate. The standard UK VAT rate is 20% for the current period, set centrally (source: gov.uk VAT rates). The US has no federal sales tax at all. Each state sets its own rate and its own rules, and five states (Alaska aside, which allows local taxes) have no statewide sales tax: Delaware, Montana, New Hampshire and Oregon, often called the NOMAD states (source: Sales Tax Institute, Economic Nexus State Guide).
What is economic nexus and when does it apply?
Economic nexus is the rule that catches most UK sellers. It says that once your sales into a state pass a set threshold, you have a tax obligation there even if you've never set foot in the country.
This comes from a 2018 US Supreme Court decision, South Dakota v. Wayfair, Inc., 585 U.S. 162 (2018), which let states tax remote sellers based on economic activity rather than physical presence (source: Supreme Court of the United States, South Dakota v. Wayfair, Inc. (No. 17-494); plain-language explainer: Sales Tax Institute, Wayfair FAQ).
The most common threshold is $100,000 of sales into a single state, measured over the previous or current calendar year, with no transaction-count requirement (many states have dropped the old "200 transactions" test). But the thresholds vary widely, and the trigger is per state, not your total US turnover.
Here are real examples of how different states set their bar.
| State | Economic nexus threshold | Measured over |
|---|---|---|
| South Dakota | $100,000 in sales | Previous or current calendar year |
| Oklahoma | $100,000 in sales | Preceding or current calendar year |
| Georgia | $100,000 or 200+ sales | (per state rule) |
| Ohio | $100,000 or 200+ transactions | Previous or current calendar year |
| California | $500,000 in sales | Preceding or current calendar year |
| Texas | $500,000 in sales | Preceding 12 calendar months |
| New York | $500,000 and more than 100 sales | Preceding four sales tax quarters |
Source: Sales Tax Institute, Economic Nexus State Guide.
Two practical points fall out of this.
First, you can be well over the threshold in one state and nowhere near it in another. You assess each state separately.
Second, the deadline to register after crossing the line differs by state. South Dakota gives you until the first full month beginning at least 30 days after you meet the threshold. California expects you to register the day you exceed it. Texas gives you until the first day of the fourth month after the month you crossed (source: Sales Tax Institute, Economic Nexus State Guide). So tracking your running state-by-state totals matters.
What about physical nexus?
Economic nexus is about sales volume. Physical nexus is about having a presence in a state, and it can catch you at a much lower level of sales.
For a UK Shopify seller, the usual trigger is inventory. If you hold stock in a US warehouse or use a US third-party logistics (3PL) provider, the state where that stock sits can treat you as having physical nexus, even if your sales there are tiny (source: Avalara, US sales tax nexus for UK ecommerce sellers).
This is the part people miss. The moment you move from shipping individual parcels out of the UK to pre-positioning stock in a US fulfilment centre to cut delivery times, you may have created a registration obligation in that state from the first sale, regardless of how much you sell.
So before you sign up a US 3PL, work out which state the warehouse is in and what registering there will involve.
Does Shopify collect and remit the tax for me?
This is the most important thing to get straight, because the answer is different from Amazon or eBay.
For your own Shopify store, Shopify is not a marketplace facilitator. You are the seller of record. That means you are responsible for registering where you have nexus, and for filing and remitting the tax. Shopify Tax can calculate and collect the right amount at checkout once you've configured it, but it does not file or remit on your behalf for your own store (source: Shopify Help Center, US taxes reference).
There is one exception. Sales made through Shopify's own Shop channel (its marketplace surface) are handled by that channel, which collects, remits and files on those orders independently of your store settings (source: Shopify Help Center, US taxes reference). But that is a narrow slice. The bulk of a typical Shopify store's revenue is direct sales where you carry the obligation.
Compare that with a true marketplace facilitator. When you sell on Amazon or eBay, the platform is legally required in most states to collect and remit sales tax on your behalf (source: Avalara, marketplace seller liability). Your own Shopify store does not get that protection.
Illustrative example: a UK Shopify store crossing thresholds
Illustrative example. Maya runs a UK-registered homeware brand on Shopify, shipping direct from a UK unit. Over the last calendar year her US sales settle out like this:
| State | US sales (last calendar year) | State threshold | Economic nexus? |
|---|---|---|---|
| California | $140,000 | $500,000 | No |
| Texas | $90,000 | $500,000 | No |
| Georgia | $112,000 | $100,000 | Yes |
| Ohio | $48,000 | $100,000 | No |
| Oregon | $60,000 | No sales tax | N/A |
On these figures Maya has crossed the economic nexus threshold in Georgia only. Her California and Texas sales are real money, but both states set the bar at $500,000, so she's well under. Ohio is under the $100,000 line. Oregon has no state sales tax at all, so those sales never count toward a sales tax obligation.
The practical upshot: Maya registers for a sales tax permit in Georgia, switches on collection for Georgia in her Shopify tax settings, and files Georgia returns on the schedule the state sets. She does not register in California, Texas, Ohio or Oregon on these numbers, but she keeps watching the running totals, because California and Texas are growing and a strong quarter could change the picture.
Now suppose Maya later moves stock into a 3PL warehouse in Texas to speed up West Coast delivery. That creates physical nexus in Texas from day one, so she would need to register there too, even though her Texas sales are nowhere near $500,000. Same business, very different answer, purely because the inventory moved.
This is why the assessment is never "what's my US turnover". It's "state by state, do I have economic nexus or physical nexus".
What about UK VAT on your US sales?
Good news on the UK side. When you export goods from the UK to a customer in the US, you can normally zero-rate the supply for UK VAT, provided you meet the conditions.
The conditions, set out in HMRC's VAT Notice 703, are that the goods physically leave the UK within the time limit and that you hold valid evidence of export. The standard time limit is three months from the time of supply to both export the goods and obtain the evidence, whether the export is direct or indirect. Acceptable evidence includes official customs documentation or commercial evidence such as authenticated transport documents (source: gov.uk VAT Notice 703).
Two things to hold in mind.
You still report zero-rated exports on your UK VAT return, they're just at 0%, not exempt or out of scope. And the responsibility for holding export evidence sits with you, even where a freight forwarder handles the shipping. If you can't produce the evidence, HMRC can treat the sale as standard-rated and you lose the zero-rating.
If your business sits below the UK VAT registration threshold of £90,000 for the current period (source: gov.uk VAT registration thresholds), you're not charging UK VAT at all yet. But export evidence still matters once you do register, so it's worth building the habit early. If you'd like a hand getting your VAT treatment right alongside your US position, our VAT and ecommerce support for Shopify sellers covers exactly this.
Do you owe US federal income tax too?
Sales tax and income tax are completely separate questions, and it's easy to conflate them. Sales tax is a transaction tax you collect from customers. Federal income tax is a tax on your profits.
For a UK limited company, the UK-US tax treaty generally protects you from US federal corporation tax on US trading profits, as long as you do not have a permanent establishment in the US. A permanent establishment broadly means a fixed place of business there, such as an office, a warehouse you own, or a dependent agent with authority to conclude contracts for you (source: IRS, United Kingdom tax treaty documents).
Two cautions, though.
First, claiming treaty protection is not automatic. A UK company carrying on a US trade without a permanent establishment is generally still expected to file a US federal return (an abridged Form 1120-F with a Form 8833 treaty-position disclosure) to claim it (source: Blick Rothenberg, US corporation tax issues for UK companies).
Second, the treaty is a federal agreement. It does not bind individual states, so state-level income or franchise tax can be a separate matter (source: Blick Rothenberg, US corporation tax issues for UK companies). This is specialist territory, and worth proper advice once US sales become material.
What changed with US import duty and de minimis?
This one isn't sales tax, but it now hits every UK seller shipping parcels into the US, so it belongs here.
The US used to let shipments valued under $800 enter duty-free with simplified clearance under the "de minimis" rule. That exemption was suspended. Executive Order 14324, "Suspending Duty-Free De Minimis Treatment for All Countries", was signed on 30 July 2025 and took effect at 12:01 a.m. EDT on 29 August 2025, ending duty-free de minimis treatment for shipments from all countries, so low-value parcels now go through customs entry and can be assessed import duties and fees (source: Federal Register, Executive Order 14324 of July 30, 2025).
In plain terms, the cheap-and-fast route for small US-bound parcels has gone. If you ship direct from the UK, factor potential US import duty and brokerage into your landed-cost and pricing, and be clear with customers about who pays it at the border. Getting this wrong leads to refused deliveries and chargebacks.
A simple decision walkthrough
When a UK Shopify seller asks "do I need to deal with US sales tax", we run it in this order.
- Do you hold stock in any US state (own warehouse or 3PL)? If yes, you likely have physical nexus there and should register in that state, regardless of sales volume.
- For each state, have your sales crossed that state's economic nexus threshold over the relevant period (commonly $100,000, but $500,000 in California, Texas and New York)? Assess each state on its own figures.
- Where the answer to 1 or 2 is yes, register for a sales tax permit in that state, switch on collection in Shopify, and file and remit on the state's schedule.
- Where it's no, you don't register, but you keep tracking running totals so you catch the moment you cross.
- Separately, handle UK VAT zero-rating of your exports (VAT Notice 703 evidence) and take advice on US federal income tax if US trade becomes material.
Work it state by state and the 50-state problem becomes a short list.
Frequently asked questions
Do I need a US company or EIN to collect sales tax?
Not necessarily for sales tax itself. States register remote sellers, including foreign ones, and the registration process is at state level. Many states will ask for a federal tax ID, and a UK business often needs to obtain an EIN to complete state registrations and to deal with US federal filing where relevant. Treat the EIN as a practical step rather than proof you owe federal income tax.
Does the UK-US tax treaty mean I can ignore US sales tax?
No. The treaty is a federal income tax agreement. It can protect a UK company from US federal corporation tax where there's no permanent establishment, but it does not touch state sales tax, which is a separate transaction tax with its own nexus rules (source: IRS UK tax treaty documents; Blick Rothenberg).
Is Shopify the same as Amazon for sales tax?
No. On Amazon, the marketplace is generally required to collect and remit sales tax for you. On your own Shopify store, Shopify is not a marketplace facilitator, so you are the seller of record and must register, collect and remit yourself. Shopify can calculate and collect the tax, but it does not file your store's returns.
Do sales to Oregon or Delaware count toward nexus?
Those states have no statewide sales tax, so sales there do not create a sales tax obligation. They don't count toward an economic nexus threshold in another state either, since each state's threshold is measured on sales into that state.
Can I reclaim US sales tax like I reclaim input VAT?
No. US sales tax has no input-credit mechanism. What you collect from customers, you remit to the state. It is a cost and a compliance step, not something you net off the way you net off input VAT on a UK return.
Do I still charge UK VAT on a sale shipped to the US?
Goods exported from the UK to the US can normally be zero-rated for UK VAT if you meet the VAT Notice 703 conditions, including exporting within the time limit and holding valid evidence of export. You still report the sale on your UK VAT return at 0%, and you must keep the export evidence.
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Want help getting your US position right?
US sales tax for a UK Shopify seller is a state-by-state puzzle sitting on top of your UK VAT and accounts. If your American orders are growing and you're not sure where you've crossed a line, our team works with UK Shopify sellers day in, day out. Book a call with a Zmartly accountant and we'll map your nexus, your VAT treatment and your filing obligations in one go.
