You have started shipping orders from the UK to customers in the States, and someone has mentioned "sales tax nexus". It sounds like an American problem. It is not. If you sell enough into a US state, that state can require you to register, collect its sales tax, and file returns there, even though you have never set foot in the country.
This catches a lot of UK sellers off guard. US sales tax works nothing like UK VAT. There is no single national tax, no reclaim mechanism, and no UK-US tax treaty to shelter behind. Each state runs its own system, and since a 2018 Supreme Court case the trigger is your sales volume, not whether you have a warehouse there.
Here is how economic nexus actually works, when a UK seller crosses the line, what Amazon and other marketplaces already handle for you, and where this leaves your obligations. Sales tax is a US state matter, so we cite the relevant US authorities throughout, and we flag where rules differ state by state or move quickly.
This is general guidance, not US state tax advice for your specific position. Where you think you have crossed a threshold, get it checked before you register or ignore it.
What is US sales tax, and how is it different from VAT? {#what-is-us-sales-tax}
US sales tax is a tax on the final retail sale of goods, charged to the customer at checkout and paid over to the state. There is no federal sales tax in the US; it is set and run entirely at state level, and in some places at city or county level on top (Avalara: states with no sales tax).
For a UK seller used to VAT, four differences matter most.
- There is no national system. Forty-five states plus Washington DC levy a sales tax, each with its own rates, rules and thresholds. Five states, New Hampshire, Oregon, Montana, Alaska and Delaware (the "NOMAD" states), have no statewide sales tax, although some Alaskan localities charge their own (Taxually: the NOMAD states).
- It is destination-based. The rate usually follows where your customer is, not where you are. A remote seller generally charges the rate for the buyer's address (Sales Tax Institute: economic nexus FAQ).
- There is no input-tax reclaim. Unlike VAT, sales tax is a single-stage tax on the end consumer. You collect it from the customer and remit it. You do not net it off against tax on your own purchases, and there is no Box 4 equivalent.
- It is separate from your UK VAT. Charging US sales tax has no bearing on your UK VAT position. Your UK VAT registration threshold is still £90,000 of UK-relevant turnover for 2026/27 (gov.uk: VAT registration thresholds), and exports of goods from the UK to the US are generally zero-rated for UK VAT, which is a separate question we cover with sellers as part of VAT advice for ecommerce businesses.
The headline: US sales tax is a stack of separate state systems, and you only deal with a state once you have a connection, or "nexus", to it.
What is economic nexus and why does it affect UK sellers? {#what-is-economic-nexus}
Nexus is the link between your business and a US state that gives the state the right to make you collect its tax. For decades, that link meant physical presence: a shop, an office, staff or stock in the state.
That changed in June 2018. In South Dakota v. Wayfair, Inc., the US Supreme Court ruled that a state can require an out-of-state seller to collect sales tax based purely on its economic activity in the state, with no physical presence needed. The South Dakota law it upheld applied to sellers delivering more than 100,000 dollars of goods or services into the state, or making 200 or more separate transactions there, in a year (Sales Tax Institute: Wayfair FAQ; US Supreme Court opinion, 17-494).
This is "economic nexus", and every state that charges sales tax has since adopted some version of it.
The part UK sellers miss: economic nexus does not care where you are based. A seller in Manchester shipping directly to consumers in a US state is a "remote seller" in exactly the same way a seller in another US state is. If your sales into that state cross its threshold, the obligation to register and collect can apply to you, with no US physical presence required (Avalara: state-by-state guide to economic nexus laws).
So the practical trigger for a UK ecommerce seller is volume into a single state, measured state by state, not a US address.
What are the sales tax thresholds by state? {#thresholds-by-state}
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There is no single national number. Each state sets its own threshold, and they genuinely differ, so you have to look at each state you sell meaningfully into.
That said, a common pattern exists. Many states use the original Wayfair-style figure of 100,000 dollars in sales in the current or previous calendar year. Some also include a separate transaction-count trigger (often 200 transactions), usually on an "OR" basis, though several states have dropped the transaction count and now use the dollar figure alone. The largest states sit higher.
The table below shows the contrast, using the four states most relevant to high-volume sellers plus the original South Dakota rule. Treat these as current at the time of writing and confirm the live figure before you act, because states amend them.
| State | Sales threshold | Transaction count | Measured over |
|---|---|---|---|
| South Dakota | 100,000 dollars | (transaction test repealed) | Current or previous calendar year |
| California | 500,000 dollars | None | Preceding or current calendar year |
| Texas | 500,000 dollars | None | Preceding twelve months |
| New York | 500,000 dollars | More than 100 sales | Preceding four sales tax quarters |
Source: Sales Tax Institute: economic nexus state guide.
A few rules of thumb that hold across most states:
- You measure each state on its own. Crossing 100,000 dollars nationally across the US does not create nexus anywhere. Crossing a single state's threshold in that one state does.
- What counts can be gross or taxable sales. Most states count all your sales into the state, including exempt and non-taxable ones, when testing the threshold, but the exact base varies (Sales Tax Institute: economic nexus state guide).
- Thresholds change. States have repealed transaction counts and adjusted dollar figures since 2018. A figure that was right last year may not be right now, which is exactly why we treat this as a check-at-the-time question rather than a fixed table to memorise.
Does selling on Amazon or a marketplace change things? {#marketplaces}
Yes, and for many UK sellers this is the single most important point.
Every US state with a sales tax has "marketplace facilitator" laws. These make the marketplace itself, Amazon, eBay, Etsy and so on, responsible for calculating, collecting and remitting the sales tax on the sales it facilitates, rather than you. So on your Amazon US sales, Amazon generally handles the sales tax collection and remittance for you (Avalara: state-by-state guide to economic nexus laws).
This removes a large part of the compliance burden for marketplace-only sellers. But two traps remain.
First, your own-channel sales are still yours. If you also sell through your own Shopify, WooCommerce or direct site, sales tax on those orders is your responsibility, and they can build economic nexus in a state on their own. Marketplace tax handling does not extend to your own store. We see this most with sellers running both Amazon FBA and a direct site.
Second, marketplace sales can still count toward your threshold. In many states, sales made through a marketplace are included when you test whether you have crossed the economic nexus threshold, even though the marketplace collected the tax on them. In other states they are excluded. It varies state by state (Sales Tax Institute: economic nexus state guide). The upshot is that a high-volume marketplace seller can have registration and filing duties for their own-store sales in a state, triggered partly by marketplace volume, even though Amazon already handles the marketplace tax.
If you sell only through a marketplace and nowhere else, your exposure is usually limited. The moment you add a direct channel, the picture changes, and it is worth mapping properly.
Illustrative example: when does a UK seller cross the line? {#worked-example}
Illustrative example. Tom runs a UK homeware brand selling into the US. He has no US company, no US stock and no US staff. He sells two ways: through Amazon US (FBA), and through his own Shopify store shipping from the UK.
In the past twelve months his US sales break down as:
| Channel | Sales into California | Sales into South Dakota |
|---|---|---|
| Amazon US (marketplace) | 460,000 dollars | 70,000 dollars |
| Own Shopify store | 90,000 dollars | 5,000 dollars |
| Total into the state | 550,000 dollars | 75,000 dollars |
Take California first. The state threshold is 500,000 dollars, and California counts marketplace sales toward it. Tom's combined total of 550,000 dollars crosses it. Amazon already collects and remits the sales tax on his 460,000 dollars of marketplace orders. But his 90,000 dollars of Shopify sales are his own responsibility, so he likely needs to register in California and collect California sales tax on those direct sales going forward.
Now South Dakota. The threshold is 100,000 dollars. Tom's combined total is 75,000 dollars, under the line, so he has no registration duty there yet, and Amazon continues handling tax on his marketplace orders into the state regardless.
The lesson: the marketplace shoulders most of the load, but Tom's own-store sales pulled him over the line in one state and not the other. He would not have known without testing each state separately and checking whether marketplace sales count there. This is the modelling we do with sellers before anyone registers anywhere.
(Figures are illustrative. State thresholds and the treatment of marketplace sales differ by state and change over time; confirm the live position for each state.)
How does a UK business register and file US sales tax? {#how-to-register}
If you have crossed a state's threshold on sales you are responsible for, you register directly with that state's tax authority (often the Department of Revenue), collect the tax at checkout, and file periodic returns, monthly, quarterly or annually depending on the state and your volume.
A UK seller can do this without setting up a US company. You do not have to incorporate in the US to register for sales tax; a UK-registered entity can apply for a sales tax permit with the relevant states. In practice, almost every state requires a US Federal Employer Identification Number (EIN) to register, which a foreign business can obtain from the IRS (Sales Tax Institute: economic nexus state guide).
The broad sequence looks like this:
- Identify your nexus states. Work out, state by state, where your responsible sales (typically your own-channel sales, plus marketplace sales where they count) have crossed the threshold.
- Get a US EIN. Apply to the IRS for an EIN for your UK business if you do not already have one.
- Register in each nexus state. Apply for a sales tax permit with each state's tax authority. Register only where you have an obligation, not everywhere.
- Collect at the right rate. Charge the destination rate at checkout. Sales tax software or your platform's tax engine usually handles the rate lookup once you are registered.
- File and remit on time. Submit returns and pay over what you collected by each state's deadline, even for a period where you collected nothing once registered.
Because each state is a separate registration and filing obligation, costs and admin scale with the number of states. That is a strong reason to register only where you genuinely have nexus, and to keep an eye on which states you are approaching. Getting the structure right also feeds into your wider US set-up, which we plan alongside your UK accounts through our tax advisory service and our ecommerce accounting service.
What about income tax and the UK-US treaty? {#income-tax-treaty}
This is where UK sellers reach for the UK-US tax treaty, and it does not help here.
Tax treaties deal with income tax, not sales tax. US tax treaties generally do not bind individual states' sales tax rules, and the federal protections that can shield a foreign seller from state income tax (such as the law often referred to as P.L. 86-272) do not apply to sales tax at all. So being a UK company with no US "permanent establishment" can protect you from US federal income tax on your profits, while doing nothing for your state sales tax position (Anchin: state tax nexus for foreign businesses).
In short, treat these as two separate questions. Sales tax nexus can exist even where you owe no US income tax. Your UK corporation tax or self-assessment position on the same profits is a third, distinct matter, handled under UK rules. Where the two countries' systems interact, that is genuinely specialist territory, and it is worth a proper review rather than an assumption.
Frequently asked questions {#faqs}
Do UK ecommerce sellers really have to pay US sales tax?
You do not pay it yourself; you collect it from your US customers and remit it to the state, but only once you have nexus in that state. Since the 2018 Wayfair decision, a UK seller can have economic nexus purely from sales volume into a state, with no US presence. Below a state's threshold, and for marketplace sales the marketplace already handles, you generally have nothing to register for.
What triggers economic nexus for a UK seller?
Crossing a single US state's sales threshold (commonly 100,000 dollars, but up to 500,000 dollars in larger states), or in some states a transaction count, on sales you are responsible for. It is measured state by state, not on your total US sales. Your physical location in the UK does not exempt you.
Does Amazon handle US sales tax for me?
For your Amazon US sales, generally yes. Marketplace facilitator laws make Amazon responsible for collecting and remitting sales tax on the orders it facilitates. But sales through your own website are your responsibility, and in many states your marketplace sales still count toward whether you have crossed a state's nexus threshold for those own-channel sales.
Do I need a US company to register for sales tax?
No. A UK business can register for a sales tax permit with a state without incorporating in the US. You will, however, almost always need a US Federal Employer Identification Number (EIN) from the IRS to complete state registrations.
Is US sales tax the same as UK VAT?
No. There is no federal US sales tax, no reclaim of tax on your own purchases, and rules differ by state. It is a single-stage tax on the final customer, set at state and sometimes local level. It is also entirely separate from your UK VAT, which still follows the £90,000 registration threshold for 2026/27 and its own rules.
Does the UK-US tax treaty cover sales tax?
No. Tax treaties cover income tax, not state sales tax, and generally do not bind individual states' sales tax rules. You can be protected from US federal income tax as a UK company yet still have a state sales tax registration and collection obligation.
Get your US sales tax position checked
Selling into the States from the UK can mean real registration and filing duties, but only in the states where you have actually crossed a threshold on sales you are responsible for. Register in the wrong places and you create needless admin; miss the right ones and you build up uncollected tax.
If you sell into the US and want a clear map of where you have nexus, what your marketplaces already cover, and what your UK VAT and tax position looks like alongside it, talk to us. Book a call with a Zmartly accountant through our tax advisory service, and we will help you get it right before it becomes a problem.
