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- National Highway Transport and Safety For marketplace-facilitated sales, almost all U.S. states require
Administration (NHTSA) that “marketplace facilitators” collect sales tax on behalf of the
- Consumer Product Safety Commission (CPSA) third-party sellers trading via their marketplace. The marketplace
- Food and Drug Administration (FDA) will thus withhold any sales tax from payments to merchants and
take care of all compliance activities in lieu of the merchants.
Positively, the FDA specified in 2016 that the restriction doesn’t When an EU merchant uses Amazon FBA in the U.S., a local
apply to these types of products: sales tax certificate may nonetheless be needed as a condition not
• Cosmetics to pay sales tax on business purchases or on the importations of
• Dinnerware goods.
• Radiation-emitting, non-medical devices (e.g.
microwaves, televisions, CD players, etc.) Alongside the economic nexus, some states have also introduced
• Biological samples for laboratory testing; and, a “click-through nexus”. As well explained by Avalara, “under
• Food, excluding ackees, pufferfish, raw clams, raw oysters, click-through nexus laws, an out-of-state business establishes
raw mussels, and foods packed in airtight containers a physical connection to a state through agreements to reward
intended to be stored at room temperature. persons in the state for directly or indirectly referring potential
purchasers through links on a website (hence the name), or
So, most clothing and furniture products enjoy the generous U.S. otherwise.”
low-value relief.
For instance, in Arkansas, a click-through nexus exists when an
European merchants should be advised, though: regardless of out-of-state seller enters into an agreement with an Arkansas
the consignment value, it may be that sales tax is still due by the resident(s) whereby the resident directly or indirectly refers
non-U.S. seller in the U.S. state of destination if a specific yearly potential purchasers to the remote seller through an internet
revenue threshold is met in that state by the seller. It is the so- link, and the resulting gross sales exceed $10,000 during the
called “economic nexus”. In the past, it was widely believed that a preceding 12 months.
nexus in a state existed only if the seller had a physical presence
in that state (e.g., warehouse, shop, or office). With the growth of Another important aspect that EU merchants holding stock in
distance sales, most U.S. states have gradually introduced revenue U.S.-based warehouses should address concerns income taxation.
and/or transaction thresholds that trigger taxation of sales made It isn’t always clear from international tax treaties whether U.S.
by out-of-state sellers. There was controversy over whether these states are allowed or not to tax profits made with sales of goods
new tax regulations complied with the constitutional framework. shipped from a local warehouse. There may be a risk of double
In 2018, the U.S. Supreme Court ruled that states can mandate taxation. ••
that businesses without a physical presence in a state with more
than 200 transactions or $100,000 in-state sales collect and remit
sales taxes on transactions in the state (South Dakota v. Wayfair).

The revenue and/or transaction thresholds vary from state
to state. In California, for instance, the nexus is met when a
merchant makes more than $500,000 worth of sales in the
preceding or current calendar year. In Connecticut, instead,
the threshold is set at $100,000 and 200 transactions in the
12-month period ending on September 30 of each year. On
other aspects, too, sales tax rules aren’t necessarily consistent
among all states. For example, some states consider shipping
charges taxable, while others don’t.

So: a European merchant making more than $500,000 per
year in distance sales from Europe to Californian consumers is
required to register for sales tax in California unless a cause of
exemption applies. There’s no statutory mandate to set up a U.S.
entity, but a local bank account will most likely be necessary to
carry out tax payments.

Alan Rhode is a co-founder at Taxmen, the one-stop-shop for legal and tax services to the e-commerce industry.

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