Q: Lately, our company has been receiving sales orders from companies overseas and asking us to dropship to a customer in a state we have nexus in. Our customer says they shouldn't be charged tax. Are they correct?
A: Unless your customer has a specific exemption, you must collect either the tax or a certificate in lieu of the tax acceptable to the state where an item is delivered. You do not have an option. It does not matter where your customer is located. A customer is never asked where they have nexus when determining what state’s rate to charge. This is no different just because your customer is foreign. However, there are 36 states where your customer can provide some form of alternative resale documentation without having to get registered. This will prevent you from having to charge the tax. However in the 10 tough states, which include CA, your customer will need to be registered in the state in order to provide a valid certificate. We have a chart available in the premium portion of our website that identifies the different forms of alternative documentation customers with nexus may use for each state.
Q: Do I need a US entity to sell in the US or collect sales tax?
A: A US entity is not required to sell in the US or collect sales tax. We have many clients that keep their foreign entity and some that are even operate as sole traders/proprietors. In some instances opening a US entity can complicate income tax requirements. If you want a US entity though, we can form it for you.
Q: Are there any benefits of opening a US entity?
A: If you are working with US suppliers some of them can/will only work with US entities. The reasoning is varied but a big one we often hear, is the supplier is often limited because of territory and or licensing issues with their supplier. In these instances a US address is generally also required. Not all supplies have either of these requirements, but we can provide a US address as well as for a US entity.
Q: Is an EIN/FEIN required to sell or collect sales tax?
A: Most states require an EIN/FEIN to register to collect sales tax. An EIN/FEIN is generally not required to sell in the US. However, some, but not all, vendors/suppliers may require it if you are making purchases in the US. Your logistics company/ customers broker may also require it. We can assist you in getting an EIN/FEIN.
Q: Is a social security number or ITIN required to register for sales tax?
A: If you are a US resident you must generally supply one of the two. If you are not a US resident, you do not have to have either. The states make it appear you do and if you do not know the work arounds you may get stuck. The state is often difficult or impossible to work with unless, you get to the correct person. The process takes longer and has more steps in some states.
Q: I don’t have a bank account in the U.S. Can you still help me with my sales tax?
A: We do not require a US bank account to file sales tax returns, remit taxes to the states or for any of our other services. However, the states and other companies that provide sales tax returns services often require a US bank account. We actually open a segregated US bank sub-account under our master account for the payment of your taxes.
Q: Can you assist with or complete forms such as the W-8BEN-E or W-8BEN forms?
A: Yes, we have a service where we can assist or complete your W-8BEN-E or W-8BEN forms.
Q: Are there states with no sales tax?
A: Yes, there are five states that do not have a state level sales tax. They are New Hampshire, Oregon, Montana, Alaska and Delaware. The Acronym used to remember these five states is NOMAD.
Q: Could I have my mail from the various states sent to your firm?
A: Yes, if we are filing your sales tax returns your may use our address as your mailing address.