US sales tax for UK online sellers: when American states expect you to collect

Figures relate to tax year 2025-26 (UK) / 2025 (US)

US sales tax can reach a British business that has never set foot in America. Since 2018, most states can require remote sellers to collect once sales into the state pass a set threshold. Where the seller is based makes no difference to that rule.

For UK brands selling through Shopify, Etsy or Amazon, the threshold decides whether you register in several states or nowhere at all. So this guide explains how the rules work, what the platforms collect for you, and where the gaps sit.

Key takeaways

• There is no federal sales tax, but 45 states and Washington DC charge their own.
• States can tax remote sellers once sales into the state pass a threshold, commonly $100,000 a year.
• Amazon and Etsy collect and pay the tax on sales made through their marketplaces.
• Sales through your own website are your responsibility once you cross a state threshold.
• A UK company without a US base usually owes no federal income tax on those sales under the treaty.

What is US sales tax?

US sales tax is a state tax on retail sales, collected by the seller from the customer and paid to the state. There is no federal version. Rates combine a state rate with local rates, so one sale can carry a different charge in each town.

It works quite differently from VAT. The tax applies once, at the final sale to the consumer, and businesses reclaim nothing through a chain of invoices. Five states charge no statewide version at all: Alaska, Delaware, Montana, New Hampshire and Oregon, although Alaska allows local charges.

Why can a UK seller owe it at all?

Because a 2018 Supreme Court ruling allowed states to tax sellers with no physical presence. After South Dakota v. Wayfair, a state can require collection once your sales into it pass an economic threshold. States apply that rule to foreign sellers exactly as they apply it to American ones.

The common threshold is $100,000 of annual sales into the state. Some states also used a test of 200 separate transactions, although many have since dropped it. A few large states set the line higher, at $500,000, so the exposure varies state by state.

The question is never whether you have an American office. It is where your customers are, and how much they spend.

Does Amazon or Etsy collect it for you?

For marketplace sales, usually yes. Every state with a sales tax now has marketplace facilitator rules, which make the platform collect and pay it on sales made through the platform. So a seller who uses only Amazon or Etsy normally has no collection duty for those orders.

The gap appears when you also sell direct. Some states count your marketplace sales toward your own threshold, even though the platform collects on them. So a brand with large Amazon sales and a small Shopify store can still owe collection on the Shopify orders in those states.

Stock held in American fulfilment centres adds a separate trigger. Inventory sitting in a state can create a physical presence there, whatever your sales figure. Sellers using Fulfilment by Amazon should therefore track which states hold their goods, not just where customers live.

Do you owe federal income tax as well?

Usually not, if you are a UK business with no fixed base in America. The US UK treaty taxes business profits only where you have a permanent establishment there. Selling online to American customers, even in large volumes, does not create one on its own.

Warehouse stock rarely changes that answer either. The treaty excludes facilities used only to store or deliver goods. According to the IRS guidance on effectively connected income (opens in a new tab), the federal test turns on a genuine US trade or business, which a remote seller usually lacks.

State income taxes sit outside the treaty, however. A few states may look at your profits once your American sales grow large. That remains unusual for a small seller, but it is worth reviewing each year.

Why do platforms ask for a W-8BEN-E?

Because it proves to the platform that you are a foreign business. Amazon, Etsy, Stripe and PayPal all ask for it before paying out to UK sellers. Without it, they may treat you as American, report your takings to the IRS, and withhold part of your payouts.

Companies use the W-8BEN-E, while sole traders use the shorter W-8BEN. Per the IRS guidance on Form W-8BEN-E (opens in a new tab), the form stays valid until the end of the third calendar year after signing. Diary the renewal, because an expired form can pause your payouts.

How do you work out where you owe?

Start from your own sales data rather than from state websites. Most platforms can export orders by delivery address, and that file answers most of the question. The sequence below keeps the work proportionate:

1. Export twelve months of US orders, broken down by delivery state.
2. Split marketplace orders from sales through your own website.
3. Compare each state total against that state's threshold and counting rules.
4. List every state where your stock sits in a fulfilment centre.
5. Register in each state where you have crossed a line, before collecting anything.
6. Switch on tax collection at checkout for those states only.
7. File returns on each state's schedule, including nil returns where required.

Registering before you collect matters. Charging customers sales tax without a permit creates its own problem, even when your intentions are good.

Which rate do you charge?

The rate follows the customer’s delivery address, not your location. Most states add local rates on top of the state rate, so the combined sales tax can differ between neighbouring towns. Checkout tools such as Shopify Tax calculate this automatically once you switch on collection for a state.

Some products also carry different treatment. Many states exempt groceries or clothing, and a few tax digital downloads. So check how each state handles your product category, rather than assuming one rule applies everywhere.

A worked example

Take an illustrative example. A skincare brand in Bristol sold $180,000 into America last year. Of that, $130,000 went through Amazon and $50,000 through its own Shopify store, spread across dozens of states.

Amazon collected the tax on the marketplace orders, so those need no action. In most states the direct sales sit far below any threshold. But one large state counts marketplace sales toward the line, and the brand's combined total there passed it.

So the brand registers in that one state and collects on its Shopify orders there. Everywhere else, it simply keeps monitoring. A single registration replaces what could have looked like a fifty-state problem.

What does HMRC see on the UK side?

Goods sent to American customers are exports, so they are normally zero-rated for UK VAT. You must keep evidence that the goods left the UK. HMRC's guidance on exporting goods sets out the proof required, and missing evidence can turn a zero-rated sale into a standard-rated one.

Your profits remain taxable in Britain in the usual way. For 2025-26, companies pay Corporation Tax at 19% on profits up to £50,000 and 25% above £250,000, with marginal relief between. Any US state tax you collect belongs to the state, so it never counts as your income.

How do tariffs fit alongside this?

Customs duty is a separate federal system, paid at the border rather than at checkout. Since 29 August 2025, the US has suspended the $800 duty-free allowance for low-value parcels from every country. So small consignments from Britain now face duty and formal entry.

Duty and state tax do not offset each other. A parcel can attract both, and your pricing should reflect that. Many sellers now ship stock in bulk to American warehouses, which also brings the physical presence question back into view.

The mistakes that turn into back taxes

Most exposure comes from assumptions rather than complexity. These are the patterns we see most often when UK brands first look at their American sales:

• Assuming no US office means no US obligations at all.
• Believing Amazon handles the tax on sales through your own website too.
• Charging customers a state tax before registering for a permit.
• Registering in every state at once, which multiplies filing costs for nothing.
• Missing nil returns in states where you are registered.
• Letting a W-8BEN-E expire, which can freeze platform payouts.

Each of these is fixable, and most are cheap to prevent. The earlier you map your sales by state, the smaller any correction becomes. A one-off review usually costs less than a single year of uncollected sales tax.

What if you have already crossed a threshold?

Then a voluntary disclosure agreement is usually the best route. Most states offer one, and they typically limit the lookback period and waive penalties. You pay the tax you should have collected, with interest, and register properly from then on.

Approaching the state first matters. Once a state contacts you, the favourable terms usually disappear. So if your export file shows past exposure, act before the state does.

How US UK Tax Accountants helps

Our US tax specialists map your sales by state, confirm where you cross a threshold, and handle the registrations. Our business tax service covers the treaty position, the W-8BEN-E and the UK side in one engagement.

In our practice most UK sellers owe far less than they fear, because the platforms carry much of the load. We confirm the exact position in writing on a fixed fee before any registration goes in. Our guide to choosing a US UK tax accountant explains what to ask any adviser.

Individual owners with American income have their own filings too. Our guide to US state tax for expats covers the personal side. The US UK tax treaty guide explains the permanent establishment rules in more depth.

Map your American sales

If your brand ships to American customers, a short review tells you whether sales tax is due anywhere. Send us your order export and we will set out the position state by state. You can book a consultation and hear back within one working day.

Last reviewed 10 September 2026 by the US UK Tax Accountants Tax Team. This article is general information, not personal tax advice — speak to a qualified US/UK tax adviser about your own position.