VAT and US Sales Tax: How Compliance Works Together (2026 Guide)

In short: VAT and US sales tax are both consumption taxes, but they work differently. VAT is charged at every stage of the supply chain and filed nationally. US sales tax is charged once, at retail, and filed state by state. A seller active in both markets needs nexus tracking, VAT registrations, checkout calculation, and a filing and payment layer.

This guide is for online sellers and SaaS businesses selling to consumers on both sides of the Atlantic. It reflects the rules as of October 2026.

What is the difference between VAT and US sales tax?

VAT is a multi-stage tax collected by every business in the chain, with credit for VAT paid on purchases. US sales tax is a single-stage tax collected only on the final retail sale, with no input credit for the seller.

• Who collects: VAT-registered businesses charge VAT on sales and reclaim VAT on costs. Under US sales tax, the retailer collects from the buyer, and buyers purchasing for resale give a resale certificate instead.
• Who sets the rules: EU VAT follows one EU directive, applied by 27 national tax authorities. US sales tax is set by each state, and many states let cities and counties add local rates.
• Registration trigger: EU and UK VAT for non-resident sellers is triggered largely by the type of supply and where goods are located. US sales tax is triggered by nexus, meaning physical presence or sales above a state threshold.
• Rates: EU standard VAT rates must be at least 15% (Directive (EU) 2018/912). In 2026 they range from 17% in Luxembourg to 27% in Hungary (Your Europe). US combined state and local rates vary by delivery address.
• Prices: Consumer prices in the EU and UK are normally shown VAT-inclusive. US shelf prices normally exclude sales tax, which is added at checkout.
• Filing: A VAT registration means one return per country, or one OSS return for qualifying cross-border EU sales. US sales tax means a separate return in each state where you are registered.

For the underlying concepts, see What is indirect tax? Sales tax, VAT and GST explained.

When does a seller have to collect US sales tax?

A seller must register and collect sales tax in a state once it has nexus there. Since 2018, nexus can be created by sales volume alone, without any physical presence.

In South Dakota v. Wayfair, Inc., decided on 21 June 2018, the US Supreme Court overruled the physical presence rule from Quill (Wayfair opinion). South Dakota's law, which the Court upheld, applied to sellers with more than $100,000 of sales or 200 separate transactions into the state each year. Since then, every state with a statewide sales tax has adopted an economic nexus rule. Missouri was the last, with its threshold taking effect on 1 January 2023 (BDO summary).

Nexus comes in two main forms:

• Physical nexus: an office, employees, stock in a warehouse (including marketplace fulfilment centres), or other physical presence in the state.
• Economic nexus: sales into the state above the dollar threshold, and in some states a transaction count, over a set measurement period.

Non-US sellers are not exempt; a European company selling to US consumers is a remote seller like any other. Five states have no statewide sales tax: Alaska, Delaware, Montana, New Hampshire and Oregon. Alaska still allows local sales taxes; see the NOMAD states.

What are the economic nexus thresholds in each US state?

Most states use a $100,000 annual sales threshold. California, New York and Texas use $500,000, and Alabama and Mississippi use $250,000. Fourteen states and DC keep a 200-transaction test, and the number keeps falling.

The list below reflects thresholds as of October 2026. What counts toward the threshold differs: some states count gross sales, others only retail or taxable sales. Lines marked "state source" were checked against the state revenue department. Others follow the Sales Tax Institute's compiled chart dated 1 August 2026 (chart); confirm them with the state before registering.

• Alabama: more than $250,000 in retail sales in the previous calendar year; no transaction test. (state source)
• Arizona: $100,000 in gross sales (previous or current year); no transaction test. (chart)
• Arkansas: more than $100,000 in sales or 200 taxable transactions in the current or previous year. (state source)
• California: more than $500,000 in combined sales (preceding or current year); no transaction test. (state source)
• Colorado: $100,000 in retail sales (previous or current year); no transaction test. (chart)
• Connecticut: $100,000 in retail sales and 200 transactions (both required) in the 12 months ending 30 September. (chart)
• District of Columbia: $100,000 in retail sales or 200 separate retail sales (previous or current year). (chart)
• Florida: $100,000 in taxable remote sales in the previous calendar year; no transaction test. (chart)
• Georgia: $100,000 in retail sales or 200 sales (previous or current year). (chart)
• Hawaii: $100,000 in gross sales or 200 transactions (current or previous year). (chart)
• Idaho: $100,000 in gross sales (previous or current year); no transaction test. (chart)
• Illinois: $100,000 in gross receipts over a 12-month lookback period; 200-transaction test removed from 1 January 2026. (state source)
• Indiana: $100,000 in gross sales (current or preceding year); 200-transaction test removed from 1 January 2024. (chart)
• Iowa: $100,000 in gross sales (current or previous year); no transaction test. (chart)
• Kansas: $100,000 in gross sales (current or previous year); no transaction test. (chart)
• Kentucky: $100,000 in gross sales (previous or current year); 200-transaction test removed from 1 August 2026. (state source)
• Louisiana: $100,000 in gross sales (previous or current year); 200-transaction test removed from 1 August 2023. (chart)
• Maine: $100,000 in gross sales (previous or current year); 200-transaction test removed from 1 January 2022. (chart)
• Maryland: $100,000 in gross sales or 200 transactions (previous or current year). (chart)
• Massachusetts: $100,000 in gross sales (previous or current year); no transaction test. (chart)
• Michigan: $100,000 in gross sales or 200 transactions in the previous calendar year. (chart)
• Minnesota: $100,000 in retail sales or 200 retail sales in the 12 months ending with the last completed quarter. (chart)
• Mississippi: more than $250,000 in gross sales in the prior 12 months; no transaction test. (chart)
• Missouri: $100,000 in taxable sales in the prior 12 months, checked quarterly; no transaction test. (chart)
• Nebraska: $100,000 in retail sales or 200 transactions (previous or current year). (chart)
• Nevada: $100,000 in retail sales or 200 transactions (previous or current year). (chart)
• New Jersey: more than $100,000 in gross revenue or 200 transactions (current or prior year). (state source)
• New Mexico: $100,000 in taxable gross receipts in the previous calendar year; no transaction test. (chart)
• New York: more than $500,000 in gross receipts and more than 100 sales (both required) in the preceding four sales tax quarters. (state source)
• North Carolina: $100,000 in gross sales (previous or current year); 200-transaction test removed from 1 July 2024. (chart)
• North Dakota: $100,000 in taxable sales (previous or current year); no transaction test. (chart)
• Ohio: $100,000 in retail sales or 200 transactions (previous or current year). (chart)
• Oklahoma: $100,000 in taxable sales (preceding or current year); no transaction test. (chart)
• Pennsylvania: $100,000 in gross sales in the prior 12 months; no transaction test. (chart)
• Rhode Island: $100,000 in gross sales or 200 transactions in the immediately preceding calendar year. (chart)
• South Carolina: $100,000 in gross sales (previous or current year); no transaction test. (chart)
• South Dakota: $100,000 in gross revenue (previous or current year); 200-transaction test removed from 1 July 2023. (chart)
• Tennessee: $100,000 in retail sales in the prior 12 months; no transaction test. (chart)
• Texas: $500,000 in total Texas revenue in the preceding 12 calendar months (taxable, non-taxable and exempt sales); no transaction test. (state source)
• Utah: more than $100,000 in gross revenue (previous or current year); 200-transaction test removed from 1 July 2025. (state source)
• Vermont: $100,000 in gross sales or 200 transactions in the prior four calendar quarters. (chart)
• Virginia: $100,000 in retail sales or 200 transactions (previous or current year). (chart)
• Washington: $100,000 in gross income (current or preceding year); no transaction test. (chart)
• West Virginia: $100,000 in gross sales or 200 transactions (preceding or current year). (chart)
• Wisconsin: $100,000 in gross sales (previous or current year); 200-transaction test removed from 20 February 2021. (chart)
• Wyoming: $100,000 in gross sales (previous or current year); 200-transaction test removed from 1 July 2024. (chart)

Alaska has no state sales tax, but many Alaskan municipalities apply a $100,000 remote seller threshold through a shared local code. Its 200-transaction test was removed from 1 January 2025 (compiled chart).

Which states dropped the 200-transaction test?

Transaction counts catch small sellers with many low-value orders, so states are removing them. Recent removals:

• Kentucky: removed from 1 August 2026 by House Bill 757 (Kentucky DOR).
• Illinois: removed from 1 January 2026 (Illinois DOR).
• Utah: removed from 1 July 2025 (Utah State Tax Commission).
• Alaska (local): removed from 1 January 2025.
• North Carolina and Wyoming: removed from 1 July 2024.
• Indiana: removed from 1 January 2024.
• Louisiana and South Dakota: removed in 2023 (1 August and 1 July).
• Earlier removals: California, Colorado, Iowa, Maine, Massachusetts, North Dakota, Washington and Wisconsin.

Fifteen jurisdictions still apply a 200-transaction "or" test as of October 2026: Arkansas, the District of Columbia, Georgia, Hawaii, Maryland, Michigan, Minnesota, Nebraska, Nevada, New Jersey, Ohio, Rhode Island, Vermont, Virginia and West Virginia. Connecticut and New York require both a sales and a transaction test. Our guide to economic nexus by state explains which sales count.

How do marketplace facilitator rules change who collects?

When you sell through a marketplace such as Amazon, Etsy or eBay, the marketplace usually collects and remits US sales tax on those sales. You still collect on your own website sales.

Every state with a sales tax now has a marketplace facilitator law (BDO summary). The details differ on three points that matter to sellers:

• Whether marketplace sales count toward your own threshold: some states include them, others exclude them. Alabama, for example, excludes sales made through a participating marketplace that collects Alabama tax (Alabama DOR).
• Whether you must still register: Texas does not require a permit from remote sellers who sell only through a collecting marketplace (Texas Comptroller). Other states expect registration once you have your own nexus.
• Record keeping: Texas requires sellers to keep records of all marketplace sales for at least four years (Texas Comptroller).

The EU and UK use a similar idea. In certain cases, an online marketplace is treated as the "deemed supplier" and accounts for VAT itself (EU OSS portal). For a full comparison, read what marketplace facilitator laws are and how they affect sellers.

How does Canada's GST, HST and PST fit in?

Canada has a federal 5% GST, harmonised into a single HST in five provinces, and separate provincial sales taxes in four others. Non-resident sellers can be required to register once taxable supplies pass C$30,000 in 12 months.

• GST only (5%): Alberta, Northwest Territories, Nunavut and Yukon (CRA rates).
• HST: 13% in Ontario; 14% in Nova Scotia from 1 April 2025; 15% in New Brunswick, Newfoundland and Labrador, and Prince Edward Island (CRA rates).
• GST plus provincial tax: British Columbia 7% PST, Manitoba 7%, Saskatchewan 6% and Quebec 9.975%, on top of 5% GST (CRA rates). Each province administers its own tax separately.
• Small supplier rule: businesses with no more than C$30,000 of taxable revenue over four consecutive calendar quarters do not have to register (CRA).
• Digital economy rules: since 1 July 2021, non-resident vendors of digital products or services to consumers use simplified registration above C$30,000 in 12 months (CRA).
• Goods in Canadian warehouses: non-resident vendors selling goods from Canadian fulfilment warehouses must use standard registration above C$30,000 in 12 months (CRA).

Read Sales tax in Canada: GST, HST and PST and selling online in Canada for more detail.

When must a US seller register for VAT in the EU and the UK?

A US seller usually has no small-business threshold in Europe. EU and UK registration is driven by what you sell, where the goods are, and how you sell them.

European Union

• No €10,000 threshold for non-EU sellers: the EU-wide €10,000 threshold only applies to suppliers established in a single Member State (Spanish Tax Agency).
• Digital services to consumers: non-EU businesses can use the non-Union OSS scheme to declare VAT on services to EU consumers in one Member State. It covers services only, not goods (Danish Tax Agency).
• Low-value imports: the Import One Stop Shop (IOSS) covers distance sales of imported goods in consignments of €150 or less (EU OSS portal).
• Marketplace sales: online marketplaces are, in certain circumstances, treated as having bought and resold the goods for VAT (EU OSS portal).
• Stock held in the EU: storing goods in an EU country, for example in a fulfilment centre, is a common registration trigger. See 9 common triggers for VAT registration in the EU.

For the full picture, read EU VAT for non-EU businesses and OSS and IOSS explained.

United Kingdom

• Domestic threshold: UK-established businesses must register when taxable turnover exceeds £90,000 (GOV.UK).
• No threshold for overseas sellers: non-established taxable persons must notify HMRC regardless of the value of their taxable supplies (HMRC manual).
• Consignments of £135 or less: overseas sellers selling direct must charge UK VAT at the point of sale and register (GOV.UK). Through an online marketplace, the marketplace charges and accounts for the VAT (GOV.UK).
• Goods already in the UK: an overseas seller selling goods located in the UK must register, whatever their value (GOV.UK). If sold through an online marketplace, the marketplace is liable (GOV.UK).

See becoming UK VAT registered and the UK VAT manual.

How do filing and payment differ between the US and Europe?

In the US, each state where you are registered expects its own return and payment. In Europe, you file one VAT return per country, or one OSS or IOSS return through a single Member State.

• US filing frequency: each state sets its own filing frequency and due dates.
• US local rates: many states require tax at the combined state and local rate for the delivery address, so address-level calculation matters.
• EU OSS: online sellers can register in one EU Member State and declare qualifying cross-border B2C sales there (EU OSS portal).

For US mechanics, see how to file a sales tax return, state by state. Late filing and late payment attract penalties and interest in every jurisdiction, so deadlines need one shared calendar.

How should you structure one compliance stack for the EU, UK and US?

A workable stack has three core layers: calculation at checkout, registration and filing, and consolidated payments. Monitoring and record keeping connect them.

1. Calculation engine at checkout: tools such as Stripe Tax or Shopify Tax work out the right VAT, GST or sales tax for each order. They need accurate customer addresses, product tax codes and a list of where you are registered.
2. Nexus and registration monitoring: track sales and transactions by state, plus EU, UK and Canadian triggers. Register before you start collecting, not after.
3. Filing layer: pull transaction data from checkout, marketplaces and ERP systems. Reconcile it, prepare returns in each jurisdiction's format and file on time.
4. Consolidated payments: combine tax payments across countries to cut bank fees, currency conversions and reference errors.
5. Records: keep exemption certificates, filed returns and adjustments in one place.

The usual failure point is the gap between layers. A checkout tool that calculates tax does not usually register you or file returns. Decide early who owns each layer.

How to choose a provider: what to look for

Choose providers by coverage, data handling and accountability. One vendor is not required, but every layer must be covered and connected.

• Jurisdiction coverage: US states and local rates, Canadian GST/HST and PST, EU Member States, OSS and IOSS, and the UK.
• Nexus monitoring: automatic tracking against current thresholds, including the transaction-test removals listed above.
• Registration support: help with state permits and VAT registrations, including fiscal representation where a country requires it.
• Integrations: native connections to your checkout (Stripe, Shopify), marketplaces (Amazon, eBay) and accounting system.
• Data validation: address and jurisdiction checks, and reconciliation of sales and tax totals before filing.
• Filing and payment: who files, who pays, and whether payments can be consolidated across currencies.
• Audit support: stored returns, logged adjustments and retrievable documents.
• Pricing model: per return, per jurisdiction or per transaction, modelled at your expected registration count.

Software categories include checkout calculation engines, sales tax filing platforms, VAT compliance platforms and outsourced providers. Taxually covers US and Canadian sales tax with LumaTax and VAT registration and filing with CrossTax. It also offers consolidated tax payments with OneTax and filing from Stripe Tax data via the Taxually App for Stripe.

This guide is general information, not tax or legal advice. Rules change often and depend on your facts, so confirm your position with each tax authority or a qualified adviser.

Sources

• South Dakota v. Wayfair, Inc., 585 U.S. 162 (2018), Legal Information Institute
• Sales Tax Institute, Economic Nexus State by State Chart (as of 1 August 2026)
• Alabama Department of Revenue, remote seller registration FAQ
• Arkansas DFA, Remote Sellers
• California CDTFA, Use tax collection requirements after Wayfair
• Illinois Department of Revenue, Informational Bulletin FY 2026-12
• Kentucky Department of Revenue, SSUTA recertification letter (29 July 2026)
• New Jersey Division of Taxation, Remote Sellers FAQ
• New York State Department of Taxation and Finance, remote seller registration
• Texas Comptroller, Remote Sellers
• Utah State Tax Commission, Out-of-State (Remote) Sellers
• European Commission, VAT One Stop Shop portal
• Council Directive (EU) 2018/912 (minimum standard VAT rate)
• Your Europe, VAT rules and rates
• Spanish Tax Agency, intra-Community distance sales (€10,000 threshold conditions)
• Danish Tax Agency, About the non-Union scheme
• GOV.UK, VAT thresholds
• HMRC VAT Registration Manual, VATREG37050
• GOV.UK, Charging VAT on goods sold direct to customers in the UK
• GOV.UK, Charging VAT when using an online marketplace
• Canada Revenue Agency, GST/HST calculator and rates
• Canada Revenue Agency, When to register for and start charging the GST/HST
• Canada Revenue Agency, FAQ on GST/HST and electronic commerce