If you are a U.S. business, how do you pay the tax on an international sale?

13 replies
Hello,

Let's say you have a U.S. business. If someone in the United States makes a sale, understanding the tax rules is easy.

But what if someone from another country bought something from you? Is there some tax you pay to that country? How/when do you pay this tax?
#business #international #pay #sale #tax
  • Profile picture of the author dvduval
    As I understand it, the money is being paid to you in America, so you pay America. If I'm wrong on that, I could be saving a thousands, but most likely I am not.
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    • Profile picture of the author Steve S
      In most cases, you will not have to pay an additional tax if your company is located in the US and you sell to someone from another country. However, there are other considerations such as tax treaties, nexus, etc.

      You need to provide more information. For instance, does your company maintain a sales force, satellite office or manufacturing/warehousing facilities in that country? These may establish nexus within that country and make you subject to tax.

      My advice to you would be to contact your CPA and discuss this issue with him. Soliciting tax advice on a forum is a big mistake. I am a CPA and a member of a number of affiliate marketing forums. Most tax advice given on forums is dead wrong and you simply cannot convince people otherwise. As a result I no longer debate tax issues in forums.

      If you are in business and intend to stay that way, please find yourself a competent CPA in your area and pay him for his/her advice. It will be some of the smartest money you ever spent. Again, please ignore tax advice from forums.
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      • Profile picture of the author beginner warrior
        Thanks,

        I'm looking for the overall basic idea. This is for a U.S. company located only in the USA with no international sales force, no overseas shipping centers, etc.

        I thought maybe you would have to pay the other person's national VAT tax, or maybe some sort of import/export tariff.
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        • Profile picture of the author Steve S
          You really need to consult with a professional and have a thorough discussion of your business. I have a client incorporated in Michigan. They sell into Canada. They are liable to Canada for GST tax. But, every situation is different. What applies to one may not apply to another because of the significant circumstances involved.

          You really cannot rely on a forum for direction. There are other potential taxes you may be liable for. We have no idea what you are selling or to whom. Any answer you might receive here is pure speculation and worth the price you paid for it.
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        • Profile picture of the author paulie888
          Originally Posted by beginner warrior View Post

          Thanks,

          I'm looking for the overall basic idea. This is for a U.S. company located only in the USA with no international sales force, no overseas shipping centers, etc.

          I thought maybe you would have to pay the other person's national VAT tax, or maybe some sort of import/export tariff.
          As Steve has mentioned, we do not know where you are located and to whom you're selling. All I can tell you is that as a seller located in the US, I have sold digital products to people located in the UK, Spain, Australia and New Zealand among other countries, and have not been requested to pay the VAT or foreign national sales taxes.
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          • Profile picture of the author donhx
            Sales tax is, at this point, a state by state issue in the US. That is, you must be registered to collect sales tax when you make a sale within your own state. You add tax to the sale and remit to your state government, usually on a quarterly or annual basis. This is the way it has been since the 1920s in the U.S.

            You had to have a brick and mortar presence within a state and needed only to collect for sales from within your state. You never have had to collect or pay sales tax if someone purchased from another state. That is one reason Internet sales have been so robust--people can order online, and if the company is in another state, sales tax is not added. So, if you are located in California, for example, you only collect and pay for sales made in California, not any of the other 49 states. If you have company offices in California and Connecticut, for example, you have to collect sales tax from purchasers in those states only.

            In thus US, this is part of the Federal Interstate Commerce Act. You don't pay sales taxes across state lines.

            States have become desperate in this financial crunch and they are trying to get around the Federal Interstate Commerce Act. Some states (notably Colorado and Texas) are now trying to collect sales tax on sales made by Amazon in their states. Amazon is located in California, of course, so they should not have to pay sales taxes in other states. However, Colorado and Texas are saying the Amazon affiliates in those states are the same a brick and mortar presence, so they want the money. The US Supreme Court will probably end up deciding that sometime in the future.

            You also don't pay sales tax on sales made to foreign nations such as the VAT (Value Added Tax) in the EU or the GST (Goods and Services Tax) in the UK, New Zealand, Australia, Canada, etc. I notice someone here said a Michigan Company is liable for Canadian GST, but I would severely question that. In international trade it's about tariffs, not sales tax. VAT and GST are the same (and have replaced) sales tax in many countries and such taxes do not cross international borders except in the EU. They all pay the same VAT there, but if we buy in the EU from the US we never pay VAT.

            Nope, I'm not an attorney or tax specialist, but anyone in business deals with this stuff all the time and has to know how the system works. However, it's always best to get legal advice if you need it.
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            • Profile picture of the author Steve S
              Every situation is different. It is not necessary to have what most people would consider an "office" in a state to make your company liable for sales, income and other taxes in said state. Hiring a sales person who lives and solicits sales from within that state is often enough to establish nexus with the state. Many times this will make you liable for sales, business use, income and/or franchise taxes to said state.

              As I said before, find a competent professional and get your advice there.
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              • Profile picture of the author radiator
                OK, to lay out a more specific scenario

                I am a US company with a single physical presence in PA, registered in DE

                I want to sell audio recordings OUTRIGHT (no license - they OWN them) to a Chinese company.

                I have no company in China, they just read my website and basically said "make the recordings and we give you X amount of money" - so to be clear...
                - they own it.
                - it is not a service.

                So What does my invoice need to look like?
                - Do I have different line items for VAT or Price of the product?
                - Or is it just the cost of the product?
                - Do I need to register some tax id in China?

                Im sure I'm making this more complicated than it is.
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                • Profile picture of the author kindsvater
                  Originally Posted by radiator View Post

                  OK, to lay out a more specific scenario

                  I am a US company with a single physical presence in PA, registered in DE

                  I want to sell audio recordings OUTRIGHT (no license - they OWN them) to a Chinese company.

                  I have no company in China, they just read my website and basically said "make the recordings and we give you X amount of money" - so to be clear...
                  - they own it.
                  - it is not a service.

                  So What does my invoice need to look like?
                  - Do I have different line items for VAT or Price of the product?
                  - Or is it just the cost of the product?
                  - Do I need to register some tax id in China?

                  Im sure I'm making this more complicated than it is.
                  You are. You are paying US income taxes on the sale. If the buyer would like something on an invoice to comply with Chinese law they can let you know.

                  .
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            • Profile picture of the author Alexa Smith
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              Originally Posted by donhx View Post

              such taxes do not cross international borders except in the EU. They all pay the same VAT there
              Well, it's not quite as simple as that. VAT in Europe actually varies from country to country. The lowest rate is 15% (Cyprus) and the highest I think is currently 25% (Denmark and Sweden ... possibly Hungary also, can't quite remember now).
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  • Profile picture of the author scortillion
    If you are in the US and someone buys from you, you pay only US taxes. The persons buying the product is responsible for what they buy.
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  • Profile picture of the author roley
    Originally Posted by beginner warrior View Post

    Hello,

    Let's say you have a U.S. business. If someone in the United States makes a sale, understanding the tax rules is easy.

    But what if someone from another country bought something from you? Is there some tax you pay to that country? How/when do you pay this tax?
    Contact an accountant or the tax man

    usually you only charge tax for people in your country or your state
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  • Profile picture of the author Michael Oksa
    I take the current exchange rate between the two countries as of GMT -5, then add in the square root of the cost of 2.19 troy ounces of gold at the close of trading the previous Tuesday. After that I will read the tea leaves and roll three sets of dice (four sets if any two concurrent rolls total an even number), and multiple by pi. However, if the number is greater than it was the last time (unless done in an odd-numbered month) then I will double it after subtracting the nearest prime number (but never rounding up). Once that's all done I realize that I'm no expert on tax law, so I just keep track of everything and let my accountant figure it out...I would suggest you do the same.

    All the best,
    Michael
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