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Tax requirements for Australian resident selling to US customers

Asked by: Leah  — 13 January, 2013


I am and Australian resident looking to start a .com business which will sell primarily to US customers, but also may sell internationally. I will be using a US based drop shipper to fulfill my orders (i.e.- I will have no physical presence in the US)

2 questions:

1. Do I have to charge sales tax on my US sales?
2. Do I need to consider any US revenue tax laws? or can I simply just transfer any profits from pay pal back to my Australian bank account and pay tax in Australia?

Many thanks for your help!

Answered by: admin  — 13 January, 2013


Regarding sales tax: US has no federal sales tax, so sales tax is regulated and collected on state level. Because of specific approach to interstate commerce, as defined in the US constitution, states can only collect sales tax within their respective borders. That means if your company makes a sale to a buyer in a given state, you only need to collect sales tax if your company has established what is called a “nexus”, as defined by that state laws.

So for example if you form a Delaware LLC then your company has nexus in Delaware (however, Delaware is one of 5 states that have no sales tax, just FYI). If you are selling to a buyer in California, and you are using a dropshipper in California, then you create nexus in California and need to collect sales tax. If you open an office in New York you create nexus in New York.

To summarize, if you form an LLC in Delaware and ship your products using a dropshipper you will only be required to register for, and collect and report sales tax in the state where the dropshipper is located (and all other states the dropshipper has nexus in, so make sure you investigate this topic with the dropshipper). If you form your LLC in a state like Wyoming you also need to register for sales tax in Wyoming as well.

As far as taxes go I always recommend to consult a US accountant, however this chart from IRS would be helpful to establish if you need to pay taxes in the or not. If not then all your company profit is taxed on your personal tax return in Australia.

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