VAT in the USA: the Sales Tax explained, and what a US LLC must do

Is there VAT in the US? No. The United States has never adopted a value-added tax. The closest thing is Sales Tax, a retail sales tax set by each state and often topped up by counties and cities. It is nothing like VAT: not in the way it works, not in its rates, not in what it asks of you.

This article answers the question in the order it comes up: what Sales Tax is and what it costs, who has to collect it, then what it means for a US LLC owned by a non-resident, and what LLC Place tells you about it as part of your support.

No VAT, but a Sales Tax in 45 states

VAT is a tax on added value. It is collected at every stage of the chain, businesses deduct it, and it is harmonized across a whole country at a national rate. Sales Tax is a tax on the final sale, paid once by the consumer at the moment of purchase, and never deductible for that consumer. A business buying goods to resell is in principle exempt, on presentation of a resale certificate.

In other words, there is no national Sales Tax in the United States. There are dozens of regimes, with different rates, exemptions and thresholds, and five states apply none at all: Delaware, Montana, New Hampshire, Oregon and Alaska at the state level. That patchwork is what throws entrepreneurs who are used to a single rate.

What is the Sales Tax rate in the US?

There is no single rate but thousands of them. The state rate runs from 0% to 7.25% in California, and county and city taxes stack on top of it. All in, the rate you pay at the register usually lands between 6% and 10%, depending on the delivery address. For reference, the combined rate reaches 8.875% in New York City, around 9.5% in Los Angeles, and goes past 10% in some cities in Louisiana and Alabama.

The rate is worked out at the buyer’s address, not the seller’s. That is why no company knows it in advance: it has to be determined order by order, which is what billing software and selling platforms do.

Nexus, the concept that decides everything

A state can only require you to collect Sales Tax if you have a sufficient link with it, called nexus. There are two forms:

• Physical nexus, as soon as you hold an office, inventory or staff in the state, including stock sitting in a marketplace warehouse.
• Economic nexus, as soon as your sales into that state cross a threshold, most often $100,000 in annual revenue or 200 transactions, depending on the state.

For a non-resident entrepreneur selling services to businesses, the question almost never comes up: most states do not tax services, and economic nexus is only reached with serious sales volume into a single state. For someone selling goods or digital products to consumers, it comes up state by state.

What applies depending on what you sell

How a threshold is actually calculated

A threshold is never assessed globally but state by state. Selling $300,000 into the United States triggers nothing if that amount is spread across forty states without any of them passing its own floor. Conversely, $100,000 sold to customers in Florida alone makes you liable there.

Three details separate a correct reading from a false positive:

• The reference period, which is the calendar year in some states and the last twelve rolling months in others, shifting the date you cross.
• Which sales are counted, since several states leave out exempt sales or those already collected by a marketplace.
• The transaction count, which more and more states have dropped to keep revenue alone, protecting sellers with small orders.

Once the threshold is crossed, the procedure is always the same: register with the state, collect the tax at the rate applying to the delivery address, then file and remit on the monthly, quarterly or annual schedule the state sets according to your volume.

Digital products, the most unsettled area

Nothing varies more than the treatment of digital goods. The same software subscription can be exempt in one state, taxed as tangible property in another, and put under a regime of its own in a third. Online courses, downloadable files and licenses each follow their own logic.

The practical consequence is simple: if you sell digital products to US consumers, the point is not to find one single rate but to know which states you are getting close to a threshold in. That is monitoring work, not advanced tax law, and it is done with good billing software connected to your store.

Marketplaces, the part most often misunderstood

Since the Marketplace Facilitator laws, the large platforms collect and remit Sales Tax themselves on the sales they host. If you sell only through Amazon or Etsy, most of the subject is handled for you. Those sales still count toward some thresholds, though, and a store of your own alongside the marketplace stays your responsibility.

And what about VAT?

Your LLC is American. It has no European VAT number and charges none on its invoices for services rendered to businesses abroad: the client reverse-charges the tax at home. It is a different story if you sell digital services to consumers in the European Union, because the VAT of the customer’s country is then due from the first euro, through the One Stop Shop, whatever country your company is registered in.

Conclusion: a question of business model, not of country

Sales Tax does not depend on your nationality or your place of residence, but on what you sell and the volume you do in each state. For most non-resident LLCs, which invoice services to businesses, it simply does not apply. For sellers of products, it is watched state by state, and the platforms take on a large share of it.

You can form your LLC with LLC Place or have an expert review your model before your first sale, so you know exactly what you have to collect, report or ignore.

Frequently asked questions

Is there VAT in the US?

No. The United States does not apply a value-added tax. Each state sets its own Sales Tax on retail sales, paid once by the final consumer, and five states have none at all.

What is the VAT rate in the USA?

There is no national rate. State, county and city Sales Tax combined usually lands between 6% and 10%, and it is calculated at the buyer’s delivery address. Some states, such as Oregon and Delaware, apply none.

Does my LLC need a VAT number?

No. A US LLC has no VAT number. It has an EIN, which is a US tax identifier with nothing to do with VAT. Your European business clients reverse-charge the VAT on your service invoices.

I sell an online course to consumers, does this apply to me?

Potentially on both sides. Some US states tax digital products above a threshold, and some countries require a foreign seller to collect their local VAT from the very first sale to a consumer. Tracking state by state and country by country then becomes essential.

What happens if I cross a threshold without noticing?

The state can claim the uncollected tax plus interest and penalties. That is exactly why you should switch on the calculation from your first sale outside a marketplace, with Stripe Tax or TaxJar, and keep an eye on your sales state by state.

Does Sales Tax undo my 0% federal tax?

No. They are two separate regimes. Collecting Sales Tax in a state does not make your LLC liable for federal income tax on profits, which depends on whether there is an actual trade or business in the United States, not on your remote sales.