Welcome back to the Wild West – where eCommerce business situated in one country sells to other countries and the tax collectors are struggling to put in place legislation to collect duties.
Most commonly for eCommerce businesses here in Australia, we sell using eCommerce platforms to the USA using shopping carts such as Shopify and Amazon.
A very common question we get here at CloudCounting is – does my Australian eCommerce business have to register and collect USA sales tax? What about income tax? Whilst we don’t have all the answers – the answer for a small eCommerce business that would sell less than $500,000 to the USA is ‘probably not’.
The answer isn’t so simple, because in the USA there are over 10,000 sales tax jurisdictions – and every single State / County / City has different rules. So how do you, as an Australian eCommerce business work out if you must register and comply? The only way to do this properly is to engage a USA based accountant and have them do a review of your operations. But in summary, it is very unlikely that your eCommerce business will have to register and pay sales tax unless ‘nexus‘ is established for your business. The most common example of nexus is economic nexus – but if you sell less than $100,000 per annum to any of these one jurisdictions, or if you sell under 200 orders to each jurisdiction per annum, it is unlikely your eCommerce business will be required to collect sales tax. Here is a link to a good article that summarizes the rules by State so far.
The next question we get asked is ‘do we have to pay income tax in the United States‘. The quick answer is as an Australian resident, you and your business will pay income tax on your worldwide income here in Australia. This is assuming you live here as a resident more than half the year. To get more detailed advice, you would have to consult with an International taxation expert. Any tax you do have to pay in the United States would most likely be subject to a tax treaty, and you would get credit for the tax paid when you lodge your Australian taxation return.
These are complex issues, but if you are a small eCommerce business selling into the United States, chances are that you will not have to register for USA sales tax.
Please give us a call at CloudCounting to discuss your specific needs. Please note that we only work with eCommerce businesses that use us as their tax agent. We will consider which countries you sell your eCommerce products and services to and advise you on the international implications.