US Sales Tax for Indian Sellers: Economic Nexus, Marketplace Rules & Registration (2027)
US sales tax for Indian sellers is one of the most misunderstood parts of selling to American customers. Sales tax depends on where your customers are, not on where your LLC is formed or where you live. If you sell on marketplaces, the platform may handle much of it for you, but if you run your own store, you may have to register, collect and file yourself. This guide explains economic nexus, marketplace rules and how to stay compliant.
US sales tax for Indian sellers: the short answer
- Sales tax is a state tax. The US has no single national sales tax. Each state with a sales tax sets its own rules.
- It is separate from income tax. Paying or not paying income tax does not settle your sales tax duty.
- Your LLC's state does not decide it. What matters is where your buyers are and how much you sell there.
- Marketplaces often collect for you, but not for sales made through your own website.
Rules change often, so check each state's department of revenue before you rely on any figure in this guide.
What is economic nexus?
Before 2018, a seller usually needed a physical presence in a state, such as an office, employee or inventory, before that state could require it to collect sales tax. After the Supreme Court's South Dakota v. Wayfair decision, states can require out-of-state sellers to collect tax based on sales activity alone. This is called economic nexus.
Typically, a seller crosses the line when its sales into a state exceed a set amount in a year, a set number of transactions, or both. Examples at the time of writing:
- Alabama: $250,000 in sales.
- Colorado: $100,000 in sales.
- New York: both $500,000 in sales and 100 transactions.
- Connecticut: both $100,000 in sales and 200 transactions.
Many states use $100,000, and some also use a 200-transaction test, while others have dropped the transaction count. Which sales count (for example marketplace sales or exempt sales) also varies. Check the state's own page.
US sales tax for Indian sellers on Amazon, Etsy and eBay
Every state with a statewide sales tax has marketplace facilitator rules. Under these rules, a marketplace such as Amazon, Etsy or eBay is treated as the seller for the sales it facilitates, so it collects and remits the tax. That is a big help for small sellers.
Do not assume it covers everything:
- Sales outside the marketplace still belong to you. This includes your own website.
- Some states count marketplace sales toward your threshold even though the marketplace collects the tax.
- Fulfilment by Amazon (FBA) can create physical nexus. If Amazon stores your inventory in a state, that state may treat you as having a presence there regardless of thresholds.
- Local rules differ, such as in Alaska.
If you are setting up an Amazon store, read Amazon seller account with a US LLC from India.
US sales tax for Indian sellers with their own store
If you sell through your own website, for example on Shopify, you are generally responsible for tax on direct sales once you have nexus. Your store tools may help calculate tax, but you still have to register with the state and file returns. See Shopify with a US LLC from India.
For a full picture of how sales, costs and compliance fit together, read our illustrative e-commerce example.
Which states have no sales tax?
Four states do not charge a state-level sales tax: New Hampshire, Oregon, Montana and Delaware. Alaska has no state sales tax, but local governments in its remote seller commission enforce their own rules.
Do not assume these states are tax-free for you in every way. Other taxes and filings may still apply.
Does your LLC's state affect sales tax?
Not directly. If you form your LLC in Wyoming or New Mexico but ship products to customers in Texas and California, Texas and California are the states whose rules matter for those sales. Forming in a state with no sales tax does not remove your duties elsewhere. See the best state to form an LLC from India for how to choose a formation state on other grounds.
How to register and collect: a step-by-step plan
- Track your sales by state. Keep a monthly record of sales and transaction counts for each state, separating marketplace and direct sales.
- Compare them with each state's threshold. Do this regularly, not once a year.
- Register before or as soon as you cross a threshold. Most states let you register online with the department of revenue. Some also need a business licence. See does an LLC need a business license?.
- Collect the right rate on taxable sales from the date the state tells you to.
- File and pay on time. Filing frequency depends on the state and your sales volume.
- Keep records, including invoices, exemption or resale certificates and filing confirmations.
Services are generally not taxable in most states, but this varies, and digital goods can be treated differently. Check the rules for what you actually sell.
Sales tax is not the same as income tax
Your US LLC may also have income tax and annual reporting duties. A foreign-owned single-member LLC generally files Form 5472 with a pro forma Form 1120 each year. Read foreign-owned LLC taxes and 5472 and 1120 for foreign-owned LLCs. Indian tax and reporting rules apply separately, so ask a professional.
What if you ship from India?
Selling and shipping from India to US customers adds customs, import and carrier questions on top of sales tax. How those work depends on the shipment, the product and the platform. Check the platform's rules and speak to a customs or tax adviser for your products.
Moving money after you sell
Sales tax you collect is not your money. Keep it separate from your profit, and plan how you move your profit to India. See how to transfer money from a US LLC to India.
Mistakes to avoid
- Assuming the marketplace covers all your sales.
- Forgetting that FBA inventory can create presence in other states.
- Using one threshold for every state.
- Collecting tax without being registered. Most states require a registration first.
- Spending the sales tax you collected.
- Not keeping records of sales by state.
- Treating sales tax and income tax as the same thing.
How FormLLC can help
FormLLC helps Indian founders form a US LLC, get an EIN, set up banking and stay compliant. If you are unsure how US sales tax for Indian sellers applies to your store, book a free consultation and we will help you work out the next step.
*This article is for general information only. Tax rules and thresholds change often. FormLLC is a business formation and compliance services provider, not a law firm, and does not provide legal or tax advice. Speak to a qualified tax professional about your situation.*
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Frequently Asked Questions
They may. If your sales into a US state pass its economic nexus threshold, you generally have to register, collect and remit tax there. Marketplaces often handle tax on sales they facilitate.
No. Sales tax depends on where your customers are and how much you sell in each state, not on where your LLC was formed.
It is a sales tax obligation created by selling enough into a state, even with no office or staff there. Thresholds are commonly $100,000 in sales and/or a number of transactions, and they vary by state.
For sales it facilitates, yes, in states with marketplace facilitator rules. It does not cover sales through your own website, and FBA inventory can create presence in a state.
New Hampshire, Oregon, Montana and Delaware have no state sales tax. Alaska has no state tax but has local rules for remote sellers.
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