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US attractive ecommerce opportunity – beware of sales tax trap

  • Feb 5, 2021 | Richard Asquith

Many European and international ecommerce sellers are looking to the US for further expansion as it continues to expand through the COVID-19 pandemic.  This includes many UK sellers who are finding EU VAT and customs obligations too challenging.

What are the key steps to think through?

Think local fulfilment

Spiralling single delivery shipment costs and high customer fast delivery expectations mean no serious seller can rely on shipping from outside of the US. This has included hikes on foreign shippers through the US’ Universal Postal Union last summer.

So it’s economically worth holding US-stocks if you are shipping even just a couple of hundred consignments per month from Europe or elsewhere. This also means a speedy service for your customers and no import tax surprises for your customers.

Establish yourself as foreign corporation

Register your foreign business with a state authority to gain a licence to trade. This is simply a matter of sending in proof of company incorporation from the country of residence, and legal support.

Need to register for sales tax

The US now has similar rules on ‘remote’ sellers as the EU’s distance selling rules. Meaning you do not need to have any local, of physical nexus in a state to be liable to charge local state sales taxes. But there are varying thresholds, often starting from $100,000 per annum.  But if you hold stocks in the states, then that will trigger physical nexus registration obligations.

Contact Avalara’s team to learn the details of what your obligations may be. Our AvaTax calc product integrates into most ecommerce or shopping cart systems to help determine the right sales tax charges. And our returns service ensures low-cost filing is taken care of too.

Weigh up fulfilment locations

Once you are ready to set-up US-based fulfilment, there are a couple of major considerations. Firstly, location. The US is vast, and ferrying goods around isn’t as simple or as cheap as you may assume. If you don’t want to split your stocks between the East and West coasts, then think about a Midwest state to keep a lid on shipping costs and inventory management challenges. Support of fulfilment – returns etc – is the other big challenge given the big time difference between Europe and the US. It’s therefore imperative that you find a great support company for this.

Shipping to the US

When you are ready to finally set-up your US stocks, it is important to get an locally experienced freight forwarder. The customs and logistics issues are complex, and getting things like US commodity codes wrong will be expensive and a massive time burden.

‘Americanise’ your sales

Now that you are set up to sell – stocks in the US and sales tax ready – there are some key issues to think about ‘Americanising’ your market approach. Shopper expectations are different – often much higher – than what you may be accustomed to in Europe or elsewhere:

  1. Ensure your selling messages emphasise local fulfilment and speedy delivery. Because you are from Europe, US shoppers may believe there will be long lead times and problems with returns
  2. Make sure you’re speaking ‘American’! Use dollars and local units of measurement – pounds not kilo’s.
  3. Be bold and direct in your copy and email communications. Americans expect powerful statements about the benefits of the product.
  4. Watch out for local sales cycles. Ensure your offers or discounts fit in to national holidays and traditional discount days.

For more content like this visit: 
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VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which won International Tax Review's 2020 Tax Technology Firm of the Year. Richard trained as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.
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