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US Texas updates foreign sales tax obligations

  • Feb 15, 2021 | Richard Asquith

Texas has provided new guidance on the sales tax obligations for foreign sellers and marketplaces. Texas introduced foreign sales tax obligations, based on the economic nexus principle, from 1 October 2019. This includes foreign marketplace providers that facilitates sales in Texas by foreign sellers.

Key points of the new guidance includes:

  • Sellers and marketplaces must maintain transaction records for at least four years; 
  • Foreign sellers which are only selling via marketplaces are excused from registration if they obtain a proof the marketplace collecting sales and use tax on their behalf;
  • Where a seller is registered in their own right and using marketplaces, they must report marketplace sales in box 1 of the tax filing, Sales, but in box 2, Taxable Sales;
  • Marketplaces have not specific reporting requirements to sellers on the transactions they have collected taxes on;
  • The single use tax rate may not be used by marketplaces; and
  • Marketplaces are subject to audit of their sellers’ transactions. Foreign sellers retain the liabilities for lack of details or errors in in the information they provide their marketplaces.

Texas sales tax registration threshold

Following the 2018 South Dakota vs Wayfair Supreme Court ruling, US states may tax foreign sellers – without an in-state physical presence or nexus - on income their make from sales online to local customers.

This includes a registration threshold of $500,000 sales in the previous twelve months. Any business passing this business must register with the Texas tax authorities – Texas Comptroller.

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.

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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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