There are states in Usa that impose sales tax.
There are 50 states in the USA, we have compiled a list of these states on this page .
In Usa, if the income of the company owner originates from the USA;
How much sales tax should be collected,
When to collect sales tax
Must know what sales tax means.
In this article, we will talk about your sales to your customers in US states, current tax rates as of 2024, and when you need to collect sales tax.
If you are ready, let's get started.
If you have an llc in the USA and you make your sales to different states of the USA, you need to collect sales tax from customers if you exceed the sales and turnover limits of the states.
A foreign LLC has no obligation to collect taxes if it does not exceed the limits provided to foreign traders
Marketplaces like Amazon collect sales tax themselves in almost all states in the US. If you are an Amazon marketplace seller, you do not need to collect sales tax in states that Amazon supports. Amazon collects this tax and refunds it itself.
So, what are the turnover and transaction limits on a state basis?
the answer US State Limits for Aliens .
When Do You Pay Income Tax in Usa?
this Economic Nexus for Foreigners .
When the limits are exceeded, the “Economic Nexus” is triggered, ECI occurs and the company owner must declare the income tax he will pay to the IRS for his transactions during the year by filling out a 1040-NR form at the end of the year.
Get ITIN Number
If you are going to pay your taxes in the USA at the end of the year, you need an ITIN number. We have a service where we can get your ITIN Number, here .
Sales Tax
Sales tax in the US is quite complex, but if you are a seller, you must collect taxes from your customers at rates determined on a state-by-state basis.
In the USA, there is no general VAT rate on a product basis as in Turkey. Tax rates vary within each state, even within cities
Platforms such as PayPal, Etsy, Amazon and eBay have come up with a solution to collect taxes in this way by setting an average rate according to the states.
So, when you, as a foreign trader or company owner, need to collect taxes when you exceed the limits given to you on a state basis, at what rate will you collect your taxes?
We will answer this later in the article.
Which States in Usa Have No Sales Tax?
The states of Alaska, Delaware, Guam, Montana, New Hampshire, and Oregon do not impose statewide sales tax. However, some regions may even impose a “sin tax” on items such as cigarettes or gambling.
Collecting Sales Tax
In US states, all sales taxes are collected from the customer (total sales price + tax added) and then remitted to the state by the selling retailer. Retailers (sellers) in the USA have the status of tax collectors of the state.
Sales Tax Chart by US State
Taxfoundation published a table and took the general averages of the provinces and reflected them in this table.
You can access this table below. You can find out the average sales tax rate of that state by clicking on the state you want. You can also find an up-to-date sales tax table just below this chart.
Sales Tax List by State in Usa (2024)
| state | State Tax Rate | Rank | Avg. Local Tax Rate | Combined Rate | Rank | Max Local Tax Rate |
|---|---|---|---|---|---|---|
| Alabama | 4.00% | 40 | 5.289% | 9.289% | 5 | 7.50% |
| Alaska | 0.00% | 46 | 1.821% | 1.821% | 46 | 7.85% |
| Arizona | 5.60% | 28 | 2.779% | 8.379% | 12 | 5.30% |
| Arkansas | 6.50% | 9 | 2.948% | 9.448% | 3 | 6.13% |
| California (a) | 7.25% | 1 | 1.601% | 8.851% | 8 | 4.75% |
| Colorado | 2.90% | 45 | 4.907% | 7.807% | 16 | 8.30% |
| Connecticut | 6.35% | 12 | 0.000% | 6.350% | 33 | 0.00% |
| Delaware | 0.00% | 46 | 0.000% | 0.000% | 47 | 0.00% |
| Florida | 6.00% | 17 | 1.002% | 7.002% | 24 | 2.00% |
| Georgia | 4.00% | 40 | 3.384% | 7.384% | 19 | 5.00% |
| Hawaii(b) | 4.00% | 40 | 0.500% | 4.500% | 45 | 0.50% |
| Idaho | 6.00% | 17 | 0.026% | 6.026% | 37 | 3.00% |
| illinois | 6.25% | 13 | 2.605% | 8.855% | 7 | 4.75% |
| indiana | 7.00% | 2 | 0.000% | 7.000% | 25 | 0.00% |
| Iowa | 6.00% | 17 | 0.941% | 6.941% | 29 | 2.00% |
| Kansas | 6.50% | 9 | 2.154% | 8.654% | 9 | 4.25% |
| Kentucky | 6.00% | 17 | 0.000% | 6.000% | 38 | 0.00% |
| Louisiana | 4.45% | 37 | 5.113% | 9.563% | 1 | 7.00% |
| Maine | 5.50% | 29 | 0.000% | 5.500% | 43 | 0.00% |
| maryland | 6.00% | 17 | 0.000% | 6.000% | 38 | 0.00% |
| massachusetts | 6.25% | 13 | 0.000% | 6.250% | 35 | 0.00% |
| Michigan | 6.00% | 17 | 0.000% | 6.000% | 38 | 0.00% |
| Minnesota | 6.875% | 6 | 1.163% | 8.038% | 15 | 2.15% |
| mississippi | 7.00% | 2 | 0.062% | 7.062% | 22 | 1.00% |
| Missouri | 4.225% | 38 | 4.160% | 8.385% | 11 | 5.88% |
| Montana (c) | 0.00% | 46 | 0.000% | 0.000% | 47 | 0.00% |
| Nebraska | 5.50% | 29 | 1.468% | 6.968% | 28 | 2.00% |
| Nevada | 6.85% | 7 | 1.386% | 8.236% | 13 | 1.53% |
| new hampshire | 0.00% | 46 | 0.000% | 0.000% | 47 | 0.00% |
| New Jersey(d) | 6.625% | 8 | -0.024% | 6.601% | 30 | 3.31% |
| New Mexico(b) | 4.875% | 34 | 2.742% | 7.617% | 17 | 4.06% |
| new York | 4.00% | 40 | 4.532% | 8.532% | 10 | 4.88% |
| north carolina | 4.75% | 35 | 2.246% | 6.996% | 27 | 2.75% |
| north dakota | 5.00% | 32 | 2.041% | 7.041% | 23 | 3.50% |
| Ohio | 5.75% | 27 | 1.488% | 7.238% | 21 | 2.25% |
| Oklahoma | 4.50% | 36 | 4.489% | 8.989% | 6 | 7.00% |
| Oregon | 0.00% | 46 | 0.000% | 0.000% | 47 | 0.00% |
| pennsylvania | 6.00% | 17 | 0.341% | 6.341% | 34 | 2.00% |
| Rhode Island | 7.00% | 2 | 0.000% | 7.000% | 25 | 0.00% |
| south carolina | 6.00% | 17 | 1.499% | 7.499% | 18 | 3.00% |
| South Dakota(b) | 4.20% | 39 | 1.911% | 6.111% | 36 | 4.50% |
| Tennessee | 7.00% | 2 | 2.548% | 9.548% | 2 | 2.75% |
| Texas | 6.25% | 13 | 1.950% | 8.200% | 14 | 2.00% |
| Utah (a) | 6.10% | 16 | 1.149% | 7.249% | 20 | 4.20% |
| Vermont | 6.00% | 17 | 0.359% | 6.359% | 32 | 1.00% |
| Virginia (a) | 5.30% | 31 | 0.471% | 5.771% | 41 | 2.70% |
| washington | 6.50% | 9 | 2.878% | 9.378% | 4 | 4.10% |
| WestVirginia | 6.00% | 17 | 0.567% | 6.567% | 31 | 1.00% |
| Wisconsin | 5.00% | 32 | 0.696% | 5.696% | 42 | 2.90% |
| wyoming | 4.00% | 40 | 1.441% | 5.441% | 44 | 2.00% |
| District of Columbia | 6.00% | N/A | 0.000% | 6.000% | N/A | 0.00% |
Article Source:
GuamTax.com. " Guam Tax Structure Tax-Rate.org. " The 2020 Puerto Rico State Sales Tax Tax Policy Center. " The State of State (and Local) Tax Policy North Carolina Department of Revenue." Sales and Use Tax Rates Effective Pitt County Development Commission. " Taxes: Pitt County, North Carolina https://www.investopedia.com/sales-tax-by-state-4842758
59 Comments . New Comment
have a nice day. It seems really difficult to get an ITIN number. Will I have a problem if I get the ITIN number after forming my company? Because I need an income tax return to get ITIN and I don't have any income in Usa right now.
If the application is made through an IRS-approved agent, no declaration is required. If you apply yourself without an agent, a declaration is required and self-service applications are now generally rejected.
Hello, I have an LLC company in the state of Kentucky, USA. And I currently sell on Etsy, ebay and shopify platforms. My payments are deposited into my Mercury Bank account belonging to my LLC company. And I have researched many resources on taxation, but I have not found a solution so far. So far, $2,250 has been deposited into my bank account due to the sale. Apart from the sale, a friend of mine sent 2200 dollars from his personal account to my Mercury Bank account.
How will I tax this business? What can I declare as expenses?
Should the money sent by my friend be taxed?
Can you give information about this? Thank you very much.
Hello,
you need to declare your income and expenses in 2024, you do not need to do anything yet. If you consult a counselor and explain the issue in the new year, they will support you on what you need to do.
Hello, we read your topics in Wyoming and completed the installation. Thank you very much for this. I have a few tax questions.
There is no income tax or corporate tax in Wyoming. We only have to pay taxes to the IRS, starting from 10% and increasing.
Another tax is sales tax, which varies by state. I have a question for you here. Should we collect this sales tax when we reach the limits or before we reach them? Can you suggest a program to follow this? (note we sell our own products through shopify.)
Hello,
it would be beneficial for you to check and add up the annual turnover potential. Software such as Quickbooks or Xero can automate these, and if you are paying with Stripe, there are also apps that do this.
Hello, I am planning to buy products from Usa and sell them to Canada and Mexico using a dropshipping business model. What is the sales tax rate for Canada and Mexico?
I will live in Turkey and do drpshipping in the USA, but are the only taxes I have to pay federal income tax and sales tax? Isn't there any state income taxes etc?
You pay federal income tax, calculated at the end of the year. You don't pay state tax
When a merchant who is not resident in the United States and has an llc in the United States makes a sale to the United States over the internet, should he apply the sales tax of that state to which state he made the sale and if that state's address is on the invoice, then go and register in that state and pay the tax to that state? has to. Isn't there a central payment system? I kindly ask you to shed light on this situation, I wish you good work.
There is sales tax and federal taxes. What you mean by central is probably federal income tax. In other words, the income obtained from the USA is paid to the state.
Sales tax means that when you exceed the state limits, you register taxes in the state where you exceeded the limit and pay back the taxes you collected to that state.
No income tax is paid to the states. Income tax is paid to the state only after income and expenses are calculated at the end of the year. This is called federal tax.
If you exceed the limit in the state, you collect sales tax and pay it back to that state, so the company becomes the collector.
What has changed after 1 year? Austin Irs asked for my statement nr 1040. They also asked for documents from the passport issuing authority, I sent them to the population, but I haven't received them yet.
Hello, I find what is written very useful, but it can still be a bit confusing for beginners like us.)
I will start the company establishment process to sell on Etsy, I think my annual minimum turnover target will be around 400 thousand dlr, which state is the establishment in? should i do?
Thanks in advance!
Hello,
The most preferred state to open an account in marketplaces is Wyoming. We recommend registering your company in this state.
Additionally, when you open an account with an Etsy LLC company, you will also receive an ITIN number. After your company is formed and you receive your EIN number, I recommend you to get an IIN number immediately.
Good luck in advance.
Hello
ITIN should not be applied for without a tax return; Otherwise, you will be rejected due to lack of documentation, which is why most ITINs are rejected.
Forming an llc and having an EIN is not enough to apply for an ITIN.
ITIN is generally applied for in 7 situations, and only 1 of them is for non-resident aliens like those of us who own an LLC. That article is also about filing a tax return. Other articles concern people who live in the USA or are US citizens.
To apply for ITIN, you need to send ITIN application form W7 and tax declaration form 1040NR along with it. There are a few more documents to send, but I won't go into them here.
You can check the IRS website for details.
https://www.irs.gov/instructions/iw7
Good luck.
Hello Mr. Şakir, thank you for your support, but I would like to make a correction with your permission.
What you mentioned may be valid if the person submits ITIN applications to the IRS individually, that is, if the person does not apply through an IRS-approved agent.
However, what you mentioned is not valid for ITIN applications made through an approved IRS agent, because we also provide ITIN service and all of the dozens of applications we made through our IRS approved agent have been successful. Even though we did not file a 1040NR tax return in any of them.
The IRS doesn't pay much attention to individual ITIN applications because it has been tried and failed too many times by too many people. Generally, the IRS requires a consulate-certified foreigner status document from the individual for individual applications. It is not possible to get this from the US consulates by appointment because there are long wait times for appointments. Of course, the 1040 NR declaration you specify in individual applications may also be effective. Of course, if the person submits the application through an IRS-approved agent, none of this is necessary.
For this reason, if you want to be absolutely successful in ITIN applications, transactions must be made through an IRS-approved agent. Almost all of our applications were successful in approximately the 8th week.
Hello
I am learning good information from you too. 🙂 Since CAAs are fully authorized and knowledgeable on this issue, they may choose the "Other" option out of approximately 7 options and request an exception. Or I don't know now.
Although I think there will be no need for a consulate-approved document when it is an original passport, but my information is only based on the information on official sites. You are in the middle of the business. In practice, things may be changing.
I will apply individually :) However, I need my passport as I will be going abroad soon, and therefore I am thinking of extending the 1040RN tax declaration period with 4868 form and applying for ITIN in July with the original passport and 1040NR.
Let's see if I will be successful.
Thanks again for your experience and information. We truly learn a lot from everyone on this site, especially from you.
We are learning together Mr. Şakir, we have learned a lot from you too :)
It is important to share the results of the experiences accurately and in a timely manner, and we believe that we do this with all transparency. We have the opportunity to try many combinations and even have close contact with our followers, which contributes to experience and accurate information. Otherwise, a lot of time is wasted as the transactions take a long time.
We had followers who applied for ITIN with their own means, even with a notarized passport. Unfortunately, after 6 weeks, rejection letters came on the grounds that there was no consulate approval. Maybe the passport could change the real thing, we need to try it. By the way, there has been no response regarding 1040 from personal applications, perhaps this will be the next reason for rejection, it is unknown.
If you have time constraints, I would not recommend you to apply yourself and risk it. Some personal applications (made in the past) have also been rejected without reason.
If you still want to try it, I recommend that you get a document from the consulate in any case, of course 1040 NR may also be effective.
Good luck.
I swear, I sent documents approved by the headman. It has arrived and I will let you know the result. The district governorship tells you to go to the notary first for aposil, and the notary says the smallest transaction starts from 200 lira. Our headman did not receive any money.
Hello,
As I read, I find very useful information on the site, for which I would first like to thank you very much.
1. I will invoice my customer in the USA for software services every month. For this reason, I am planning to form an LLC company in Wyoming and open a bank account in Usa. Since I will be performing the software service outside the USA, I am not subject to any income tax in the USA, as far as I understand. Well, regarding the sales tax part, I think I am not subject to any tax since I provide services, not products, but I am not sure.
2. I want to open the LLC with 2 members instead of a single member, and my partner wants to sell products from Turkey by doing Amazon FBA. In this case, apart from the fact that each member fills out the forms we provide to the IRS on their own behalf, will there be many extra procedures that complicate things? The company will have income and expenses, my software service revenues, and Amazon FBA transactions.
Thanks a lot.
Hello,
we are glad if it was useful, you are welcome.
1. If you collect payments from credit cards through a payment gateway such as Stripe, you may receive 1099 K after a certain turnover. If you are going to receive payments by transfer to your US bank account, there will be no income tax, regardless of the service or digital product, you just need to report your income and expenses to the IRS every year with 5472.
2. If you form this type of partnership structure, you may lose the single-member LLC tax advantages in the first article. In addition, Amazon already sends 1099 K when a certain turnover is reached and notifies you to file taxes with the IRS. At this stage, even if you earn non-US income from your other digital business, you will need to file a tax return as an llc and pay / refund taxes for both company members.
If it is not absolutely necessary, it may be more logical to form a separate company without mixing the two entities together.
Thank you very much, Mr. Muhammet, for your answers.
Yes, what you said is exactly what I thought. The reason we want to form a partnership structure is to form a family business. I am dealing with the software business (for now, I handle payments through Payoneer, we are planning to use Mercury when we form an llc), and my wife is dealing with the textile export business. That's why we thought about working through a single company, and that it would be advantageous if we applied for the E-2 visa in the future. We will weigh the pros and cons and decide accordingly.
When we decide to form the company, we will form it in Wyoming through the Northwest registered agent, with your reference.
Thanks.
Thank you. Good luck in advance!
Could Missouri be the most advantageous LLC to provide software services to Usa? I have read that it has no annual fee, cheap digital services to open and are excluded from sales tax. Why do you recommend opening it in Wyoming?
Also, does an LLC owner that provides software services abroad need to pay taxes again in Turkey?
Yes, it can be. In states such as Mexico and Missouri, there are no annual reports and annual recurring state fees, so the mentioned states have advantages for software companies and digital product service sales.
Foreign LLCs already declare their taxes on their annual income (US sourced income) federally instead of state, so no tax is paid to the state.
Wyoming is recommended in trade areas such as Amazon and marketplaces due to its conveniences such as address verification and resale certificate. Otherwise, we can say that Wyoming has no special advantages for this type of digital work.
When income earned abroad is transferred to Turkey, it may be on the radar of the revenue administration after a certain level. For this reason, an advantage can be gained by considering the tax agreement between the two countries in coordination with both the consultant in the USA and the local consultant company.
Once your income level is clear, you can evaluate the issue with a consultant abroad and get support and advice on tax advantages. It is not right for us to give tax advice directly on tax and accounting issues. This is not legal and each company may have specific tax classes based on its turnover and income.
There is almost no physical bank I haven't applied to, including small banks. They all want SSN. I think Mercury financial institution, Stripe financial institution, Payoneer financial institution. When you ask for an official letter from the bank, they say we are a financial institution and cannot give it to you. Mercury does not open accounts under LLC. Kind regards
Yes, Mercurybank and similar digital banks are financial institutions behind a bank.
Physical banks either ask for your ID, or to see you in person in the USA, or for confirmation of residence in the USA. This is not new or special information, it has been like this for years. There are already Mercurybank and similar financial institutions so that there is no need to visit in person.
By the way, Mercurybank allows opening accounts for LLC, thousands of applications are approved every day, and many LLC owners from Turkey open accounts.
If you wish, read our article on opening a Mercurybank account. You probably made some mistakes or provided incomplete information so that they did not approve your account.
Hello,
I established my company in a short time, acting in line with the information I received from you regarding the establishment of the company. Thanks to you, I also received my EIN number with the free EIN campaign. I also opened my bank account through Wise. Thank you. I have some questions about the next process. For example, Wise FIBA Bank opened an account in the name of my company and also gave me an IBAN number. I am also someone who does business in Turkey. Is there anything I need to do to account for the money coming to my Iban number from Türkiye?
Hello,
It is pleasing that you have successfully formed the ecosystem, congratulations.
Although it may seem like Wise is opening an account from Fiba, it is not exactly like that. Essentially, the account is in the name of Wise Türkiye, but the IBAN is linked to your company and is unique. The TR IBAN number provided to you is specific to your company, but while the money is transferred to your account, the person who sent the money must write "Birleşik Öde Hizmetleri ve Elektronik Para A.Ş" in the recipient section. If your company name is written in the recipient section, the money will not arrive in your account. It is necessary to pay attention to this.
The money is not related to your company account or person in Turkey. You do not have to receive money directly from Fiba. Whatever Wise's procedures are globally, the procedure for the money coming to TR Iban should be the same.
However, since we are not qualified advisors, it is always beneficial to consult an advisor on such financial matters. You can even get support on this issue by sending a support request via Wise.
It doesn't end with forming the company. You also have to pay income tax.
There are 4 basic expense items paid during and after the company formment phase. Actually, it is 5, but since each state will give it to the federal government anyway, I won't go into that detail here. What are these 4 basic expense items?
State filing fee; It is paid one-time during the establishment phase.
State annual report fee (you said franchise)
Sales Tax (VAT) is paid for products purchased from within the USA.
Income Tax is paid as a percentage of annual net income. 5% in Kentucy 0% in Wymoing
If you are not going to arbitrage, that is, if you are not going to buy products from sellers in the USA, the sales tax in the state where you will form the company will not have any meaning for you. Whether high or low.
The important thing here is Income tax. Because we all want to sell products and make money, and the more products we sell, the more money we make. And we have to pay taxes on the money we earn.
State income tax in Wymoing is 0%. In Kentucky it is 5%. I strongly recommend that someone who wants to form an llc in the USA should form the company in one of the 7 states where income tax is 0%.
I had chosen 12 states out of 52, and Kentucky was not on this list.
Now let's make a calculation for the next 5 years. We will form an llc and make a net profit of $1000 every month.
While in Kentucky you pay an average of $623 per year after 5 years (you pay $600 in income tax), in Wyoming you pay a total of $70.
If your annual net income is $1200, then income tax in Kentucky is $60 per year. This makes the total amount we will pay $83.
In summary, if you are going to do long-term income tax or arbitrage for company formment costs, sales tax should also be taken into account. Since they did not participate, states such as Kentucy and Deleware seem to be at the forefront.
If you are not going to arbitrage, I would definitely recommend Wyoming, followed by South Dakota.
If you are going to arbitrage, in order not to lose the price advantage competition, although the profit rate you will get from the product sold, the price you will buy the product and the total turnover need to be calculated, there are two states I would recommend: Montana and Hampshire.
You can calculate these values yourself by entering them into an Excel file.
It was a nice summary, Mr. Şakir. Among the 7 states with 0 income tax, is Wyoming the best? Can you elaborate a little more? I am thinking of FBA private label, so the income tax issue will be at the forefront. Do you have any other recommendations?
Also, is there a social media platform where I can reach you? If I have any questions, I can ask them. Of course, if you are available ^^
Best worst etc. There is no such state, this question of which is the best state is persistently asked by many people. There is no such classification, each state's taxes and laws are different, they all apply different rules.
Like everyone else, you can form your LLC company in the state of Wyoming and start trading. The laws in the state of Wyoming are more or less clear. It is difficult to understand what kind of favor you are looking for :).
Mr. Şakir has already explained it very well, to get more detailed information, go to the website of all 7 states and read their laws one by one and decide which one makes sense for you. Or, if you do not have the time or energy to read and understand, you can enlighten us by contacting a tax lawyer or accounting firm in the USA here https://startupsole.com/amerika-muhasebe-firmalari/ and getting paid consultancy on taxation issues.
As the admin said, you can take a look at the tax rates and laws of 7 states. You are now at the point where there are fine selections in the state election. It is necessary to understand the laws well here.
You can write your questions here, everyone who knows, especially the Admin, will reply.
Hello Mr. Şakir. I want to arbitrage on Amazon. I will proceed with the wholesale sales model. In this regard, in which state to form an llc, taxes, fixed expenses, etc. I wonder if it would be advantageous for expenses?
Hello.
For 2023, the state of Montana made some reductions. Whether you do arbitrage or not, considering the cost items such as one-time filing fee, annual fee paid to the state, sales tax (also local sales tax) and state income tax, the most logical state seems to be Montana.
If I were to start a new company right now, I would start it in Montana with my eyes closed.
I had made an Excel file before. I have now updated it to 2023 fees. I compare states' founding and subsequent tax fees. Here, if you formed an llc and this company remained open for 5 years and you earned a net profit (not gross) of $ 1200 every year, and if you purchased products to sell from companies in the USA for $ 1200 each year, excluding sales tax; At the end of these 5 years, the annual average wages to be paid were listed as follows, from the cheapest state to the most expensive state.
There is no federal income tax here. I used 2023 as the basis for prices and tax rates, and possible changes in subsequent years are naturally excluded from the calculation. Again, the registration agent fee where you formed the company is also excluded from the calculation.
Now, whoever wants to form an llc in which state can roughly see how much annual average taxes and expenses they will pay based on the above criteria.
Order State Annual fee payable after 5 years $
1 Montana 39.00
2 Missouri 84.70
3 Hawaii 89.80
4 New Mexico 90.40
5 South Carolina 94.00
6 Alaska 100.00
7 Oklahoma 102.00
8 Arizona 107, 20
9 Colorado 107.60
10 Ohio 121.98
11 Nebraska 123.52
12 Wyoming 128.00
13 Georgia 130.00
14 Louisiana 130.60
15 South Dakota 134.00
16 Texas 135.00
17 Pennsylvania 140.84
18 New York 141.00
19 Kentucky 149.00
20 Iowa 149.80
21 North Dakota 150.20
22 West Virginia 153.00
23 Wisconsin 153.48
24 Mississippi 154.00
25 Indiana 155.80
26 Virginia 157.60
27 Michigan 158.00
28 Utah 160.20
29 Idaho 161.60
30 New Hampshire 168.00
31 Vermont 172.20
32 Oregon 177.00
33 Minnesota 177.70
34 New Jersey 196.30
35 Kansas 197.20
36 Rhode Island 209.00
37 Alabama 212.00
38 Connecticut 216.20
39 Florida 237.00
40 Illinois 239.40
41 Maine 255.60
42 Arkansas 261.00
43 Washington 262.00
44 Washington DC 289.80
45 North Carolina 339.00
46 Delaware 344.40
47 Maryland 416.00
48 Tennessee 444.00
49 Nevada 517.20
50 Massachusetts 735.00
51 California 909.00
Thank you for your contribution, Mr. Şakir, but a small correction is needed.
Federal income tax is the tax that every business pays to the United States at the end of the year. We cannot say there is no federal income tax here. Since the company type is LLC, we can say that there is no state income tax.
There is no such thing as no federal tax because LLCs declare and pay federal taxes (if they reach a certain level within the USA) directly to the state from their year-end net income.
Other than that, thank you again for your observations and the table you shared.
Hello
When I said no, I meant to indicate that I excluded it from the calculation. I expressed it incorrectly. As you said, each company will pay year-end "federal income tax" in proportion to its profits.
If there are state-specific income taxes, I have included them.
Thank you too for your contribution.
I have one more question. To both admin and Mr. Şakir..With the new incentive application in the state of Colorado, the fee for the first company formment is determined as 1 USD. There is also an annual state payment of 10 USD. It stands out as a cost-effective state for initial installation and subsequent installation. Do you think Colorado is suitable for e-commerce and especially Amazon business?
The state of Colorado reduced the initial filing fee to 1 USD this year. From this perspective, it is a very logical and economical state.
However, if you are going to do business for Amazon, there may be a problem with the address. In this state, Northwest does not receive the address verification letters sent from Amazon when opening an account. If an llc for Amazon is to be formed in Colorado, you can rent a private address from a different platform and set up in this state.
Thank you for your contributions and detailed analysis...
Mr. Şakir, you mentioned state income tax in your article. But I know that state income tax is paid only when we have a physical connection in the state where we formed the company. Additionally, in Montana, the one-time filing fee is $35 and the annual state fee is $20. It is 115 dollars excluding sales tax, federal income tax and registration agent. Maybe you made a mistake in the calculation? Also, I have no information about local sale tax. I would be happy if you explain.
Hello,
I established a company in Wyoming and I need to fill out the annual report within 2 months. I didn't exceed 200 transactions or $100k for the first year. In 2021, I had a customer from Massachusetts. Is the tax calculated at 6.3% or the 4% Wyoming tax? I fill out the annual report every May. Do I include the sales I made until May or the income in 2021 in the report? Don't I just fill out the annual report and file sales tax?
You don't have to pay sales tax. You do not need to pay income tax, you just need to declare your income and expenses in 2021 by filling out form 5472.
I applied for ITIN from the IRS 1.5 months ago. I filled out forms 1040 NR and 1040 Schedule C. An accountant I know was saying that I didn't need to take any further action this year. Do I need to fill out Form 5472? And I filled in the tax amount I had to pay on the 1040 form. Do I need to pay with the ITIN number I received it from?
You have already made a tax declaration, so there is no need to do so, but it would be beneficial to ask your accountant friend.
Hello, when buying products from Amazon, the sales tax is higher than these rates. For example, I sold a product worth 14.88 dollars in California and paid 1.53 dollars in sales tax. When I calculate it as a percentage, a rate of 14.88 / 1.53 = 9.76 appears, but here it appears 7.2%. Do you know the reason for this?
We don't know for sure, but could Amazon have deducted an additional service fee because it refunds and collects taxes?
Hello
There is another issue that no one usually talks about or doesn't talk about because they don't know. In Usa, each state has a sales tax (sales tax-VAT) rate. This rate applies to residents of that state. The VAT rate in California is exactly 7.25%. There may have been a small % increase later.
Anyway. I said that this sales tax rate is applied to those residing in that state, but there is one more condition: the seller must be a registered seller in that state. In other words, when a buyer in California purchases goods or services from a seller registered in California, the VAT that will be applied is 7.25%.
But what if the seller is a registered dealer in another state? Then an additional tax comes into play, which we call local sales tax. In addition to the sales tax of each state, there are also local sales tax rates. These rates vary by state. In order to ignore this variability, there is a rate called average local sales tax. This rate is 1.57% in California. And sales tax + average local sales tax gives us the combined sales tax. This makes 7.25% + 1.57% = 8.82% for California. In other words, if a person residing in California buys a product or service from a state outside California, the average VAT rate he will pay is 8.82%.
Here, the following comes to mind: For a person residing in California, "If this value is an average value, then what is the maximum tax I will pay?" For this, there is a maximum local sales tax rate for each state, and a local sales tax above this rate cannot be applied. This rate is 2.50% for California.
I understand your registered business is not in California. Therefore, the total sales tax rate of 7.25% + 2.50% = 9.75% was calculated for the $14.88 product you sold. As you said, this is $14.88 / 9.75% = $1.53.
Add the maximum local sales tax together with the sales tax in states other than the state where your business is registered and calculate it as "total sales tax". This way, you can know the maximum sales tax that will be allocated. It can be below this, but not above it.
Greetings, I opened an individual store on Ebay Us. My question is, when I list a product, for example, the tax in Florida is 6% and in Oregon it is 0. Does Ebay deduct this tax from me? In which state is it most logical to sell?
Ebay collects sales tax from the customer in 46 states on your behalf and pays it to the state. That means you don't have to do anything, you just have to pay income tax if you have it.
A guideline regarding taxes for sellers on the Ebay website. The translated version is below.
”
If you sell to buyers in the United States, some jurisdictions may require you to collect applicable Internet Sales Tax on your transactions. As of July 1, 2021, a total of 46 jurisdictions require the collection of sales tax. In such cases, eBay collects and remits Internet Sales Tax on your behalf.
Learn more about Internet Sales Tax on our help pages or from your tax advisor.
Starting in November 2019, the way taxable transactions are processed and how taxes are charged for remittances will change as follows:
In jurisdictions where eBay is required to collect Internet Sales Tax from buyers, order totals submitted for processing will reflect the gross order amount including tax.
After payment, the tax amount will be automatically deducted for remittance to the relevant tax office.
A record of the sales tax portion of the order will be available on the Seller Central Order details page and in our Download order report.
Please note that applicable tax will continue to be paid by the buyer and you do not need to take any action. These changes do not apply to merchants in managed payments.
”
Link where the article was published: https://pages.ebay.com/seller-center/service-and-payments/tax-information.html#:~:text=Will%20eBay%20charge%20Internet%20Sales,sale%20price% 20of%20your%20items .
Hello, do you recommend Wyoming or Delaware for Amazon Usa? They say that Wyoming is more advantageous due to its faster installation and lower costs during the pandemic process, but I am not sure, there is a lot of information pollution on the internet.
Hello,
Amazonians generally prefer Wyoming. Your Wyoming LLC will be formed in approximately 5-6 days (maximum). Delaware has become less preferred because its annual costs are high (Delaware $300) and the installation time is longer than Wy. However, the choice is yours of course.
Hello. It is calculated according to the rates of the state where we formed our company or according to the rates and borders of the state where our customers are located.
Hello, sales tax is based on the state where the customer purchasing the product is located.
Then there is no point in forming the company in Delaware because sales tax is zero. The costs are high. Customers can come from any state. What is the reason why people concentrate there? Am I thinking wrong?
Delaware is preferred for larger and more serious projects in order to receive investments for the future. Also, in case of possible lawsuits, Delaware laws are more supportive and protective of companies than other states. There is also a matter of confidentiality. Apart from these, the state does not matter as a foreign company, which is why states with low annual expenses are preferred for enterprise projects.
This is an absolutely correct observation, I congratulate you. I see the Delaware issue as if a crazy person threw a stone into a well. VAT, which we call sales tax, is a type of tax that concerns buyers. There is no advantage or disadvantage to sellers. If you are going to buy products from a wholesaler in the USA for the company you formed in the USA, then you will be the buyer and it is your business. The most important issue when choosing a state as a seller is the state income tax, which we call incom tax. One of the states where this is zero and the annual filing fee is low and the installation cost is affordable is Wyoming. I send and sell products from China to Amazon in the USA, Wyoming was the best one for me.
Mr. Şakir, why did you choose Wyoming for the FBA model in Amazon? Normally, the fee for company establishment is $100 and Franchise Tax is $50 (every year), right?
Wouldn't it be more appropriate to have a Kentucky establishment tax of $40 and a Franchise Tax of $15 (each year) instead
? Is there a special reason why you chose Wyoming?
I'm also thinking of starting the FBA model, that's why I'm asking,
thank you.
Hello.
It's too late, but I wanted to write it in order to benefit someone who will come later.
While doing research, I did not choose any state with income tax. In 2022, income tax in Kentucky was 5%. 0% in Wyoming
I chose Wyoming because I do not pay state income tax in the long term after 3-5 years (Federal income tax is always paid). Also, I don't do arbitrage. That's why I'm not interested in the 5.33% sales tax in Wyoming.