North American sellers know that starting from July 1st, the Canadian tax reform officially took effect. In fact, in North America, the tax law changes that took effect on July 1 are not limited to Canada.
In the US states of Florida and Kansas, economic association laws have also come into effect starting on July 1.
So today we will tell you about the US tax reform and the impact of the US tax reform on Chinese cross-border sellers.
U.S. tax reform
On June 21, 2018, the U.S. Supreme Court decided to increase sales tax collection bills in various states, and began to collect sales tax on distance-selling online retailers arising from the economic connection law. This tax reform originated from a ruling in the Wayfair case of South Dakota.
With the explosive growth of online retailing, Wayfair’s decision overturned long-standing physical taxation rules; these sales levies could generate $8 to $26 billion in revenue for state and local governments
Almost every state has now adopted the Economic Connection Law, and the taxable sales threshold in most states is 200 transactions per year or $100,000 in sales.
The impact of U.S. distance sales taxation on Chinese cross-border sellers
U.S. states have not enforced remote sales tax collection laws on actual sellers, but placed the responsibility for collection on e-commerce platforms, such as eBay or Amazon.
Before Wayfair’s decision, foreign inbound sellers did not need to pay distance sales tax because they had no physical presence in the United States.
After Wayfair’s decision, foreign remote sellers are no longer affected by the absence of physical presence. As long as they form an economic relationship in the United States, they will need to pay sales tax.
Florida & Kansas adopted the Economic Association Act, which became effective on 2021.07.01.
The company’s taxable distance sales in the previous year exceeded US$100,000, and it must register and collect and pay sales tax.
Missouri’s Economic Association Act took effect from 2023.01.01.
Need to register SalesTax in states that exceed remote sales
➢ Then monthly/quarterly sales tax declaration
➢ Need to add sales tax to the price of goods sold
In addition to sales tax, cross-border e-commerce sellers need to declare and pay income tax in the United States.
U.S. sales tax rate & distance sales limit
