US Sales Tax and Non-Resident LLC Owners: The 'Hidden Tax' That Has Nothing to Do With the IRS

Most non-resident LLC owners spend their first year worried about the IRS — the EIN, Form 5472, federal income tax. But there is a second, completely separate US tax system that has nothing to do with the IRS and nothing to do with your income: state sales tax. It is run by individual states, not the federal government, and it can apply to a foreign-owned LLC that owes zero US federal income tax. Many non-resident sellers only discover it when a state mails a bill for years of uncollected tax, plus penalties and interest.

Sales Tax Is a State Tax, Not a Federal One

Federal income tax and state sales tax are two different worlds. A non-resident LLC can be perfectly correct in owing no US federal income tax — no US office, no employees, no effectively connected income — and still be legally required to collect and remit sales tax in one or more states. The two questions do not overlap.

Sales tax is also structurally different. It is a tax on the buyer that the seller is responsible for collecting at checkout and passing on to the state. You are not paying it out of your profit. But if you fail to collect it when you should have, the state can hold the business liable for the amount you should have collected — money you never actually charged your customers.

What Changed in 2018: South Dakota v. Wayfair

Before June 2018, a business generally had to collect a state's sales tax only if it had a physical presence there — an office, staff, or inventory. In South Dakota v. Wayfair, Inc., decided on 21 June 2018, the US Supreme Court overturned that physical-presence rule. States may now require out-of-state sellers to collect sales tax based on "economic nexus" — simply a volume of sales into the state — with no physical footprint required.

This is the part that surprises non-residents: it applies regardless of where the seller is located. A seller in Dubai, Lagos, or Karachi shipping to US customers can carry the same obligation as a seller in Ohio. There is no foreign-seller exemption.

Economic Nexus: The Thresholds That Trigger Registration

Most states use a threshold of $100,000 in sales into that state over a 12-month period. Once you cross it, you must register, collect, and remit. Historically many states added a second test of "200 separate transactions," but that test is disappearing fast: Utah removed it in July 2025 and Illinois removed it on 1 January 2026, leaving sales volume as the only trigger.

Large states set higher bars. California and Texas use $500,000 in sales with no transaction count. New York is stricter in form, requiring both more than $500,000 in sales and more than 100 transactions. States also count differently — some count only taxable sales, others count gross receipts including exempt and wholesale sales. And the threshold is measured per state: you can have nexus in three states and none in the other forty-seven.

Marketplace Facilitators: Amazon, Etsy and eBay Often Collect For You

If you sell through a marketplace such as Amazon, Etsy, eBay, or Walmart, "marketplace facilitator" laws — now enacted in all 50 states and DC — generally require the platform itself to calculate, collect, and remit sales tax on your behalf. For a pure marketplace seller, that removes most of the burden.

Two traps remain. First, some states still require you to register and to count your marketplace sales toward your own economic-nexus threshold, even when the platform handles the actual collection. Second, the moment you also sell the same products through your own website — Shopify, WooCommerce, or a direct checkout — those direct sales are entirely yours to handle. The marketplace's collection does not cover them.

Why This Catches Non-Residents Off Guard

Non-resident founders are usually told, correctly, that with no US presence and no effectively connected income they owe no US federal income tax. That statement is true and completely irrelevant to sales tax. Sales tax follows the customer's location and your sales volume, not your residency or your income tax position.

The exposure is also cumulative. A state can look back over several years, and because sales tax is money you were supposed to collect from customers, the state can pursue the LLC for the full uncollected amount plus penalties and interest — even though that money never sat in your account. The longer it goes unnoticed, the larger the eventual bill.

What to Actually Do

You do not need to register in fifty states on day one. The practical approach is to know where your customers are and track your sales by state; understand whether you sell through marketplaces (often covered for you) or direct (your responsibility); watch the common $100,000 line and the higher $500,000 lines for the big states; and register only where you genuinely cross a threshold.

Many small non-resident sellers operating purely through Amazon or Etsy have little or no direct obligation. But the only way to know is to look at the actual numbers, state by state — not to assume that "no IRS tax" means "no US tax."

Have Questions About Your Own Situation?

Sales tax sits in a real blind spot for many non-resident LLC owners, and whether it applies to you depends entirely on what you sell, how you sell it, and where your customers are. If you would like to talk it through with the MP Partner experts team — no pressure, no hard sell, just clear answers — we are happy to help.

Book a free consultation with our experts →