VAT vs U.S. Sales Tax: What International Sellers Need to Know

The single biggest difference: the U.S. has no VAT and no national sales tax. Each state runs its own system, and you can create a tax obligation simply by selling enough into a state — even with no office, staff, or warehouse there. For brands used to a single VAT regime, this is the part that most often catches them off guard.

VAT vs U.S. sales tax, in plain terms

Under VAT, tax is collected at each stage of the supply chain under one national system, and businesses reclaim input VAT. U.S. sales tax is fundamentally different: it’s a single point-of-sale tax charged to the end consumer, administered separately by each state (and sometimes by counties and cities on top).

There is no federal sales tax and no equivalent of reclaiming input VAT. What you have instead is dozens of independent jurisdictions, each with its own rate, rules, product taxability, and filing schedule.

Economic nexus: the concept that trips brands up

“Nexus” is the connection that requires you to collect tax in a state. Since a 2018 Supreme Court decision, most states apply economic nexus — meaning once your sales into a state cross a threshold (commonly around $100,000 in sales or a set number of transactions), you’re required to register, collect, and remit there. No physical presence needed.

For a growing brand, that means the number of states where you owe tax expands as you scale. It’s not a one-time setup; it’s an ongoing compliance operation.

What this means operationally

• Registration in each state where you have nexus, before you collect.
• Collection at the correct rate for each jurisdiction, which marketplaces like Amazon handle for marketplace sales but which you manage yourself for your own store.
• Remittance and filing on each state’s schedule — monthly, quarterly, or annually.
• Marketplace facilitator rules: for Amazon and Walmart sales, the marketplace often collects and remits on your behalf, but your own DTC sales and registration obligations remain yours to manage.

The practical takeaway

You don’t need to register everywhere on day one — you need a strategy for where and when nexus is triggered as you grow, and a system to stay compliant as the map expands. Treating it as an operational discipline from the start avoids expensive back-tax cleanups later.

Getting the U.S. tax foundation right is part of every market-entry engagement we run. A strategy assessment is the fastest way to see where you’ll owe and what to set up first.