Home / Forums / e-commerce Forum / Sweden Company; Do I need to pay sales tax to the US? Do I need Resale tax ID?
- This topic has 3 replies, 2 voices, and was last updated 3 months, 2 weeks ago by Vivian .E.
Hi, i saw your blog posts and loved the content i had a question which is very important to me. So i own a ecommerce business which uses dropshipping method and my company is based in Sweden however i have suppliers in US with warehouses and they send the products to my customers, non of these products are actually mine and i only use their inventory however do i need to pay sale tax to US? also some suppliers ask for a tax ID/ resale ID before starting to work with me and is that something i can get even if my business is based in Sweden. Thanks!
Hello, Thanks for loving the blog’s content! I’m a Lawyer but I’m not a US Attorney but I’ll answer your questions from experience. You can try to contact a US attorney for legal advice. Okay that said, You do not need to pay sales taxes or income taxes in the US since you do not sell in the US market and your Company isn’t registered in the US. You’ll need to pay sale taxes in the EU once you reach a sale threshold of 10,000 Euros! When suppliers ask for your Tax ID, go ahead and give them your Sweden tax ID for your company! Some suppliers may ask that you fill and submit the IRS W8-Ben form. See what the form looks like on this link;
This is basically so they can report to the US that you are not a business registered in the US and claim treaty benefit and be excluded from paying 30% US income tax! This treaty benefits applies if your Country (Sweden has a double tax exemptions treaty with the US. Yes, Sweden has a double tax exemption treaty with the US!
You can see a list of countries that have a double tax exemption with the US here;
Let me know if you have any other questions
Thanks for answering my questions and this was very insightful. I appreciate it a lot. Is resale Tax ID the same as that because I noticed some of these suppliers ask for that as well? Also as a foreign company can I register myself in US but use a Swedish bank account for capturing transactions. Why I ask this is because I want to use a payment vendor from US and they require that I register my company in US for providing their services so I was wondering if that is even possible.
No, a resale Tax ID is different from that!
I’ll try to explain this to you in simple terms so that you’ll easily understand it.
There are different types of taxes!
1. Company income tax which is a flat 30% rate! As an Alien business (a non US company), because your country (Sweden) has a Double tax exemption treaty with the United States, your Sweden Company is not required to pay income tax in the United States! However you may need to fill form W8-Ben to the IRS to officially verify your status as an Alien Company.
In this case, use your Sweden Tax ID. Filling Form W8-Ben is not difficult as most US suppliers that need that form for you will basically hand you the form, to fill it, sign it and submit it to them, they in turn will submit it to the IRS! For example Amazon presents this forms to their sellers where necessary.
Note that you can register a US company! But then your US Company will need to pay to Income tax (as it is not an Alien Company) and yes, you can have a US company and receive money via your Swedish bank!
You may be able to register a US company online. For example, in Canada foreigners can register a Company entirely online in the Province of British Columbia. I believe it’s possible as well in the US.
2. There is a Sales taxes; Sales is nearby to be remitted to the IRS by sellers. For example as A Dropshipper if you sale to the US, you will need to collect sales tax and remit it to the IRS once you’ve reached a defined sales threshold (Depending on the US state where you sell products or have an economic nexuSelker s). Although there are some US states with 0 sale tax rate. In most cases you’ll be charging this sale tax on your customers and then remitting it the IRS. Once you’ve reached the sale threshold in a particular US state, you’ll need to register for a sales tax account in that State to remit your sales tax account, which you’ll invariably be charging your customers in that state! The sale tax rate you can charge and remit is also defined by each State!
On the other hand, if you are a reseller, who is buying products to resale and purchasing the product from a wholesaler/supplier. The wholesale will need your Resale tax ID. Your resale tax ID means that the Wholesaler will not charge you as his Customer any sales tax on the products for which you present a Resale ID before purchasing the product from him!
This policy is mainly for the US Government to avoid double taxation! Since you as a reseller will still charge sale taxes on your Customers then you shouldn’t pay another sales tax to the Supplier on the same product!
If the product you are purchasing is not for
Resale but for your own use and consumption then you would not need to present a Resale ID and you can be charged Sales tax when you purchase the product!
Note that for most US states to issue you a Resale ID, you’ll need to show that you have a Seller’s sales tax registeration in at least one US State where you charge and remit taxes!
Most big Retailers who purchase inventory in bulk from US Wholesaler can easily meet these requirements. If you are a small Dropshipper have a few options, I can suggest for you;
1. Check if these are requirements you can meet
2. Research if there are any US states with more relaxed requirement where you can easily get a Resale ID (I don’t know any one off my head, right now)
3. work with Suppliers who understand the nature of the dropshipping model and make their requirements more relaxed for their Dropshipping Partners. Here is list of Dropshipping Suppliers you may consider;
Let me know if you have any other questions! Happy to help!
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