As a business, you have an obligation to identify the states or provinces and countries where you have tax obligations and need to register to collect tax (referred to as nexus in the US). Registration requirements vary by jurisdiction, and you can trigger it in a few ways, including, but not limited to:
- Building offices
- Employee locations
- Inventory locations
- Products sold
- Buyer locations
When you’ve met the requirements to start collecting tax in a local jurisdiction or foreign country, you should register with that jurisdiction before you begin collecting. Typically the registration process requires submitting general business and industry information (like your product catalog), and financial information (like total sales). The time it takes to complete a registration varies by jurisdiction. Additionally, some jurisdictions might require you to file returns even if you don’t have any collected tax to remit. Stripe recommends you consult with your tax advisor to determine your businesses tax obligations in regard to registering for indirect or consumption tax.
Where and when to collect tax
As your business sells into new markets or sets up new offices, you should monitor how this impacts your obligations. If you’re selling into a new country, you may have tax obligations there even if you don’t have a physical prescense. You should also monitor regulatory changes to these requirements. Examples of significant regulatory changes would be the Wayfair decision in the US which laid the foundation for businesses to register, collect, and remit tax across all the markets they sell into, no longer limiting tax obligations to markets where they have a physical presence, known as “economic nexus” in the US. In the European Union, an important upcoming regulatory change is the VAT E-commerce package that came into effect July 1, 2021, which implements new rules for selling physical goods online.
For example, as of April 2019, a business with no physical presence selling into Connecticut, should register to collect tax after surpassing 200 transactions and 100,000 USD in sales to customers in Connecticut in the current or previous full year. If they don’t have any other nexus triggers in Connecticut, they wouldn’t need to register until that point.
Another example is the introduction of new registration requirements for non-resident businesses supplying digital products or services to consumers in Canada. As of July 2021, these businesses must register for GST or HST and collect and remit the tax on their taxable supplies to Canadian consumers.
List of state and country registration sites
You can leverage the following websites to seek more information directly from individual jurisdictions, or to start registering.