As a business, you have an obligation to identify the states 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 have 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 may require you to file returns even if you don’t have any collected tax to remit. We recommend you consult with your tax advisor to determine your businesses tax obligations in regard to registering for sales tax, VAT, or GST.
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. That means even if your business is based in one country and selling into another, you may have obligations in that country even if you don’t have a physical presence. Additionally, monitoring regulatory changes to these requirements is just as important. 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 coming into effect July 1, 2021, which implements new rules for the selling of 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 merchants in Canada, supplying digital products or services (such as online subscription-based video streaming, and including traditional services such as legal and accounting services) to consumers in Canada. As of July 2021, these merchants 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.