Reply To: Sweden Company; Do I need to pay sales tax to the US? Do I need Resale tax ID?
You’re welcome!
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!