Sooner or later every client asks: "And what about VAT in the US?" The short answer is in our primer: there is no VAT on the European model; instead, the states levy their own sales tax. The long answer is the reason for this article, because between "does not exist" and "never affects me" there is, in 2026, a mechanism you should understand once as a service provider or seller of digital products: economic nexus, the transaction thresholds that are being abolished, the SaaS question and the marketplace rules. Here is the practical guide, as of August 2026, with an honest rule of thumb for your business model at the end.
Why "US VAT" is the wrong question
Sales tax is not a federal tax but a matter for the individual states: 45 states plus Washington D.C. levy a statewide sales tax, five do not (New Hampshire, Oregon, Montana, Delaware and Alaska, although in Alaska local governments levy their own rates). Combined state and local rates are typically between 6 and 10 percent; the Tax Foundation keeps a continuously updated overview (a secondary source). The difference from the EU system is fundamental: sales tax applies only at the last stage, on the sale to the end customer; there is no input tax deduction, no tax at every stage of value creation, no VAT number logic. And, most important for you: by default it taxes goods, not services. So if your LLC sells consulting, design, development or marketing, you start out in the uncritical league of this system. Why that is and where the exceptions lurk, in detail below.
Wayfair and economic nexus: when a state can reach you at all
Until 2018 the rule was: a state could only require companies to collect sales tax if they were physically present there, with an office, warehouse or staff. The Supreme Court's decision in South Dakota v. Wayfair ended that world and established economic nexus: sales into a state alone can trigger the duty to register, without any physical presence. Since then every sales tax state has defined its own thresholds, and the landscape in 2026 looks like this:
The standard threshold is 100,000 dollars in annual sales into the state in question. Some large states are considerably higher: according to its tax authority, the CDTFA, California only requires registration from 500,000 dollars in sales of goods into the state, Texas likewise from 500,000 dollars, and New York combines 500,000 dollars and at least 100 transactions as a double condition.
And the famous 200-transaction threshold, which used to sit next to the revenue threshold almost everywhere and pulled small sellers with many cheap sales into the net? It is in retreat: as of August 2026, 17 states have dropped it without replacement, including California, Colorado, Illinois (from January 1, 2026), Louisiana, Massachusetts, North Carolina, Utah, Washington, Wisconsin and Wyoming; Kentucky followed on August 1, 2026. Avalara keeps the continuously updated list (a secondary source from a compliance provider, as of August 3, 2026). In a good dozen states the transaction threshold still exists, though, so you cannot ignore it across the board if you have many small sales into individual states. The direction is clear all the same: increasingly, only revenue per state counts, and the bar is at six-figure amounts per state and year. If your US revenue is spread across many states, you often stay below the threshold everywhere, even though your total revenue is substantial.
Services: why B2B work is usually uncritical
Now the part that concerns the typical service LLC, the freelancer as well as the agency: most states do not tax services at all, or only individual, expressly listed categories. Consulting, strategy, copywriting, software development as a work for hire, design, coaching: for services like these to business clients, the large majority of states simply charge no sales tax, even if you were to cross the revenue threshold. Then there is practical reality: as a solo service provider or small agency working remotely, you rarely reach 100,000 dollars in a single state, because the threshold applies per state, not US-wide.
The exceptions are part of being honest: Hawaii, New Mexico, South Dakota and West Virginia tax services as a matter of principle; there, tax on services is the norm with exceptions rather than the other way round. And on July 1, 2025, Maryland introduced a 3 percent tax on data and IT services that also covers tech services provided remotely to customers in Maryland. That does not change the rule of thumb, but it shows the direction: the states are looking for money, and services are slowly coming into view. For you that means: remote B2B services = stay relaxed, but check your client list against the special cases once a year. The distinction matters too: the sales tax question is completely separate from whether your LLC triggers US income tax; one is a consumption tax on your customers, the other an income tax on your profits.
SaaS and digital products: here it depends on the state
With software subscriptions and digital goods the comfort ends, because the states have added a great deal here in recent years. Around half of the sales tax jurisdictions now tax SaaS in some form. A few solid examples instead of an invented 50-state table:
New York treats access to software as taxable "prewritten software", whether installed, downloaded or used remotely; the tax department explains this in its Tax Bulletin, and an appellate ruling from January 2026 has just confirmed the line again. Texas classifies SaaS as a "data processing service": taxable, with a flat 20 percent exemption, so that effectively 80 percent of the subscription price is taxed. Pennsylvania, Washington, Massachusetts and Ohio tax SaaS as well. On the other side are California and Florida, which do not tax SaaS because no tangible property is transferred. E-books, online courses and downloads follow the same patchwork logic with each state's own definitions; Louisiana, for example, has taxed digital products since the beginning of 2025.
What does that mean in practice for your SaaS or your digital product business? First: the issue only becomes relevant when you cross the nexus threshold of a state that taxes SaaS, for example more than 100,000 dollars in annual revenue with customers in Pennsylvania, or more than 500,000 dollars with customers in Texas or New York. Second: from that point it is not a disaster but administration, registering, collecting and remitting, like millions of US companies do. Third: modern payment and billing providers calculate the tax automatically at checkout, but the duty to register remains yours.
Marketplace facilitators: when the platform collects
If you sell through Amazon, Etsy, eBay, app stores or comparable platforms, the third pillar of the system applies: since Missouri followed as the last state on January 1, 2023, every sales tax state requires the marketplaces themselves to collect and remit sales tax for their sellers. For you as a platform seller, that means the tax on your marketplace sales is normally dealt with before you ever see it. Two footnotes keep this from turning into false complacency: in many states, marketplace sales still count toward your own nexus threshold, which matters as soon as you also run your own shop. And if you have goods in US warehouses through Amazon FBA, the warehouse gives you physical presence in several states; the FBA article covers that case, and the e-commerce piece the logic for goods as a whole.
Registration and filing: what the duty looks like when it arrives
Suppose you do cross a threshold one day: you then register the LLC with the state's Department of Revenue for a sales tax permit, collect the tax at checkout from then on and file returns, monthly, quarterly or annually depending on volume. That is diligence, not rocket science, and it can largely be automated. On top of that there is a real simplification: the Streamlined Sales Tax program (SST), with 24 member states, offers a central, free registration for all member states, and remote sellers without physical presence can use certified service providers (CSPs) there, whose costs are borne by the member states: calculation, filing and remittance then run practically without you. The catch: the big four (California, Texas, New York, Florida) are not SST members, so direct registration remains there. Our practical order for clients: measure first (which state, how much revenue, which product category), then register, never the other way round. Register as a precaution in ten states where you owe nothing and you buy yourself ten filing duties with nothing in return.
What all this is NOT: EU VAT
The most common mistake in first calls is mixing up the systems, so here it is as clearly as possible: sales tax only concerns your sales to US customers. Your invoices to European clients have nothing to do with it; they follow EU logic, which we have written up separately: reverse charge for B2B invoices to EU business clients, OSS duties for digital B2C sales into the EU. The two worlds share no form, no threshold and no authority. An LLC can be completely below all nexus thresholds in the US and still have OSS duties in the EU, and vice versa. Keep the two questions cleanly apart and you have already understood half of compliance.
And because it belongs in the same drawer: this article is aimed at people who have moved abroad or are moving, and whose residence question is settled. If your residence question is not settled yet, sales tax is your smallest issue, because the LLC's profits are taxed where you live in any case; the legal position is explained here. Residence first, then the tool: that order stays.
The honest rule of thumb for each business model
Freelancers and agencies with B2B services: as a rule, no sales tax duty, anywhere. Once a year, check whether meaningful revenue falls into the service-taxing states (Hawaii, New Mexico, South Dakota, West Virginia) or under Maryland's tech tax. SaaS providers: uncritical until revenue per state reaches six figures; from then on, keep a list of states, with New York, Texas, Pennsylvania and Washington as the usual first candidates. Sellers of digital products to US consumers: like SaaS, with an even more colorful set of definitions; if the platform sells (course portal, app store, marketplace), the facilitator usually collects. E-commerce with goods in the US: the only model where sales tax belongs on the agenda from the start, especially with FBA warehouses. And for all four: sales tax is an administrative issue, not a tax risk to your model. It does not reduce your profit, because it is added to the price and passed through; it only costs discipline.
Your next step
If your business is a B2B service: order your LLC and put this topic on the back burner with a clear conscience; you get the invoicing and compliance templates in the package. If you sell SaaS, digital products or goods in the US, or are about to, book a consultation with Sebastian, held in English, before your US revenue reaches six figures per state: one hour, honest feedback, 15-minute guarantee, and if needed we take over registration and ongoing filings as an engagement.
About the author
ZeroTax LLC is a service of Mount Bonnell Advisors in Austin, Texas.
Founder of Mount Bonnell Advisors, Austin, Texas. Has answered the question about "VAT in the US" so often that the answer had to become an article of its own.
Book a consultation with Sebastian (held in English only)