Many entrepreneurs form a US LLC to run their e-commerce business tax efficiently and with international flexibility. But while the income tax question is often settled, there is a lot of uncertainty about another topic: sales tax and VAT. What applies to nomads with a US LLC who sell to US customers?
A tax-free paradise? The "zero-tax country" fallacy
At first glance it looks ideal: you no longer live in your old high-tax country but travel the world as a digital nomad. Your US LLC sells products through Shopify or Amazon FBA, directly to US customers. Since you are tax resident neither in your old home country nor in the United States, no income tax is due. Right?
Yes and no. Because even if there is no income tax, one question remains explosive: who levies VAT or sales tax, and when?
The basics: what is the difference between sales tax and VAT?
Sales tax (USA): In the United States, sales tax is not a national tax. Each state (and often counties and cities too) regulates its "sales tax" independently. It is charged to the end customer, mostly at retail, and typically lies between 4% and 10%.
Value added tax (VAT, EU): In the EU, VAT is a mandatory tax on almost all goods and services. It is charged at every stage of the value chain, and the end consumer ultimately bears it.
Important: The tax obligation does not depend on where your company is based, but on where your customer is and where the "place of supply" lies for tax purposes.
The typical case: e-commerce with US customers through a US LLC
Many nomadic entrepreneurs live outside the EU and sell physical products, such as dietary supplements or fashion, to US customers. The classic setup:
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A US LLC in Wyoming, New Mexico or Florida
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Amazon FBA or Shopify as the sales channel
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A warehouse in the United States
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End customers in the United States
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The entrepreneur lives in Bali, Dubai or Latin America
Result: → No US income tax, because there is no "effectively connected income" (ECI) and no US trade or business (ETBUS) → But: what about sales tax?
When is sales tax due in the United States?
After the Supreme Court ruling in South Dakota v. Wayfair, the United States introduced the so-called economic nexus principle. This means: even without a physical presence, a purely economic connection can make you liable for the tax, for example through sufficiently high sales in a state.
Each state has its own thresholds. In California, for example: from USD 500,000 in annual sales to customers in the state, you are liable for sales tax, regardless of how many transactions you make. The 200-transaction threshold does not apply there. In other states, the threshold is sometimes as low as USD 100,000.
Important: If you store your products in US warehouses through Amazon FBA, that counts as a physical presence ("physical nexus") in several states. Even if you do not reach the economic nexus thresholds, you still have to register as soon as your goods are stored there.
Platforms such as Shopify and Amazon partly offer built-in solutions for collecting sales tax, but they do not release you from the obligation to register and remit in the states concerned.
What about the EU? VAT can apply here too
Many nomads think: I'm out of the EU, so EU VAT is no longer an issue. But be careful: VAT follows the place of consumption, not where you as the entrepreneur are registered.
If you sell to end customers in the EU with your US LLC, whether digital products or physical goods, you are generally liable for VAT in the customer's country.
That applies, for example, to:
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Selling online courses, PDFs or software (digital content) to B2C customers in Germany, Austria or France
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Shipping physical products from an EU warehouse to private customers within the EU
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Importing physical products from non-EU countries to end customers in the EU (import VAT and possibly a local registration requirement)
VAT applies to physical goods as well: you have to declare it correctly and, where necessary, report it to the customs authorities.
OSS: the One-Stop Shop for EU-wide VAT obligations
Since July 2021, entrepreneurs with EU B2C customers can use the so-called OSS (One-Stop Shop) scheme. It lets you register in just one EU country to handle VAT obligations for all 27 member states centrally.
The OSS scheme applies not only to digital content but also to shipping physical goods within the EU, for example if you use an Amazon FBA warehouse in Poland and deliver to customers in France or Germany.
The requirements:
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Registration in one EU member state (for example Estonia, Ireland or Cyprus)
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Possibly a fiscal representative, if you yourself are not established in the EU
When does EU VAT NOT apply?
If you sell exclusively to B2B customers with a valid VAT number, you can invoice without VAT under the reverse charge mechanism. That applies to digital and physical supplies alike. But: B2C sales are always taxable, regardless of where your company is based.
What happens if you don't comply?
If you do not register and do not remit tax despite being liable, you face:
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heavy fines in the EU or the United States
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forced registration by the tax authorities
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back payments including interest and penalties
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your Amazon, Shopify or Stripe account being blocked
In the United States, the states increasingly rely on platform reports and AI-supported audits. In the EU, enforcement runs through DAC7, payment service providers and the customs administration.
What solutions are there?
1. Sales tax registration in the United States: Use services such as TaxJar or Avalara to identify the right states and register your LLC.
2. A VAT strategy for the EU: Register correctly in the OSS system or through local tax advisers if you sell regularly to B2C customers in the EU.
3. Automated collection on platforms: Use the built-in sales tax and VAT tools on Shopify, Etsy or Amazon, but check regularly yourself that everything is working correctly.
4. Restructuring: In many cases it makes sense to run two separate entities, for example a US LLC for US customers and an EU structure for EU customers. We are happy to advise you on possible setups.
Freedom from VAT does not happen on its own
Many people believe a US LLC lets them escape every sales tax obligation. Often the opposite is true:
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In the United States you are liable for sales tax above certain sales thresholds or because of warehousing.
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In the EU you are liable for VAT on B2C sales (physical and digital alike), even if you do not live there yourself.
Sales taxes are complex worldwide, but with a good structure the pitfalls can be avoided, provided you know the rules and set yourself up cleanly.
Our solution: we make your US LLC truly tax compliant
At Mount Bonnell Advisors in Austin, Texas, we have supported international entrepreneurs in structuring their US LLC for many years.
What we can do for you:
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Formation and setup of your US LLC
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Review of sales tax risks in the United States
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Support with VAT and OSS for EU sales
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Support with Shopify, Stripe, Amazon and the like
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Structuring for scalable, international setups
Important: We do not offer free initial calls. But you can book a paid initial consultation online at any time, held in English, and we will clarify your individual situation quickly and concretely.