US Sales Tax Registration for Foreign Sellers: Economic Nexus Rules and Steps

There is no federal sales tax in the United States. Each state, and many cities and counties, run their own, and a seller in Pune, Toronto or Mumbai can owe it without ever setting foot in the country. This guide to US sales tax registration for foreign sellers explains when your sales create an obligation, how the thresholds work in Illinois and Texas, and the order of steps to register and file. It reflects state guidance current in October 2026; thresholds and taxable items change, so confirm each state before you rely on it.

Who needs US sales tax registration for foreign sellers

You must consider registration if you sell taxable goods or services to buyers in a US state and either have a physical presence there or cross the state's economic threshold. Physical presence can be an employee, inventory in a warehouse, or an office. Economic presence is a count of your sales into the state. The tax belongs to the state of the buyer, not your home country, and it is separate from US income tax and from India's GST or Canada's GST/HST.

States tax different things. Illinois describes its retailers' occupation tax as a tax on selling tangible personal property at retail, while the treatment of software, digital goods and services differs widely between states, so each product line needs a taxability check.

What are the economic nexus thresholds?

For Illinois, a remote retailer is an out-of-state seller without physical presence. A retailer that fills any orders from inventory in Illinois is not a remote retailer. From quarters beginning after March 31, 2026, the test is run on a rolling quarterly basis. If you were registered only because you met the old 200-transaction test, the Illinois Department of Revenue said it would change your registration to voluntary use tax from January 1, 2026.

Texas says remote sellers below $500,000 are not required to hold a permit or collect, and that once you exceed it you must obtain a permit and begin collecting no later than the first day of the fourth month after the month in which you passed the threshold.

How to register, step by step

1. Map your sales by state. Pull 12 months of orders by delivery address, split taxable and exempt items, and compare each state's threshold.
2. Check marketplace sales separately. If a marketplace facilitator collects and remits for you, record those sales but they may not count toward your own collection duty.
3. Get your tax identifiers. An EIN helps; see our guide to getting an EIN as a foreign founder.
4. Register in each state. In Illinois, register with the Department of Revenue through MyTax Illinois using Form REG-1; the online route takes about one to two business days. Texas lets a seller located outside the United States send its application by email or fax.
5. Configure rates by destination. Illinois requires remote retailers to collect and pay destination-based tax. Use the state's rate lookup, not a single rate.
6. Collect, file and remit. In Illinois, file Form ST-1. Local filing schedules differ between states; our Illinois sales tax guide shows the Illinois flow.
7. Keep exemption certificates. Wholesale and exempt buyers must give you valid certificates; without them the tax is yours.

If you must register in many states, the Streamlined Sales Tax system lets sellers register for about two dozen member states at once. Illinois is not on its list of full or associate members.

Documents and information you need

• Sales by state for the last four quarters, taxable and nontaxable
• Business formation papers, EIN and a US or foreign address
• Product catalog with taxability notes
• A list of marketplaces you sell on and whether they collect tax
• Bank account details for state payments

Deadlines and penalties

State returns can be monthly, quarterly or annual depending on volume, and each state sets its own due dates and penalties. In Illinois, if a seller that does not meet the threshold collects destination-based tax after January 1, 2026, the amount should either be refunded to the customer or remitted to the state as Use Tax, and anything above the 6.25% state Use Tax rate reported as excess tax. Taxes collected from customers belong to the state, so unreported collections can lead to penalties and, in some states, liability for responsible individuals; keep clean books.

Country and state notes

Our comparison of GST and sales tax and the indirect tax filing comparison put the three systems side by side.

A worked example

Anita runs an online store from Pune that ships handmade textiles to customers across the United States through her own website. Over the last four quarters, her sales to Illinois customers totaled $130,000 and her sales to Texas customers totaled $320,000 (all hypothetical). Illinois crosses its $100,000 test, so she registers through MyTax Illinois and begins collecting destination-based tax, then files Form ST-1. Texas is below the $500,000 safe harbor, so no permit is required yet, but she tracks monthly totals. Her marketplace sales on a separate platform are collected by that platform, and she keeps the reports.

Mistakes to avoid

• Waiting for an assessment instead of testing thresholds each quarter.
• Charging tax before registering, which leaves collected money with no state account to receive it.
• Counting only your own website and forgetting other sales channels that no marketplace collects on.
• Assuming the marketplace handles everything, including states where the marketplace is not collecting.
• Forgetting that cross-border shipments may also involve customs and import rules, which are separate from sales tax.

How we can help

We map your sales by state, register you where required, set up filing calendars and reconcile returns to your books. For sellers in India or Canada we coordinate with your Chartered Accountant or Canadian CPA so GST, GST/HST and US sales tax are handled consistently. We are based in the Aurora, Illinois area and work with Illinois businesses as well as overseas owners. See sales tax and GST compliance, bookkeeping and accounting and cross-border tax. Multistate income tax is a different question, covered in multistate residency and nexus.

Frequently asked questions

General information only. It is not tax, legal, accounting or immigration advice for your situation, and rules change; confirm the current rules with the official source or a licensed professional in the relevant country.