US consumers have to pay a state tax when checking out at AliExpress. However, there are many ways to avoid paying this tax and save a few bucks.
State sales tax has been gradually implemented in different states. This tax is collected by foreign sellers such as AliExpress from American consumers.
There are currently 45 states in the US that impose the sales tax. In some cases, these taxes can affect your shopping experience drastically.
Luckily, even if you live in one of the 45 states that impose this tax, you are only charged sales tax if Alibaba Group has a sales tax nexus or economic presence in your state.
Here’s everything you need to know about AliExpress sales tax for US shoppers and how to avoid it.
If you are in the UK or European Union, you may refer to Everything About AliExpress VAT in the EU and the UK and for a refund guide AliExpress Refund FAQ: Tips On How To Successfully Get a Refund.
- VAT Vs. State Sales Tax: Is It the Same Thing?
- What is Sales Tax Nexus?
- What Are the Rates of State Sales Tax?
- AliExpress Sales Tax Exemptions
- AliExpress Sales Tax: How It Works
- How Does AliExpress Collect Sales Taxes?
- What if I order a product from a US warehouse on AliExpress?
- Why am I charged sales tax on AliExpress?
- How to Avoid Sales Tax on AliExpress?
- AliExpress Customs Import Taxes
- Customs Import Taxes on Gift Packages
While you’re at it, here are some comprehensive guides to a safe and successful AliExpress and Alibaba shopping along with a comprehensive reply to the most common Q&As in AliExpress Disputes: A Comprehensive Q&A guide.
VAT Vs. State Sales Tax: Is It the Same Thing?
VAT, short for Value-added Tax, and state sales tax have as many similarities in common as differences.
Both state sales tax and VAT are taxes imposed on merchandise purchased from a foreign seller or marketplace i.e those outside the consumer’s country.
VAT is the worldwide imposed tax on purchases from a foreign seller. More than 170 country requires VAT collection from all foreign sellers.
The US, however, is not among the 170 countries. In fact, it doesn’t have a national tax on goods purchased from a foreign seller or marketplace.
What it has, however, is a tax imposed at the state level known as state sales tax. 38 states have local sales taxes, and 45, in addition to Washington DC, have state sales tax.
The rates of VAT and state sales tax vary greatly. Because VAT is adopted at the national level, it generally has a fixed rate. State sales tax changes almost yearly and varies between the states.
The major difference between VAT and state sales tax is who pays the tax.
State sales tax is collected from the final consumer only. Businesses involved in the selling process, such as resellers, are exempt from paying this tax.
Conversely, VAT is collected from each transaction leading to the final consumer.
What is Sales Tax Nexus?
Sales tax nexus is when a foreign business has a significant economic presence in a state that has a state sales tax.
The significant economic presence can be in the form of physical presence, employees or salespeople, drop shippers, or inventories.
If a foreign business has any of these factors of economic presence or nexus in a state, they are required by that state to collect sales tax from US consumers.
AliExpress and Alibaba, AliExpress’s parent company, certainly have an economic presence in the US. AliExpress has warehouses and drop shippers all over the US, while Alibaba has U.S sellers and small businesses.
Therefore, they are required to collect sales tax.
It is noteworthy to know that unless your state has an AliExpress nexus, you will not be charged a sales tax on your AliExpress orders. This is true even if your state is one of the 45 states that have state sales tax.
What Are the Rates of State Sales Tax?
If you don’t live in Alaska, Delaware, Montana, New Hampshire, or Oregon, you probably have to pay sales tax when shopping from AliExpress. Find 2021’s sales tax rate in your state in the following table.
|State||State Sales Tax Rate||Rank|
|New Jersey (e)||6.625%||8|
|New Mexico (c)||5.125%||32|
|South Dakota (c)||4.50%||36|
Generally, the sales tax you would pay is calculated by multiplying your purchase price by the tax rate.
Note that the rates in the table above are the base rates, which means these are the minimum rates applicable by your state.
Your state’s sales tax rate can increase depending on the type of goods you’re ordering from AliExpress.
Some states exempt you from the tax if you’re buying groceries, prescription drugs, feminine hygiene products, or intangibles, such as Arizona, California, Florida, Iowa, Michigan, and more.
Other states exempt you from the sales tax if your order is under a certain value and in an eligible category of goods such as clothing.
Examples of these states include Massachusetts with a threshold of $175, New York $110, and Rhode Island $250.
Because all states have different regulations, there’s an exhausting list of exemptions based on the goods type of the purpose of the purchase.
It is best to learn about your state’s regulations before making any huge order from AliExpress.
There are other taxes that might incur besides state sales tax, such as customs import duties, import taxes, and others.
The best way to not end up paying more in taxes than your purchase’s value is to be well aware of what you’re owed in taxes and duties.
AliExpress Sales Tax Exemptions
Some people and organizations are exempt from paying sales tax.
As explained earlier, sales taxes are only paid by the final consumer. This is good news for small businesses and resellers because they will not be charged sales taxes when shopping at AliExpress.
Moreover, many states exempt charitable, religious, and diplomatic organizations from sales taxes.
Resellers that are eligible for sales tax exemption must provide an exemption certificate. The certificate must be approved by the state in which they operate.
Luckily, 38 states approved a Uniform Sales and Tax Resale Certificate.
When Shopping at AliExpress, you can provide this exemption certificate in order to not be charged the tax.
You might also use it to get a refund after you are charged the tax by contacting AliExpress Customer Support.
AliExpress Sales Tax: How It Works
AliExpress is required to collect sales taxes from US consumers who live in the 45 states that impose this tax since it’s a China-based marketplace.
Sometimes, the sales tax is included in the price or the shipping fees set by the seller. Most often than not, however, the sales tax is not included in either the price or the shipping fee.
When the tax is not included by the seller, AliExpress will notify you of the sales tax and its value before checking out.
AliExpress is required by U.S law to collect sales tax, but if you checked out without paying any taxes, you might be required to pay them by the customs of the post office that delivered your order.
To avoid any complications or paying twice, ask your AliExpress seller about any taxes or customs duties that you need to pay. Make sure whether the tax is included in the total of your order or if it will be collected by AliExpress at check-out.
How Does AliExpress Collect Sales Taxes?
Like VAT, sales taxes will be collected automatically by AliExpress. You will not have to do anything from your end if everything goes smoothly. Every time you make a check-out, the tax will be collected by AliExpress if not included in the item’s price by the seller.
What if I order a product from a US warehouse on AliExpress?
AliExpress has several warehouses across the US. When ordering products from a US warehouse, you might still be charged a sales tax for two reasons:
- If you live in a state that requires AliExpress state sales tax collection
- If the warehouse is located in a different state than yours. This is because state sales tax can be imposed on purchases between states.
Origin Vs. Destination Sales Tax
Origin sales tax and destination sales tax refer to which state’s rate is applied when an interstate purchase takes place, the seller’s or the buyer’s.
In the US there are 12 origin-based sales tax states: Arizona, California, Illinois, Mississippi, Missouri, New Mexico, Ohio, Pennsylvania, Tennessee, Texas, Utah, and Virginia.
If the seller is based in one of these states, he collects sales tax at the rate of his state.
If the seller is based in a destination-based sales tax state, all states except the 12 aforementioned ones, he collects sales tax at the rate of the buyer’s state, the destination of the order.
However, sellers are only required to collect taxes if they have nexus in the buyer’s state.
While you may avoid paying customs import duties, you might still be charged sales tax when buying from an AliExpress US warehouse. You might be also charged local sales tax in addition to state sales tax.
Why am I charged sales tax on AliExpress?
AliExpress is required by some states to collect state sales tax from US consumers. This sales tax will be remitted to the concerned state’s authorities.
How to Avoid Sales Tax on AliExpress?
If you live in a sales tax state and you are not a reseller, you might still be able to avoid paying sales tax. To avoid paying sales tax on AliExpress:
- Consider shipping your order to a no-sales tax state because AliExpress does not collect taxes on their behalf.
- Check if your state has an AliExpress or Alibaba nexus. If not, you will not be required to pay a sales tax.
- If you live in one of the states that have a threshold value for sales tax, such as Massachusetts, New York, and Rhode Island, try to keep your orders under that threshold in order to avoid paying the sales tax.
AliExpress Customs Import Taxes
All orders from AliExpress, i.e China, are imports that are regulated by the U.S Customs and Border Protection (CBP). The import duties and taxes vary depending on what you’re importing and its value.
The good news is, that there’s a value threshold for the import duties to be collected from you. AliExpress Imports below $800 will not be taxed by the CBP.
When your order is less than $800 per day, you will be exempt from paying sales tax in AliExpress. This includes all your purchases in a single day. If your order is shipped in more than one package or box, the customs might open them to verify their value and whether they exceed $800.
Other duties and fees might be charged by the CBP depending on your item, its value, and weight.
All duties and fees are paid at the post office that delivered your packages.
Customs Import Taxes on Gift Packages
AliExpress is required by many states in the US to collect sales tax from American consumers who make purchases on the marketplace.
Currently, there are 45 states that impose collecting states sales tax on foreign sellers. However, only sellers with nexus in the concerned state are required to collect taxes.
When buying from AliExpress, you will be charged a sales tax if you reside in one of these states.
The sale tax might be included in the price or shipping fee by the seller. It might also be charged directly by AliExpress before your check-out.
In addition to sales tax, you are required to pay customs import duties if your order exceeds $800.
You can avoid paying sales taxes at AliExpress by shipping your item to a state that doesn’t impose state sales taxes or a state with very little AliExpress economic presence.