Why the USA is ideal for dropshippers

Dropshippers who try to sell into the EU quickly discover that its regulations and patchwork of tax rules make dropshipping incredibly hard.

In the USA, on the other hand, getting your products to customers is far easier. In this article we explain the advantages of the US market and exactly how sales tax works. You will also learn how to form a US company simply and without hassle, or expand into the States with a business you already have.

1The advantages of the US market

The US is the largest economy in the world. But that is not the only reason dropshippers should set their sights on the USA first:

1. The USA is a single market. Around 342 million people live here, speak the same language and pay in the same currency. The EU has the euro, but its member states neither speak the same language nor all use the same currency.
2. The legal framework across the USA is the same. Of course there are differences between states, but taxation basically follows the same principle. In the EU you have to deal with the laws and regulations of many different countries.
3. Prices are higher in the USA than in the EU, and people are willing to spend more. On top of that, sales tax, the US equivalent of VAT, is not included in the displayed price, which lets you advertise lower prices. Americans expect tax to be added to the net price at checkout, while EU shoppers get annoyed when the price changes after the fact.

That last point, sales tax, is a key reason why dropshippers should look mainly to the USA. More on this below.

Here are the 10 most popular US states for foreign direct investment.

2Sales tax and dropshipping

Dropshipping involves three parties and therefore two separate sales. The graphic below shows how dropshipping works:

GRAPHIC

First, the customer orders the product from the seller (the dropshipper) and pays for it. The seller passes the order on to a company overseas, usually in China, and pays for the product, naturally at a lower price to keep a margin. The overseas company then ships the product directly to the end customer.

So the seller never physically touches the products, which raises the question of how all this is taxed.

First, the customer buys a product from the seller. The seller has to collect the sales tax of the relevant state. In some cases this is not necessary, which we cover further down.

In the second sale, you buy the product from a supplier, so this is a B2B (business-to-business) transaction. For this, you as a business should have a "resale exemption document" for each state you ship products to. That way you pay no sales tax. The supplier has to keep these documents on file.

3Nexus and the Wayfair decision of 2018

Nexus means connection, and it describes the link between a seller and the state it sells into. Before the US tax system was overhauled in 2018, sales tax only had to be paid if the seller had nexus in the state where the product was sold.

Back then, nexus meant physical presence. If you lived or ran a business in a state, you had to pay sales tax there. That made it easy for many e-commerce businesses to avoid sales tax almost entirely. Most orders naturally come from big states such as Florida, New York or California. Sellers only had to base themselves in another state, such as Wyoming, to pay almost no sales tax. To counter this, in 2018 the tax system and the definition of nexus were switched to economic presence. Now, if a seller exceeds a certain sales or transaction threshold in a state, it creates nexus there and has to collect and remit sales tax.

Each state sets its own threshold. In California it is $500,000 a year, in Georgia $100,000 a year. Some states also count the threshold as exceeded once you pass a certain number of transactions; 200 transactions a year used to be common. Many states have since dropped this transaction threshold, however.

As you can see, even high-tax states like California have very high thresholds. The sales levels that trigger sales tax registration are extremely business-friendly and generous. In the EU, by contrast, you have to deal with VAT registration in individual member states from your very first sale, which means far more admin.

So much for the first sale in dropshipping. In short: if you have nexus in a state, you must collect and remit sales tax. Where physical presence used to be required, economic presence is now enough. A popular platform for keeping track is Taxjar.com, where sellers can log their invoices and transactions on an ongoing basis and see whether they have nexus in a state.

You can find the exact sales and transaction thresholds that trigger registration in each US state, plus a detailed guide to sales tax nexus laws, on this page.

Read more about registration requirements for marketplace sellers in each state on this page.

4How resale documentation works

Now to the second sale in dropshipping. Once the seller has received an order and payment from the customer, it has to arrange for the product to be shipped. To do so, it orders the product from another company, whether in the USA or overseas. The key here is to obtain the right document confirming that it has nexus in the relevant state.

This resale documentation confirms that the seller is acting as a reseller, so it does not have to pay sales tax to the supplier. The supplier therefore needs to receive such a document in order to sell the product without sales tax.

Which document you need again depends on the state. What matters is that you have one for every state you deliver to. The following documents are usually accepted:

• In-state certificates: each state has its own certificates that are valid there. 
• Multi-state certificates: some states also accept these. You fill them out only once and they are valid in a large number of states. One example is the "Multistate Tax Commission" certificate, which is valid in 38 states.

In short, you need to obtain a document in every state where you exceed the thresholds confirming that the seller is a reseller, in other words an intermediary. Without it, the seller is treated like a regular customer and has to pay sales tax on its purchase too.

5Dropshipping in the EU

Compared with the USA, dropshipping in the European Union has become extremely complicated, especially since the introduction of the new e-commerce VAT package and the VAT changes that came with it. Where the USA has dropshipper-friendly rules, in the EU this business has turned into a real administrative nightmare.

Until mid-2021, no import VAT was due on goods worth up to €22. That exemption has now been abolished. Import VAT is now due on every product imported into the EU with a value of up to €150, and customs duty applies to higher-value goods. From 1 July 2026 until 1 July 2028, the EU is also charging a flat duty of €3 per item on consignments up to €150.

The EU-wide "One-Stop Shop" has also brought new VAT rules. Sellers used to register for VAT in individual member states only after passing certain sales thresholds, but those thresholds are now gone. VAT at the rate of each country is due from the very first sale.

Find out more about dropshipping in the EU on this page.

More details on the new e-commerce VAT package are here.

For dropshipping and e-commerce businesses, this means a substantial administrative burden in the EU. That is why the USA, the world's largest economy, is in many ways the more attractive option. Sales tax thresholds there are relatively high. Import duties, however, have followed a new regime since August 29, 2025: the de minimis exemption of $800, under which shipments entered the USA duty-free, has been suspended for all countries by executive order. Duties now apply to low-value shipments too and belong in every calculation.

6Dropshipping in the USA: two options

In this section we look at which company you need for dropshipping in the States. If you are wondering whether to form a new US company or which other structures might work, here is your answer.

As a dropshipper, you have two options in the States: either you form your own company in the USA, or you expand into the land of opportunity with your existing (European) business.

Which route you choose depends entirely on your situation and personal preference. Both are possible and legal, from a legal and a tax perspective alike.

If you are not sure which route suits you better, here are a few reasons that can speak for using a US company:

Risk and liability: Damage claims and product liability are a big deal, especially in the States. A US company ring-fences that risk. If something goes wrong, any lawsuit only affects the US corporation or LLC, and your business at home stays completely untouched.

Customers: Depending on your industry, a US company may come across as more trustworthy to American customers than a business with European contact details. Unlike a foreign company, it raises no worries about extra customs fees or long delivery times. It builds trust.

Investors/buyers: A US presence increases the value of your business. If you might sell the company one day, an American presence pays off. In the USA especially, finding investors is often much easier with an American subsidiary.

Taxation: Depending on your personal situation, a US company can have tax advantages.

Personal reasons: If you plan to move to the USA yourself, or simply want a second mainstay, forming a US company can make a lot of sense.

The only good reason to use a company in Europe is that you already have one. If you own a European business and want to avoid forming another company, or simply keep trading through your existing one, that is perfectly legitimate.

7Expanding to the USA as a dropshipper with your existing company

If you already have a business in Europe, using it to serve US customers may be the simpler route. In principle, there is nothing against this from a tax or legal perspective.

7.1How an existing company is taxed in the USA

As a rule, no US tax liability arises as long as the company has no permanent establishment in the USA; our sister firm Zerotax LLC specializes in exactly these structures without a US permanent establishment. So if you sell your goods as a dropshipper exclusively through a third-party platform, there is no taxation in the States. Instead, the company pays its taxes in its home country. The exception, of course, is sales tax. Depending on each state's rules, you still have to register once you exceed certain revenue thresholds or a certain number of transactions. Foreign companies can register without any problem.

When it comes to tax liability, though, a few points always need to be checked in detail, case by case. One is where the goods are located: a warehouse in the States could mean your profits are taxable in the USA. A support employee on the ground could also trigger US taxation.

Read more about how dropshipping and e-commerce profits are taxed.

8Forming your own US company as a dropshipper

The whole sales tax system may sound a little complicated at first, but at heart it is quite simple. With the right tools, you can easily keep track of the sales tax owed in each state.

To make full use of the US market, forming your own company in the USA makes sense for tax reasons. But which state is really a good fit for company formation, and how should you go about it?

At Mount Bonnell Advisors, we support you every step of the way with your company formation in the USA. From a tax perspective, a state like Wyoming is the clear recommendation. Some of the advantages:

• No state income tax
• No state corporate tax 
• A high level of privacy for managers

A quick word on location: we offer Jackson, in Teton County. Set in the Rocky Mountains, this town has the highest per-capita income in the entire USA, according to current figures. More and more wealthy people use it as a retreat from the stress of big-city life. Jackson is also a top ski resort and easy to reach by air.

So you can see that Jackson is an excellent location for forming a company. Of course, we support you at every step and help as best we can. If you form your company through the firm, we help you with the following:

• Formation of the company by an attorney on the firm's team
• Government fees and postage
• Applying for your US tax ID
• Opening an American bank account 
• Ongoing tax advice as needed

Forming a company in another country is certainly not easy. But the benefits for you and your success can be enormous.

Still have questions about life in the USA? You will find first-hand insights on topics like safety, health insurance, homeschooling and much more on our website.

9Choosing the legal form for your US company

As with any company formation, you need to choose a legal form. The USA offers several options, such as an LLC (limited liability company), a limited partnership or a corporation. For you as a dropshipper, the C Corporation is the right choice. Here is a brief look at its advantages over the other forms:

10The drawbacks of an LLC

First, a quick word on why we do not recommend an LLC. After all, the LLC is the most popular legal form in America, because the US authorities do not classify it as a partnership or a corporation: business owners are free to choose.

But that is exactly what can be risky for business owners outside the USA. While the USA leaves the choice to the owner, the tax authorities in your home country may not. They can classify the LLC differently, and if you live in Europe and your classification differs from theirs, this can lead to serious tax disadvantages.

So unless you plan to move your residence to the USA, you should not form an LLC.

10.1C Corporation

So what is a C Corporation? Broadly speaking, it is a stock corporation, comparable to a public limited company in Europe, and a popular legal form for business owners, not least because of its legal certainty. And while European public companies tend to suit larger businesses, a corporation can in principle be run by a single person. A corporation generally has several bodies and roles:

• Board of Directors
• Executive Officers
• Secretary
• Treasurer
• CEO
• President
• Shareholder Meeting

The Board of Directors sets the general direction of the company, meaning the corporation's strategic goals. The Executive Officers are more like regular managers: they make sure day-to-day operations run as intended and that the goals are pursued correctly. In a large company, different people will hold these roles, but that is not required. As a solo business owner, you can take on every role yourself or hire staff.

So if you are seriously considering company formation in the USA , we at Mount Bonnell Advisors setting up your company and ongoing support afterwards.

11Taking the profits out of a US company

That brings us to the last key part of this article: the taxation of an American corporation. This is where you see why it pays to form your company in Wyoming. There is no state-level tax here, so the corporation only pays 21% federal tax on its profits.

So how do you take the profits out? There are 2 ways:

1. Pay yourself a salary: if you register as a director, you can pay yourself a salary. In the US, this salary is not subject to income tax, and there are no social security contributions or other deductions. However, you also have to look at how your home country taxes it. If you live in a country with income tax, you will owe income tax on this salary there. It only becomes really attractive if you live in a country with no income tax, such as Dubai, where you receive the full director's salary.
2. Profit distributions: paying out the corporation's profits is a different matter. For one, the US levies a withholding tax. It is normally 30%, but tax treaties can reduce it, in many European countries to 15%. On top of that, you also need to consider the tax on investment income in your home country.

12Dropshipping in the USA: what this means for you

The USA is a great fit for dropshippers. Simple tax rules, a single unified market and the chance to earn high profits make the USA far more attractive than the EU.

And if you choose the right legal structure, you can take your profits out tax-efficiently too. Have more questions on this topic, or already have concrete plans to form a company in the USA? Don't hesitate to get in touch with us directly. Our E-Commerce & Dropshipping page gives you an overview of every article in the series, and the article on taxing profits from e-commerce & dropshipping shows exactly how the profits are taxed.

In short

• The USA is a single market of around 342 million people, with one language, one currency and taxation built on the same principle.
• Since the Wayfair decision in 2018, economic presence also creates nexus: if you exceed a state's sales or transaction threshold, you must collect and remit sales tax there.
• When buying from the supplier, resale documentation ensures the dropshipper does not pay sales tax themselves.
• Since August 29, 2025, the $800 de minimis exemption for imports into the USA has been suspended, so tariffs belong in every calculation.
• You can sell through your existing company or form a US company. For dropshippers, this article recommends a C Corporation, for example in Wyoming.

How we help you

• Sales taxRegistration and returns in the states where you have nexus.
• Form a CorporationThe US corporation (Inc) for growth, investors and your visa.
• US Company FormationLLC, Inc or LP in Delaware, Florida, California, New York, Texas or Wyoming.
• Tax structureA clean structure between parent company and US subsidiary, or between you and your US company, coordinated with your accountant.
• US Bank Account OpeningYour own access to the American financial system, even without an SSN.
• Company formation consultationEntity type, state and tax consequences, before you commit.