Do You Have to Pay Taxes for Dropshipping in the USA?

If you are planning to start dropshipping for the USA market — whether from India or any other country — one of the biggest questions you will face is:
Do I have to pay taxes for dropshipping in the USA?
The answer is:
👉 Yes, you must follow US tax rules depending on where your store is registered, where your customers live, and how your business is structured.
But the good news is: dropshipping taxes are SIMPLE once you understand the basics.
This guide explains everything clearly:
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Do foreign sellers (Indians) have to pay USA taxes?
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Do you need to collect sales tax?
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What is Nexus?
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What about income tax?
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What if you set up a US LLC?
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Shopify, Amazon, Etsy tax rules
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Simple solutions for beginners
Let’s start.
Table of Contents
✅ 1. Do Dropshippers Have to Pay Taxes in the USA?
There are two types of taxes you should know:
1. Sales Tax (charged to customers)
2. Income Tax (on your profits)
Your tax responsibility depends on:
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Where your business is registered
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Where you have nexus (presence)
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Where your customers live
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Whether you have a US LLC or are operating from India
Let’s break it down.
✅ 2. If You Live in India and Sell to USA — Do You Pay US Taxes?
If you are an Indian seller dropshipping to US customers without a US company, then:
✔️ You DO NOT pay US income tax
You are a foreign seller. You only pay income tax in India on your profits.
❌ BUT you are responsible for collecting US Sales Tax only if you have economic nexus.
✅ 3. What Is Sales Tax Nexus?
Nexus means a “tax connection” with a state.
You must collect sales tax only if:
a) Physical Nexus
You have a warehouse/employees in that US state
👉 Dropshippers usually do not have this
b) Economic Nexus
You cross state sales thresholds, usually:
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$100,000 in sales, or
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200+ orders in a year
If you reach these numbers in ANY state, you must:
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Register for a Sales Tax Permit
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Collect sales tax from customers
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Remit to the state
If you don’t cross these thresholds, you don’t need to collect sales tax.
✅ 4. What If You Set Up a US LLC for Dropshipping?
Many dropshippers prefer creating a US LLC for better payment gateways (Stripe, PayPal USA, etc.).
If you form a US LLC:
You MUST file these taxes:
✔️ Federal Tax Return (annual)
✔️ State Taxes (if your LLC is in a taxable state)
✔️ Sales Tax (if you have nexus)
BUT:
Foreign owners of LLCs (non-US residents) often pay 0% federal tax if:
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No US employees
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No US office/physical presence
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Business is conducted from outside the USA
You only pay taxes on profits in your home country, like India.
✅ 5. What If You Sell on Shopify / Amazon / Etsy?
Shopify Stores
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You must enable taxes only in states where you have nexus
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Shopify automatically calculates sales tax
Amazon / Etsy Marketplace Sellers
Amazon and Etsy automatically:
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Calculate
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Collect
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Remit
sales tax for most states (Marketplace Facilitator Law).
This makes dropshipping easier on marketplaces.
✅ 6. US Taxes for Dropshipping — Simple Scenarios
Scenario 1: Indian Seller → US Buyers (No US LLC)
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❌ No US income tax
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❌ No sales tax unless you hit $100k+ per state
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✔️ Pay income tax only in India
Scenario 2: Indian Seller with US LLC
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✔️ Must file US taxes
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✔️ Sales tax if nexus
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❌ May or may not owe US federal tax depending on structure
Scenario 3: Amazon Marketplace Dropshipper
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✔️ Amazon automatically handles sales tax
✅ 7. Do You Need a Tax ID (EIN) for Dropshipping USA?
Only if:
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You form a US LLC
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You want Stripe US
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You hire contractors
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You open a US business bank account
If you sell from India, you don’t need EIN.
✅ 8. Sales Tax Tools That Make Everything Easy
You can automate compliance with:
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TaxJar
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Avalara
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Shopify Tax Settings
These tools automatically calculate and file taxes.
⭐ Conclusion: Do You Have to Pay Taxes for Dropshipping in the USA?
✔️ If you live in India → You do not pay US income tax
✔️ You pay sales tax only if you cross nexus threshold
✔️ If you form a US LLC → you must file US returns
✔️ Marketplaces (Amazon/Etsy) automatically collect sales tax
In most cases, beginners don’t have to worry about US taxes until they scale big.
🧾 FAQs
1. Do foreigners pay US taxes for dropshipping?
No, unless you create a US entity or have physical presence.
2. What is the sales tax threshold in the USA?
Mostly $100,000 or 200 transactions per state.
3. Do I need to charge sales tax on Shopify?
Only in states where you have nexus.
4. If I sell from India, do I need EIN?
No, not required.
5. Should I form a US LLC?
Yes, if you want Stripe USA, better conversions, and trust.