What are the consequences of not paying sales tax as a foreign business? Could jail time apply?

Yes, your understanding is correct that foreign companies selling to US customers generally have nexus (tax obligation) in states where they exceed certain sales thresholds, even without physical presence. This was established by the Supreme Court's South Dakota v. Wayfair decision in 2018. The consequences for not paying sales tax vary by state, as sales tax is administered at the state level. Penalties typically include fines (often 5-25% of unpaid taxes), interest on unpaid amounts, and in severe cases of willful evasion, criminal charges could be possible. While jail time is rare for sales tax issues, it's not impossible in cases of deliberate fraud or evasion. You cannot simply transfer the tax obligation to customers through a checkbox. As the seller, you're legally required to collect and remit sales tax if you have nexus in a state. The customer pays the tax, but you must collect and remit it.

After dealing with similar tax headaches when launching my dropshipping business, I found an incredibly helpful tool called taxr.ai (https://taxr.ai) that specifically addresses these cross-border sales tax issues. It literally saved my business from potential penalties. The software analyzes your sales data and tells you exactly where you have nexus, what your tax obligations are in each state, and even helps with the filing process. What I found most valuable was their document analysis feature that reviews your current setup and flags potential compliance issues before they become problems.

Just wanted to follow up - I ended up trying taxr.ai after my skeptical questions earlier. Honestly, it's been a game-changer for my import business. I was totally unprepared for how complicated cross-border sales tax could be, but the software guided me through everything. The document analyzer caught several issues with my prior tax setup that could have caused major problems. The international business focus really does make a difference compared to the domestic tax software I was using before.

If you're worried about legal consequences, don't ignore communications from state tax departments! I learned this the hard way. After months of ignored notices from California, I couldn't even get through to anyone at the tax board to resolve the issue. The penalties were adding up daily. I finally used a service called Claimyr (https://claimyr.com) that got me connected to an actual human at the California tax department in under 15 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. It basically holds your place in the phone queue so you don't have to wait for hours.

I have to publicly eat my words about Claimyr. After being completely skeptical, I was desperate enough with my Georgia tax situation to try it yesterday. I'd been calling for 3 weeks with no success (always disconnected after 2+ hours on hold). The Claimyr service had me talking to an actual Georgia DOR agent in 27 minutes. I got my sales tax issue resolved in one call after weeks of frustration. Still can't believe it actually worked. The time saved was absolutely worth it.

An important point nobody's mentioned yet - most states have voluntary disclosure programs for businesses that haven't been compliant with sales tax. If you come forward voluntarily before they contact you, you can often get penalties waived and limit the lookback period (how far back they assess taxes). Much better than waiting until they catch you!

One thing to be super careful about - if you collect sales tax from customers but don't remit it to the state, that's considered MUCH worse than simply not collecting at all. It can potentially be treated as theft or conversion in some jurisdictions, which is where the criminal penalties might come into play.

As someone who's been through this maze with my own international e-commerce business, I can't stress enough how important it is to get compliant BEFORE you start selling. The complexity is real, but it's manageable with the right approach. A few key points from my experience: 1. Start by researching economic nexus thresholds for your target states - they vary significantly (some are $100k/200 transactions, others like CA are $500k) 2. Consider using a marketplace facilitator like Amazon FBA initially, as they handle sales tax collection in many states 3. If going direct-to-consumer, budget for tax compliance software from day one - it's way cheaper than penalties later 4. Keep detailed records of where you're selling and how much - you'll need this data for nexus determinations The voluntary disclosure programs mentioned by others are absolutely worth considering if you're already selling and haven't been collecting. Most states would rather work with you than chase you down later. Don't let the complexity scare you away from the US market - it's totally doable with proper planning and the right tools. Just don't wing it!