Value-added tax (VAT) made up an estimated 14.6% of the UK government’s total revenue in the 2025–2026 financial year. But not all UK businesses selling to US customers can charge UK VAT. The rules vary depending on what your business sells, who you sell it to, and which place of supply rule applies. If you get the classification wrong, you’ll either overcharge customers or underreport to His Majesty’s Revenue and Customs (HMRC).

Below, we’ll discuss when UK companies charge VAT to US customers, when no VAT is due, and what evidence you’ll need to support that.

Highlights

• UK VAT usually doesn’t apply to sales made to US customers. The specific rules differ by product type and customer status.

• The B2B versus B2C distinction doesn’t affect the outcome for physical goods, but it can determine whether a service sale sits inside or outside UK VAT scope.

• Many US states have economic nexus thresholds that require UK businesses to register and collect sales tax once their revenue in that state exceeds a certain level.

How does VAT apply to UK businesses selling internationally?

In the UK, businesses must charge the standard 20% VAT rate on most goods and services once they exceed the £90,000 threshold in taxable turnover in a rolling 12-month period. But UK VAT law is based on a concept known as “place of supply.” If a supply is treated as taking place outside the UK, then UK VAT doesn’t apply, even if the seller is UK-based.

The rules vary depending on what the business is selling:

• The VAT treatment for goods is typically determined by where the goods are shipped from and to.

• The place of supply for services depends on whether the customer is a business (i.e., if it’s a business-to-business, or B2B, transaction) or a consumer (i.e., a business-to-consumer, or B2C, transaction). There are different default rules for each.

• Digital services have their own specific rules that override the usual B2C default.

When do UK companies charge VAT to US customers?

In many cases, the outcome for UK businesses selling to US customers is that no UK VAT is charged. The reasoning differs slightly depending on what your business is selling.

Shipping physical goods

Shipping physical goods from the UK to the US counts as an export. Exports are zero-rated for UK VAT purposes. That means you issue an invoice showing 0% VAT, and you record the sale on your VAT return.

You’ll need to keep export evidence, such as customs declarations, shipping documents, and proof of delivery (POD) to a non-UK address. HMRC expects this evidence within three months of the time of supply. Without it, the zero rating can be challenged, and VAT will be charged at the standard 20% VAT rate.

Supplying services to US businesses (B2B)

The general rule for B2B services is that the place of supply is where the customer belongs (i.e., where they’re located). If it’s a US business customer, that means the sale is outside the scope of UK VAT. There are exceptions, such as land-related services and admission to events, but for many consultancy, software-as-a-service (SaaS), marketing, commercial, and professional services supplied B2B, UK VAT doesn’t apply. That means you invoice without VAT, and any US-side tax treatment is handled under the customer’s domestic rules.

You’ll need to show why you treated the customer as a business, with information such as a business name, address, and evidence of a commercial relationship, in order to apply this VAT treatment.

Supplying services to US customers (B2C)

The default B2C services rule puts the place of supply in your place of belonging (i.e., the UK), which would normally bring the sale into UK VAT scope. However, many common services don’t follow this default. Digital services, in particular, use different rules that shift the place of supply back to the customer’s location.

What are the VAT rules for selling digital services to US customers?

Digital services have their own place of supply rules, and they cause issues for more UK businesses than any other category. If you’re selling SaaS, ebooks, streaming services, online courses, or website hosting, the standard B2C logic doesn’t apply.

Instead, both B2C and B2B sales of digital services define the place of supply as where the customer belongs. That means sales to US individuals and US businesses are treated as taking place in the US and are therefore outside the scope of UK VAT.

Even when no VAT is charged, HMRC expects proof of customer location. If it’s for a digital service, you must keep at least two nonconflicting data points, such as a billing address, an IP address, or a bank country.

Do UK companies charge sales tax to US customers?

The US doesn’t have one universal federal sales tax. Instead, individual states levy sales taxes, which are often triggered by “economic nexus” thresholds that require you to register and collect sales tax once your revenue in that state crosses a certain level. A common threshold for many states is $100,000 in sales or 200 transactions, but some state thresholds are as high as $500,000. That’s a US tax obligation, not a UK VAT one, but it’s worth knowing it exists.

Another US obligation worth noting is that, prior to August 2025, de minimis thresholds made most shipments of goods from the UK to the US under $800 duty-free. Today, there’s no threshold on which goods can be subject to the customs process, including tariffs and other fees. Again, that’s a US tax obligation, but it’s useful to be aware of.

How can UK businesses manage cross-border VAT compliance when selling to the US?

Accurate VAT treatment depends on three inputs: what you’re selling, who you’re selling it to, and where they’re located. Applying that logic consistently at scale is a challenge, but tax software can help.

Here’s what it can do for your business:

• Transaction-level tax logic: This logic automatically determines when UK VAT doesn’t apply and whether US state sales tax does.

• Location verification: The software collects and stores customer location signals—such as billing address, IP address, and similar data points—to support HMRC’s evidence requirements for digital services.

• Integrated invoicing: This integrates with invoicing and billing products, so the correct tax logic is applied consistently across your payments infrastructure, rather than relying on manual overrides.

• Tax reporting: Transaction-level tax reporting makes it easier to work with a tax advisor on edge cases or US state sales tax registration decisions.

Software tools can apply rules, but they can’t always interpret the gray areas. Questions about whether a specific service falls under an exception or whether your US revenue prompts state-level registration still require advice from a tax adviser who specialises in cross-border VAT and US sales tax.

How Stripe Tax can help

Stripe Tax reduces the complexity of tax compliance so you can focus on growing your business. Stripe Tax helps you monitor your obligations and alerts you when you exceed a sales tax registration threshold based on your Stripe transactions. In addition, it automatically calculates and collects sales tax, VAT, and goods and services tax (GST) on both physical and digital goods and services—in all US states and in more than 100 countries.

Start collecting taxes globally by adding a single line of code to your existing integration, clicking a button in the Dashboard, or using our powerful application programming interface (API).

Stripe Tax can help you:

• Understand where to register and collect taxes: See where you need to collect taxes based on your Stripe transactions. After you register, switch on tax collection in a new state or country in seconds. You can start collecting taxes by adding one line of code to your existing Stripe integration or add tax collection with the click of a button in the Stripe Dashboard.

• Register to pay tax: Let Stripe manage your global tax registrations and benefit from a simplified process that prefills application details—saving you time and simplifying compliance with local regulations.

• Automatically collect tax: Stripe Tax calculates and collects the right amount of tax owed, no matter what or where you sell. It supports hundreds of products and services and is up-to-date on tax rules and rate changes.

• Simplify filing: Stripe Tax seamlessly integrates with filing partners, so your global filings are accurate and timely. Let our partners manage your filings so you can focus on growing your business.

Learn more about Stripe Tax, or get started today.