Guide · European Union · United Kingdom · California
EU OSS registration vs US sales tax nexus
· updated·5 min read
Sell software across borders and two systems come for you at once: American economic nexus and EU OSS registration. They look alike from a distance — both make you collect tax from customers abroad — and they are built on opposite logic, so the instincts you develop in one will mislead you in the other.
In this article
- Why the US has fifty separate tests and the EU has one
- The threshold that does not exist for non-EU sellers, and what replaces it
- How a single OSS return covers twenty-seven countries
- Which numbers to watch when you are exposed to both
What is EU OSS registration?
EU OSS registration is a single VAT registration that lets a seller report cross-border sales to consumers across all twenty-seven EU member states through one quarterly return. You charge each customer their own country's VAT rate, then remit everything to one member state's tax authority rather than registering in each country separately.
The US system: fifty separate tests
There is no federal sales tax. Every state writes its own rule, and you are measured against each one independently.
What economic nexus means
In 2018, *South Dakota v. Wayfair* let states tax sellers with no physical presence, provided the seller has an economic one. That economic presence is defined by a dollar figure, a transaction count, or both — and every state picked its own.
- Californiasales tax$500,000Preceding or current calendar year
- Washingtonsales tax$100,000Previous or current calendar year
- Texassales tax$500,000Preceding 12 calendar months
Three states, three different answers. Multiply by fifty.
Where the complexity actually is
- Some states test revenue only; others add a separate transaction count
- Where both exist, some trigger on either test and some require both — which changes the answer completely
- The measurement window varies: previous calendar year, current year, trailing twelve months, or four sales-tax quarters
- Several states have repealed their transaction test recently, so guidance written two years ago is now wrong
The European system: one bloc, one return
For digital services the EU behaves as a single market, and the simplification is real — but it starts from a harsher place than the US does.
There is no threshold for non-EU sellers
A business established outside the EU selling digital services to EU consumers owes VAT from its first sale. There is no allowance to cross. The €10,000 figure people quote is real, but it belongs to EU-established micro-businesses only.
- European UnionVAT€10,000Current or previous calendar year, EU-wide combined
The €10,000 cross-border threshold, and who it applies to.
This is the inversion that catches American founders: in the US you accumulate toward an obligation, and in the EU you have one immediately and are simply not enforcing it yet.
How the one-stop shop works
- 1Register in one member stateNon-EU sellers use the Non-Union OSS scheme and pick a single member state to register in — Ireland and the Netherlands are common choices for English-language administration.
- 2Charge the customer's local rateVAT is due at the rate where the customer is, not where you are: 19% for Germany, 20% for France, 23% for Ireland. Your checkout has to know the difference.
- 3File one quarterly returnYou report all EU sales, broken down by member state, through your OSS portal and pay a single amount. That authority distributes it.
- 4Keep records for ten yearsOSS record-keeping obligations run far longer than most jurisdictions, and two pieces of non-contradictory evidence are required for each customer's location.
Watching both at once
What you actually have to monitor
The EU side needs one number: total sales into the bloc, plus proof of where each customer was. The US side needs fifty, each against a different limit on a different clock, some of them counting transactions rather than money.
Add the UK — which left the EU VAT area and runs its own registration threshold — and you are tracking three genuinely different systems from the same stream of Stripe charges.
Where do you stand on the big three?
Your sales into each, in its own currency. Nothing is sent anywhere.
Mistakes that cost real money
Assuming B2B works the same way
EU cross-border B2B sales are reverse-charged and sit outside your OSS return entirely — but US economic nexus counts gross sales regardless of who bought. Excluding B2B from your US numbers understates every state threshold.
Using one exchange rate for the year
Thresholds are denominated in local currency. A seller pricing in USD who converts at January's rate can be materially over a euro or sterling threshold while their spreadsheet says otherwise.
Forgetting that registration is retroactive
Both systems date your obligation from the crossing, not the discovery. The tax on sales between those two dates is yours to pay, since you cannot go back and charge past customers.
Treating the UK as part of the EU
The UK has its own threshold, its own registration, and its own return. An OSS registration covers none of it.
Frequently asked questions
Do I need EU OSS registration if I only sell to businesses?
Generally no. Cross-border B2B supplies to VAT-registered EU businesses are reverse-charged, so the customer accounts for the tax. You still need to validate their VAT number and keep the evidence.
Is there a sales threshold before I need EU VAT registration?
Not for sellers established outside the EU — VAT is due from the first B2C sale. The €10,000 cross-border threshold applies only to businesses established in an EU member state.
Can one registration cover both the EU and the UK?
No. The UK sits outside the EU VAT area and operates its own registration threshold and return. Selling to both means two separate registrations.
Which US states should I watch first?
The ones where your customers actually are. Volume concentrates far more than founders expect, so a handful of states usually accounts for most of the exposure — but the transaction-count tests can trigger in a state with very little revenue.
The difference in one line
The US gives you an allowance in every state and makes you track fifty of them; the EU gives non-resident sellers no allowance at all and then makes filing simple. Neither system rewards finding out late, because both date the obligation from the crossing.
Never miss a tax threshold
Connect Stripe or Paddle and TaxesRadar watches every threshold in this article — and 73 more — warning you before you cross rather than after.
Read next
What is the GST threshold for small businesses in Canada?
The Canadian GST threshold is C$30,000 over four consecutive quarters. Here is what counts toward it, when non-resident sellers must register, and the traps.
Monitoring and guidance, not tax or legal advice. Threshold figures on this page are read live from the rules TaxesRadar tracks and were last verified against their official sources. Rules change — check the linked authority before acting.