Do US Companies Have a VAT Number?

US-based SaaS and tech companies expanding internationally into countries like the UK, Canada, the European Union and beyond often don’t realize that not only are they building a new market for their products, they’re also facing new indirect taxes.

Once you begin selling cross-border, especially business-to-consumer (B2C), your business likely faces local tax obligations, varying registration thresholds, and unfamiliar filing requirements. And most countries have VAT tax systems that are very different from the sales tax system most US-based businesses are accustomed to. 

Not to mention, global VAT compliance isn’t just for enterprise giants. Startups and mid-market companies with lean finance teams face the same rules–and often more risk. Here’s how to expand globally without the VAT headache.

EINs, TINs, and VAT Numbers: What’s the Difference?

Governments certainly love their three letter acronyms when it comes to tax compliance. But it’s important to understand what tax terminology is US-only and what is what you’ll need to know once you begin selling cross-border.

Common tax registration terms:

• Taxpayer Identification Number (TIN) (US-only) – According to the IRS, a TIN is the broad term used to administer US federal, payroll and other taxes.  Both individuals and businesses will have TIN’s.  While an individual’s TIN is generally their Social Security number, a business’s will be an EIN.  
• Employer Identification Number (EIN) (US-only) – This is a type of US TIN used to identify and administer the tax of employers and even businesses with no employees who need the number for things like opening a business bank account. 
• Value Added Tax (VAT) Number – This number is issued by taxing authorities in countries that use the VAT system to collect indirect tax on purchases. You’ll never receive a VAT number from the IRS or US states. However, when doing business in the approximately 175 countries in the world that use VAT rather than sales tax, you’ll need this number for certain tax-related activities. 

When asked for VAT details by international customers, make sure you don’t accidentally provide an EIN or TIN. This is a common mistake!

VAT vs. Sales Tax: Core Differences

US businesses who have finally become accustomed to the sales tax system can often get tripped up when dealing with VAT in other countries. Here’s your cheat sheet.

What is VAT?

VAT is a multi-stage consumption tax used globally. With VAT, tax is charged at every stage of the supply chain. For example, a raw goods supplier would charge VAT to a manufacturer who would charge VAT to a wholesale distributor who would charge the tax to a business who would charge it to their end user.  

All throughout the chain, businesses (suppliers, manufacturers, and so on) can usually recover the VAT they pay on business expenses by deducting it from the VAT they collect on sales, meaning only the final consumer bears the final VAT cost.

What is sales tax?

Sales tax is a US state and local based tax charged at the point of sale to the product’s (or sometimes service’s) end consumer. Unlike with VAT, no sales tax is charged between raw goods suppliers, manufacturers, wholesalers, and retailers. 

Since sales tax is only collected one time at final checkout, there is no need for a recovery or credit system like with VAT.

VAT for SaaS & AI Startups

With electronic purchases, such as sales of SaaS or AI products, there are no up-front natural barriers–like complex cross-border shipping–to prevent you from selling to customers all over the world. 

However, tax authorities always want their due, whether that’s the Kansas Department of Revenue or the Japanese National Tax Agency. They expect businesses, especially if you are selling to consumers in their country, to register and get compliant with VAT, often from your first sale.

Startups commonly miss or misunderstand VAT requirements, especially because they vary from country to country just like sales tax varies between US states.

• Missed registration – Many countries require VAT registration from your first sale to a consumer, with no minimum registration threshold. Be sure to check VAT rules for each country where you make a B2C sale. Unfortunately taxing authorities don’t accept ignorance as an excuse for non-compliance. 
• Tax misclassification – Some countries have special rules around SaaS and digital goods. Always make sure you’re charging (or not charging) VAT based on each country’s guidelines, otherwise you could over or under collect from your customers. 
• No system for VAT recovery (B2B) – If you only sell B2B, then you may not be required to register for VAT in many countries. Instead, many countries allow you to issue certain “reverse charge” invoices that put the onus of VAT onto your business customer. However, you must take certain steps, such as collecting and verifying your customer’s VAT number and issuing an invoice with language around “reverse charge” to comply with these laws. 
• Over reliance on US-centric tax knowledge and tools – Learning the vagaries of US sales tax is difficult enough. A business owner can be forgiven for not wanting to learn a new tax system every time you sell into a new country. But attempting to apply US sales tax knowledge and tools to VAT problems is never the right answer.   

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When Does a US Company Need to Register for VAT?

US-based companies generally need to register for VAT in the following scenarios:

• Making sales to individuals or non-VAT registered businesses in a VAT country – some countries have sales thresholds, but many require businesses to charge VAT from the first sale, no matter how little the sale was for. This includes sales to both individuals or to small businesses who may not be required to register for VAT.
• Meeting a country’s VAT threshold – Some countries have a small seller exemption, where, if you don’t sell above their sales amount threshold, you’re not required to collect VAT. For example, in Australia (which technically has a goods & services tax that works like VAT), the threshold is $75,000 AUD before you have to register and begin collecting. However, note that in many countries, such as EU member states, there is no small seller exemption and international businesses are required to collect VAT from the first sale.

• Physical presence – As is in the US, if your business has physical presence in a country–such as an employee or office, store, or inventory in a warehouse– you’re generally required to register for and collect VAT.

Important note: Recent legislation requires payment processors like Stripe to turn over to the EU administration information on any business making more than 25 sales per quarter into EU countries. This is designed to catch non-compliant businesses. We recommend double checking your EU VAT compliance before the EU cross-checks this data. 

B2B vs. B2C and the Reverse Charge Mechanism

While B2C sellers will often find themselves liable for VAT, B2B sellers may be able to take advantage of a concept called the reverse charge mechanism. 

In this case, businesses who sell to other businesses (but who have no other VAT obligation in a country) can issue an invoice stating that the “reverse charge” applies. In that case, the seller doesn’t collect VAT. They are, however, required to use a service like VIES VAT number validation to verify their customer’s VAT number to ensure they are a registered company.

The buyer, who does have a tax obligation in that country, instead self-assesses the VAT rate that would have been due on the transaction and pays it to the taxing authorities themselves on their next VAT return. 

But it can’t be overstated that reverse charge is only for B2B sales. For B2C sales, the international seller is almost always liable to charge VAT.

VAT for Digital Services: Non-Union OSS and Union OSS and IOSS

Cross-border sellers selling into the EU may be able to take advantage of several tax systems designed to simplify VAT compliance across member states.

• Non-Union One-Stop-Shop – For non-EU businesses selling digital services like SaaS to EU consumers. It allows you to pay VAT for all EU countries through a single registration. 
• Union One-Stop-Shop (OSS) – For EU-based sellers making both digital and physical goods sales to other EU customers.  
• Import One-Stop-Shop (IOSS) – For cross-border sellers selling physical goods into the US that are priced at €150 or less. This allows you to charge VAT at checkout (as with sales tax) rather than your customer having to deal with customs duties upon delivery. 

Example: You are a US-based SaaS company selling AI video editing services that have become popular in Germany and France. You can register with the Non-Union One-Stop-Shop and, after charging the local VAT rate to your Germany and France customers, file just one return rather than having to register separately in each country.

Selling Physical Goods from the US

If you’re a US-based company selling physical goods to other countries, you’re very likely to have to deal with VAT. These rules and thresholds vary country by country, so it’s important you check each country’s VAT requirements before doing business there. Remember, often even one sale into the country means you’re required to register for and collect VAT from your customers.

Also note that physical presence, like storing goods in a warehouse in a VAT country for easier shipping to your international customers, creates VAT liability. 

How to Get a VAT Number as a US Company

Each country with VAT has its own rules, but once you have triggered liability there, you are required to register for a VAT number. 

Each tax system is a little different, but in general you’ll be required to provide the following documents or information:

• Company formation documents
• Tax IDs
• Owner or officer details
• Business address and contact information
• Banking or payment details
• A description of your products/services and expected sales

Receiving your VAT number can take anywhere from days to weeks, depending on if any follow up questions or manual verification is involved. 

Some countries also require an in-country representative, like the Japanese zeirishi, for businesses who have no other presence there. Be sure to thoroughly read each country’s registration requirements.

Ongoing VAT Compliance for U.S. Businesses

As with US sales tax, registration is only the first step. Your business will then be required to file VAT returns and remit collected VAT, usually on a quarterly basis. Though, as with everything VAT, be sure to note when the country you are registered in requires that you file returns.

Today it’s easy for SaaS and AI businesses to sell into multiple countries, even with small teams. But all that varying VAT compliance can get overwhelming. 

VAT Refunds and Input Credits 

Do you make business purchases in other countries? When your business pays VAT on eligible expenses like software subscriptions, professional services, or cloud hosting, that tax is called input VAT. If you're VAT-registered in that country, you can usually deduct input VAT from the VAT you collect on sales (known as output VAT). This process is called VAT recovery or claiming input credits. Note that this is only for purchases made within the country. (I.e. you can’t buy web hosting from a company in the US and then try to claim a credit on your EU VAT return.)

Not all expenses qualify. The purchase must be for business use, and you generally need a proper VAT invoice. Personal expenses, entertainment, and certain travel costs are often excluded. Some countries also restrict refunds for non-resident businesses unless you're registered locally or working through a fiscal rep.

VAT treatment depends on how your product or service is classified:

• Taxable supplies – Standard or reduced VAT rates apply, and input VAT is recoverable.
• Zero-rated supplies – Charged at 0% VAT, but you can still claim input VAT.
• Exempt supplies – No VAT charged, but input VAT on related expenses cannot be reclaimed.

Further, if you pay VAT in a country where you are not registered, you may be able to apply for a foreign VAT refund. This is a complex process that typically requires filing through a special non-resident refund program. However, if you paid quite a lot of VAT in a county where you aren’t registered, the administrative hassle may be worth it. 

How Sphere Helps 

With Sphere you get:

• Nexus/VAT liability monitoring - Sphere analyze your sales and alerts you when you’re required to register and start collecting tax in a new state or country 
• Multi-state and country tax filing - Sphere automates tax returns and filing, saving you from dealing with disparate and complex tax filing systems around the US and the world. 
• Audit support and documentation - Review transactions at scale identifying potential problems before auditors find them.

VAT FAQs from U.S. Finance Teams

Can I use my EIN instead of a VAT number? - No, EINs are US only. You’ll need to register for each country’s VAT system separately. (Except the EU, where you can register with one member state under some systems.)

Should I charge VAT to all international clients? - Only charge VAT in countries where you are liable. In most countries, the first sale to a customer or non VAT-registered business makes you VAT liable, but that’s not always the case. 

Can I reclaim VAT paid abroad? – Sometimes, though it can be a complex process. Still, if you’ve paid a large amount of VAT, the administrative hassle can be worth it. For example, you can’t reclaim input VAT when you are registered via one of the simplified schemes such as the EU’s OSS or Norway’s VAT on E-Commerce (VOEC), etc.

What happens if I don’t register on time? – You’ll likely face penalties and interest. Every country’s penalties are different, but are generally a percentage of unpaid VAT.

The Bottom Line: Don’t Wait to Get VAT Compliant

VAT compliance is a growing challenge for US companies breaking into international markets, especially as jurisdictions formalize and tighten the taxation of SaaS and digital content.

Today’s technology means that small but mighty teams can sell globally, but that also means small finance teams may not have the knowledge or expertise to handle all the vagaries of global VAT compliance. 
That’s where Sphere comes in as your back office indirect tax professional. Sphere simplifies compliance in the US and globally by automating VAT registration, filing, and reporting anywhere you sell.