Some tourists and non-residents may qualify for a US tax refund, but not in the way many expect. Unlike countries with VAT refund systems, the United States offers limited or no tax reimbursement for most visitors.
However, certain scenarios like overpaid income tax or participation in specific refund programs may still provide partial refunds depending on your residency and spending.
This article answers key questions including:
- Can you claim tax back in the US?
- Do we pay VAT in the US?
- How much is US sales tax?
- Is there a tax refund for tourists in the US?
If you are looking to invest as an expat or high-net-worth individual, which is what I specialize in, you can email me (hello@adamfayed.com) or WhatsApp (+44-7393-450-837).
This includes if you are looking for a free expat portfolio review service to optimize your investments and identify growth prospects.
Some facts might change from the time of writing. Nothing written here is financial, legal, tax, or any kind of individual advice or a solicitation to invest.
What Is the Sales Tax in the US?
Sales tax in the US is not imposed federally. Instead, it’s administered at the state and local levels, resulting in varied rates across the country.
- State vs. Local Rates: Each state that charges sales tax sets a base rate. Cities and counties can add their own. For instance, California’s base is 7.25%, but sales tax in Los Angeles reaches 10.25% with local additions.
- Zero-Tax States: A few states such as Oregon, Delaware, New Hampshire, Montana, and Alaska either have no state sales tax or minimal local taxes.
- Nationwide Range: Overall, sales tax in the US typically ranges from 4% to over 10%, depending on the location.
Unlike VAT, US sales tax is generally not included in the displayed price; it’s added at checkout, which can catch international shoppers off guard.
Is there VAT on goods from the US?
No. The US does not have a federal VAT system like those found in Europe or parts of Asia.
Instead, it relies entirely on the sales tax structure described above.
This key difference explains why VAT-style refunds are not available in the US.
While other countries may let tourists recover some of the VAT they paid, that mechanism doesn’t exist nationwide in the US.
Can I Claim Tax Back at US Airport?
US airports generally do not offer any facility for claiming tourist tax refunds.
- No Tax Refund Counters: US airports do not provide such services. This is because the US does not levy a national VAT and has no centralized mechanism for processing US tax refunds to foreign visitors.
- Contrast with Other Countries: In countries like France, Japan, or the UK, VAT is collected nationally and refunded at the point of departure if goods are exported. In the US, sales tax is managed by state and local governments, and retailers are not required to offer refunds to non-residents, even if items are taken abroad.
- Limited Exceptions: A few airports in states with private refund programs like Houston or Dallas in Texas, may have third-party kiosks to help process state-level refunds.
How Do I Get a Refund on Tourist Tax?
While the US does not have a national tourist tax refund program, there are limited scenarios where travelers might receive a refund on sales tax, often called “tourist tax” colloquially.
- Store-Level Tax Refunds: In rare cases, certain retailers in tax-friendly states may offer in-store US tax refunds or waive sales tax if proof of foreign residency and international travel is provided. However, this is highly uncommon and typically requires managerial approval and significant documentation.
- Third-Party Refund Services: Some companies operate in states like Louisiana and Texas to help tourists claim refunds on sales tax. These services may be available at airport kiosks or online platforms.
- Pros: They handle paperwork and may work with multiple retailers.
- Cons: They often charge hefty processing fees, and participation is limited to partner stores.
- Documentation Is Key: To qualify for any type of refund, tourists must keep original receipts, show passport and visa documentation, and often provide proof of departure. Even when services are available, the process can be cumbersome, with strict deadlines and eligibility rules.
Can I Get a Refund of US Withholding Tax?
Yes, in many cases, foreign nationals can claim a refund of US withholding tax if too much was withheld from income.
Foreign nationals who earn income from US sources such as dividends, royalties, or consulting fees may be subject to withholding tax, typically at a flat rate of 30%.
However, this doesn’t always reflect the final tax obligation.
- Withholding Tax Basics: This tax is automatically deducted at the source when a foreign person earns certain types of US income. It’s meant to ensure compliance, but overpayments can occur, especially if a tax treaty offers reduced rates.
- IRS Forms to Use:
- Form 1040NR is used by non-resident aliens to file a US tax return and potentially claim a refund.
- Form W-8BEN is submitted to the US payer (such as a financial institution) to claim treaty benefits and lower the withholding rate before income is paid.
- Tax Treaty Eligibility: Refund eligibility often depends on whether your country has a tax treaty with the US. These treaties may reduce or eliminate withholding taxes on certain types of income.
- Filing Process and Time frames: The process involves submitting the necessary IRS forms, documentation proving tax was withheld, and residency certifications. Refund processing can take several months, especially for paper-filed claims.
Conclusion
US tax refunds for visitors leaving the US are generally limited due to the absence of a federal VAT system and the state-based nature of sales taxes.
While some private refund services exist, they are rare and often come with restrictions.
For foreign income earners, understanding withholding tax rules and treaty provisions is crucial to recovering overpaid taxes.
Keeping thorough documentation and staying informed about IRS requirements can simplify the process.
Consulting a tax professional is advisable for those with significant claims or complex investment income to ensure maximum eligible refunds.
¿Le duele la indecisión financiera?
Adam es un autor reconocido internacionalmente en temas financieros, con más de 830 millones de respuestas en Quora, un libro muy vendido en Amazon y colaborador de Forbes.
