Can I Register My Online Business Abroad And Sell In The Us

U.S. Taxation for Foreign Entrepreneurs

by Robert Kowalski

What Is Covered Here

Permit'southward first from a piffling disclaimer: U.South. taxation of nonresidents tin exist a adequately circuitous effect and involves many specific fact points that decide if the non-residents are discipline to Usa revenue enhancement or not. This article attempts to capture the most typical scenarios and analyze them in the context of electric current (2014-2016) U.S. taxation rules.

It is impossible to know your specific tax obligations without a lot more than data nigh your U.S. related business, so please utilize the information presented here for reference only. If you need more specific tax advice refer to the data at the finish of this commodity.

Ok, now that we take cleared this very important point, permit'southward motion on and analyze a few of the most common cases. If you don't find your case amongst those listed here no worries - just enquire your questions here and we volition try to assist.

General Taxation Questions

What are the principal types of business organisation taxes in the U.South.?
Are there any other taxes I should be concerned about?
How does U.S. income taxation work?

Sales Tax Questions

How does the sales revenue enhancement work?
How do I know if I need to apply sales tax on the stuff I sell?
Should I register in a state that has no sales tax, to avoid having to deal with it?
If I am registered in one state, but my vendors are drop shipping the stuff I sell in other states - which state exercise I need to collect sales tax in?
I know that I need to collect sales tax. How do I register?
After I register, how practise I do reporting and remit sales tax?
My business organisation is registered in one state, simply my dropshipper is in another. They want me to show sales tax registration in their state - how do I do it?
I want to buy products in the U.S. and sell them in my country - exercise I demand to register for sales tax?
How do I report sales tax in all the states I am registered in?
Exercise I need to register as foreign entity in states where I am registered to collect sales tax?

U.Southward. Business 100% Owned past Non-U.S. Person(s)

I am a single owner of a U.S. LLC, non-U.S. person living abroad. My visitor provides remote services. Practise I need to file tax return and pay income taxation?
What if I import and sell appurtenances in the U.Southward. - does it change the previous answer?
What if the LLC has more than ane possessor? What happens then?
Ok, I got the point near LLC. Only what if it'due south corporation instead?
What is the best way to reduce the taxable income of my LLC or Corporation?
Ok, let'southward talk about wages. Can I pay myself a bacon every bit a corporate officer, this way avoiding double taxation?
What if we spend all or most of the income of the U.S. company on services provided past our other company, registered in our country?
What if we retain all the corporate profits in the U.S., pay the corporate income tax, and not distribute it to shareholders? Tin we just reinvest this money into the business?
Then given all the owners are non-U.S. persons, from income revenue enhancement signal of view is it more than beneficial to register LLC or Corporation?
How and when do I file taxation return?
Do I need an ITIN to file taxes? If yes, how can I become it?
What about land income tax?
Should I annals my company in the state that has no income tax?
I heard as non-resident conflicting I need to pay xxx% income tax on my U.South. income. Is it truthful?
What is form Westward-8BEN, and when do I need to file it?
What nigh tax treaty between U.S. and my country? How does it influence my income tax obligations?

U.S. Business organisation Endemic by U.S. and Non-U.S. Partners

Is there whatsoever disadvantage of having a U.S. partner in the company owned by not-resident aliens?
Since we accept a U.S. partner in our corporation, can nosotros elect it to be S Corporation?
I am The states denizen and I want to open a business organization with a 50% partner who is a non-resident conflicting living abroad. What type of taxes will my partner pay if we grade a C Corporation?
Double tax doesn't sound like a expert idea. What if we choose LLC (taxed as partnership) instead?

U.South. Business Owned by a Foreign Business organization

Tin can a non-U.Southward. visitor own a U.South. company?
Is it ameliorate to own the U.S. company with my not-U.S. company from tax indicate of view?
I own a company in my land, and I desire to annals an LLC to be owned by this visitor. Tin can I then distribute U.South. profits of this LLC to my company, and pay the taxes in my state?
What if I own the U.S. company with my not-U.S. company, and the non-U.S. company volition sell the U.S. visitor products for resale for the same toll the U.S. company volition sell them in the U.S.? I want to avoid having to pay taxes in the U.Due south.

U.Southward. Business Owned by U.Due south. Person(s) Living Abroad

I am US citizen and a sole owner of an LLC. I live away, and my business is online only, without whatever physical connexion. What kind of taxation would I have to pay?
I am U.S. citizen living abroad. Is there a way for me to run a business from away and avoid being taxed in the U.South.?

General Taxation Questions

Q. What are the main types of business taxes in the U.S.?

The chief two types of taxes a foreign U.S. business owner should be concerned nearly are income tax and sales revenue enhancement. Those are two completely different, unrelated taxes.

Q. Are there whatever other taxes I should exist concerned about?

Some types of products have additional tax (and licensing) requirements, for case liquor and tobacco products, too as other products. If you are not sure if your product or service has licensing or taxation requirements contact united states and we will assist yous with the inquiry.

Q. How does U.S. income taxation piece of work?

This is a simple question, however it'south U.S. income revenue enhancement we are talking about. Technically, each taxpayer must pay taxation on the income created in the U.South., and in some cases (such as the instance of U.S. citizens or permanent residents) on income created abroad. The income tax is paid to the federal regime (IRS), and in many cases to the state of residence, and in some cases even to the local jurisdiction (e.g. New York City).

Nevertheless, we created this article precisely for the reason we cannot only simply respond this otherwise groovy question - the real answer is "it depends, because it's complicated". Keep reading the next items to run into if U.S. income revenue enhancement applies to y'all, and how.

OK - at present that we know the difference between sales tax and income tax let'southward handle the sales tax portion of U.S. tax, before diving into the depths of income tax.

If yous want to skip the Sales Revenue enhancement section click hither.

Sales Taxation Questions

Q. How does the sales taxation work?

Sales revenue enhancement is a tax paid past the end user (consumer) of a tangible product (and in some cases service) sold past a retailer. This tax is paid on a country level (in that location is currently no national sales revenue enhancement or VAT).

For example, if yous own electronics store in NYC, and a customer comes in and buys an item in your shop, you lot would apply 8.875% (as of 2013) tax on height of the price paid by the client. Then you lot are responsible to file a sales tax report to NY state and remit (pay) all the tax coin collected from the customers.

Q. How practice I know if I demand to apply sales tax on the stuff I sell?

Excellent question. Earlier reaching a conclusion you must answer three questions outset:

Are you lot selling to terminate users, or are you a wholesaler? Merely retailers selling to end users are required to collect and remit sales taxation.

Does your business organisation have nexus in any state that has sales tax? Nexus is physical connection, and we talk over it later in this article. Some states (Alaska, Delaware, Montana, New Hampshire and Oregon) have no sales tax to begin with.

Is your product/service taxable to begin with? Keep in mind, near tangible appurtenances are taxable, while nigh services are not, but each jurisdiction has its ain rules, and so it's not that uncomplicated.

Q. Should I register in a land that has no sales tax, to avoid having to deal with it?

Sorry, but information technology's non that easy.

For example, allow'due south assume y'all register in Delaware (that has no sales tax) and you are selling some tangible items by shipping them from China to buyers in the U.S. Since in this case your business only has nexus in Delaware (as country of registration), you will not have to worry nigh sales tax at all. However, if you lot are using a U.Southward. dropshipper that ships the production from warehouses in California, Kentucky and New Jersey, technically you are required to collect sales taxation from buyers of your production in all three mentioned states.

If you annals your company in Wyoming instead of Delaware, yous add Wyoming equally another state to collect sales revenue enhancement in. Sounds inconvenient, but only if y'all assume that a serious number of consumers of your product are roaming the vast stretches of the least populated U.S. state. We are securely in love with Wyoming, just your chances of selling anything in that state are mostly close to nix, then you might not even need to worry about registering for sales tax in that location until y'all make a few Wyoming sales get-go.

How do you register for sales tax in all these states? Read further.

Q. If I am registered in one land, but my vendors are drop aircraft the stuff I sell in other states - which state do I need to collect sales taxation in?

As you learned from the previous question, your company nexus spreads to all states where your dropshipper has nexus. So unless your dropshipper processes the payment side of your sales, or unless y'all make no sales in whatever of these corresponding states, you lot demand to obtain permits in each of these states (equally well as in your state of registration, if it has sales taxation).

Q. I know that I need to collect sales taxation. How do I annals?

We can help y'all with the registration in any state. Depending on the land this permit will exist called "sales taxation ID", "sales permit", "reseller allow", "vendor ID", or merely "revenue enhancement ID". We have this item both on its own and every bit part of our LLC/Corporation registration applications.

Q. Later I register, how practise I exercise reporting and remit sales revenue enhancement?

You will detect a good CPA (accountant) who volition handle your sales tax filing besides as your income taxation filing. You tin try doing it on your own, just we don't recommend it.

Q. My business is registered in one state, only my dropshipper is in another. They desire me to show sales tax registration in their land - how practise I practice information technology?

Almost all states have procedures to obtain sales taxation let without having to register the visitor as "foreign entity". It is usually called "out-of-country vendor ID" or something of the kind. We aid with these permits as well.

Proceed in mind though, if your dropshipper is as well the one processing the payment then they will be collecting sales tax and reporting it to the state themselves, and so you don't actually need to obtain your own permit in case like this.

Q. I want to buy products in the U.South. and sell them in my country - do I need to register for sales tax?

Patently yous don't need to collect sales revenue enhancement in the U.S. on these sales, merely you might need to collect some sort of VAT tax in the country were y'all sell, so check the rules there.

However, the real question is this - can you buy from U.S. vendors without having to pay sales tax on these purchases (in wholesale)? The respond is yes, provided you obtain sales revenue enhancement ID. That's why it'south too chosen "reseller allow" - you want to resell the products yous buy at wholesale, to the stop users, without being considered end user yourself. Check with a CPA if the land in which yous obtain the permit requires you to file zero taxation reports.

Q. How practice I report sales revenue enhancement in all the states I am registered in?

Just as y'all exercise in one country - have your CPA file reports in each state you lot are registered in for sales tax, and cutting checks for each country (or pay online, whatsoever the procedure is).

Q. Do I need to register as foreign entity in states where I am registered to collect sales tax?

Non necessarily. We distinguish the two cases every bit "soft nexus" and "hard nexus" (this is not official designation, we just like to phone call it this mode).

"Soft nexus" has to exercise with connectedness strong plenty to require you lot to register for sales revenue enhancement (for instance, if your have a dropshipper who ships from a specific state), which is usually washed with state's taxation department (or information technology's equivalent), merely not strong plenty for registration with Secretary of Land (or whatever authority registering companies in the given state).

"Hard nexus" is when you accept physical connection to a state, for example if you have an part, warehouse, employees, or if you are managing the concern from this country and are physically located there.

So register for sales tax just in states where you have "soft nexus", and register foreign entity and sales tax in states where you have "hard nexus"

Ok, the question of sales tax should exist more or less articulate by now. Let's proceed to more complex topic of income tax.

U.S. Business 100% Owned by Non-U.S. Person(s)

Q. I am a single owner of a U.Due south. LLC, non-U.Due south. person living abroad. My company provides remote services. Do I need to file tax return and pay income tax?

A single member LLC that elected to be a disregarded entity (a default election) would only pay taxation based on the tax status of the owner. Since the owner is non physically present in the U.s.a. and is providing services remotely there would be no income finer connected to the US. That means the LLC would owe no Usa tax, except for the annual registration fee in the state of LLC registration, and in that location would exist no The states federal taxation obligation (in other words there is no requirement to file income tax either).

Keep in heed though - you might non technically be producing income in the U.S., but you however could exist (and chances are) liable to income taxation on this income in your land.

Q. What if I import and sell goods in the U.S. - does it alter the previous respond?

If your concern is selling tangible goods in the U.s., yous are required to report the income from this business to the IRS. Non-US residents study their US sourced income on form 1040NR.

Don't endeavour to figure this form out - it is our recommendation to rent a CPA to handle all your U.S. tax issues. You will also need to obtain ITIN, something your CPA will be in the best position to assistance you with.

Q. What if the LLC has more than than 1 owner? What happens then?

LLC that has more than one possessor (partnership), or if information technology is elected to be taxed as South or C Corporation (whatsoever number of owners), must file federal tax return, even if it has zero income.

Q. Ok, I got the point most LLC. But what if it'due south corporation instead?

A corporation is a divide tax entity from its owners. That means the corporation files its own tax return and pays its ain tax liability. That also means that i cannot freely transfer coin betwixt the owners (shareholders) and the corporation. The corporation tin reimburse the owners for expenses they pay on behalf of the business concern, and the corporation can pay owners for services they provide to the corporation, both of which are taxation deductions for the business.

The only other choice for the shareholders to take funds from the business organization is if the corporation pays them dividends. Dividends are not a tax deduction and are generally taxable income to shareholders equally the individuals. As a shareholder, your personal income is subject to the income tax rules in your country of residence.

Q. What is the best mode to reduce the taxable income of my LLC or Corporation?

Nigh businesses have both revenues and expenses. The IRS keeps a list of eligible business expenses, and information technology is safe to say that expenses that tin can are evidently related to maintaining and running the business (e.g. hosting, advertising, salaries of employees, etc.) are considered deductible expenses. Other expenses might exist partially deductible, and it is best to accept your CPA handle the question which of your expenses are deductible and to what caste.

To minimize your tax obligation y'all would want to study equally many eligible expenses every bit possible, still you should exist able to evidence these expenses were existent, and so keeping receipts and/or bank and credit carte statements is a must.

Q. Ok, permit's talk nigh wages. Can I pay myself a salary every bit a corporate officer, this way avoiding double taxation?

If y'all are not-resident alien you probably don't take work allow, which ways you lot cannot receive a salary as a resident conflicting or U.S. citizen would. Distressing.

You could however provide services, such as management services, to the U.S. company, and receive payment in class of consulting fees. Y'all will so be required to study this income in accord with your state tax rules.

Q. What if we spend all or most of the income of the U.S. company on services provided by our other company, registered in our country?

Y'all could exercise that, provided you tin can prove services were indeed provided and properly documented. You also want to make sure these services are provided outside of the U.S., in order not to be considered U.South. sourced, and as such subject to 30% withholding requirement (more nearly it below).

Q. What if we retain all the corporate profits in the U.Due south., pay the corporate income tax, and not distribute it to shareholders? Tin we just reinvest this money into the business?

Yes, you tin can.

Q. So given all the owners are non-U.Due south. persons, from income taxation point of view is information technology more beneficial to register LLC or Corporation?

Tricky question that depends on lots of factors. Both entities take their pros and cons, then earlier reaching a decision you should clarify your specific situation, make some forecasts on how your concern will evolve, and also - consult a CPA, it will help you lot a lot.

Keep in mind, in that location is not always a "correct" and "incorrect" reply - oftentimes times either entity that you would course for your concern would piece of work but fine.

Q. How and when do I file tax return?

By hiring a knowledgeable U.S. CPA (auditor). The borderline in about cases is or effectually April 15 (each yr tin exist a bit different). You lot can file extension by that date, and the new due engagement is September 15 for companies and Oct 15 for individuals.

Keep in mind, corporations have to file quarterly reports, while LLCs taxed every bit partnerships file once a year. This could result in slightly higher cost of accounting services for corporations.

Q. Exercise I need an ITIN to file taxes? If yes, how can I go it?

Whether you lot need to obtain an ITIN will depend on if you have United states taxation reporting obligations due to your U.s. business interests. Information technology is possible that yous will need an ITIN if you take membership interest (ownership) in an LLC, but nigh probably y'all won't need i every bit a shareholder of a corporation.

KEEP IN Heed: Individuals must take a filing requirement and file a valid federal income tax render to receive an ITIN, unless they meet an exception.

For more information on ITIN please visit this IRS folio.

Q. What about state income tax?

This revenue enhancement is simply applicative to C Corporations, not LLCs. Information technology applies to income earned by the corporation in the country, unlike federal income that applies to all U.Southward. sourced income.

Even though LLCs don't pay income tax, it is a practiced idea to check with your CPA if there are any filing requirements for the LLC in the state of registration.

Q. Should I register my company in the state that has no income tax?

Again, it doesn't matter if you lot choose LLC. For corporations it matters, but just to the extent that you believe y'all will accept lot's of income in the state of registration. For example, if yous take a Delaware Corporation and your business has no income coming from sources in Delaware so you will take no corporate revenue enhancement to pay to the state of Delaware, merely the federal corporate tax.

Q. I heard every bit non-resident alien I need to pay xxx% income tax on my U.South. income. Is information technology true?

It is true in certain cases. It is called NRA (non-resident alien) withholding, significant your payee keeps xxx% of the sum they are paying y'all, and remits this sum to the IRS.

According to IRS rules "in club for a payment to be field of study to NRA withholding, it must exist a payment of FDAP income. FDAP is an acronym for Fixed or Determinable, Annual or Periodic. Some of the more than common expenses paid by US withholding agents which would consequence in FDAP income to their vendors and other service providers are interest, royalties, compensation for personal services, rents, pensions or annuities and gains from the sale or exchange of the patents, copyrights and similar intangibles..." (see more details here).

Here is a key - for FDAP income paid to a foreign person to exist subject to NRA reporting and withholding, the payment must exist U.Due south. sourced. So how do you know if your FDAP income is in fact U.S. sourced? Here are some examples:

Interest: If the debtor is a U.S. resident, the interest is by and large U.S. sourced.
Royalties: If the subject property is used in the U.South., the royalty payment is U.S. sourced. Payments made in connection with the sale of certain intangible avails, including copyrights and patents, are generally sourced like to royalties when the payments are contingent on the productivity, utilise or disposition of the intangible.
Rents: If the rental property is located in the U.S., the rental payment is U.South. sourced.
Personal Services: If the services are performed in the U.S., the payment for those services is by and large U.S. sourced.

Q. What is grade Westward-8BEN, and when do I need to file it?

Form W-8BEN is a Certificate of Foreign Status of Beneficial Possessor for U.s. Tax Withholding. You need to fill this form out and give to the withholding agent or payer if you are a foreign person and you are the beneficial owner of an amount field of study to withholding. In other words, if you have U.S. sourced FDAP income your payer will be responsible to withhold the 30% tax based on the information listed on the W-8BEN.

Go on in mind, you need to submit Form Westward-8BEN when requested by the withholding amanuensis or payer whether or not y'all are challenge a reduced rate of, or exemption from, withholding.

Q. What about revenue enhancement treaty between U.S. and my country? How does information technology influence my income tax obligations?

If you as foreign vendor are a resident in a country that has a taxation treaty with the United States, the xxx% rate may be reduced. Each treaty has specific provisions which determine the reduced withholding rate. These provisions reduce the withholding rate based on the type of income and the status of the recipient.

To know if your country has tax treaty with the U.S. please visit this page. You can study the text of the treaty to understand how it influences your withholding situation, although I would recommend using the help of a CPA for that as well.

U.S. Business organization Owned by U.South. and Non-U.S. Partners

Q. Is there whatever disadvantage of having a U.S. partner in the company owned by non-resident aliens?

Not that we know of. The rules of taxation apply start on the entity, and only then on each private partner, based on each partner's private revenue enhancement situation.

Q. Since we have a U.S. partner in our corporation, can we elect it to be Southward Corporation?

No. S Corporations cannot have not-U.S. owners.

Q. I am United states citizen and I want to open a business with a 50% partner who is a non-resident alien living abroad. What type of taxes will my partner pay if we grade a C Corporation?

In that location are pros and cons to both structures for a non-resident. A C-Corp would hateful your partner is not necessarily required to file a US revenue enhancement return. He can exist paid dividends from the C-Corp, simply as with any C-Corp in that location is no revenue enhancement deduction for dividends paid out so the earnings are probable to be double taxed, once by the corporation and then by the owners - in the US for you and in your partner's country for him - as dividend income.

Q. Double taxation doesn't sound like a good thought. What if we choose LLC (taxed as partnership) instead?

An LLC taxed as partnership would eliminate the double taxation, but definitely subjects the not-US partner to U.S. taxation for his share of earnings and profits from the business organization. The partner would then have to file a 1040NR and report his share of profits and pay Us tax on those profits. The partnership would also need to withhold revenue enhancement at 30% for the foreign partner. Depending on his earnings the withheld tax would exist credited and potentially refunded against what he may owe when he files his individual non-resident tax return.

U.S. Business Owned by a Foreign Business

Q. Can a non-U.Southward. company own a U.South. visitor?

Yes, information technology can, provided the U.S. company is not Southward Corporation (or LLC taxed as Southward Corporation).

Q. Is information technology better to ain the U.S. visitor with my non-U.Due south. visitor from tax bespeak of view?

Not necessarily. Ownership does not command if revenue enhancement is due on US operations of the business concern. You will need to consider Us revenue enhancement of not-resident aliens, and if the profits earned in the U.s.a. are what is known as income effectively connected to operation of a United states business organization, to sympathize how taxation would work in your specific case.

Q. I ain a company in my country, and I desire to register an LLC to be owned by this company. Can I and then distribute U.South. profits of this LLC to my visitor, and pay the taxes in my land?

Information technology is not uncommon for an online business to avoid US revenue enhancement, but there are a number of specific factors that are unique to every business which you will have to consider. As you can see from a previous answer, ownership is non the only factor in defining if revenue enhancement is due, and then cases like this should be discussed with a Us based tax professional

Q. What if I ain the U.Southward. company with my not-U.S. company, and the non-U.Southward. company volition sell the U.Southward. visitor products for resale for the aforementioned cost the U.S. company will sell them in the U.S.? I desire to avoid having to pay taxes in the U.S.

Y'all would not exist able to sell at zero profit, due to what are known as transfer pricing rules, which establish how related entities located in two different taxing jurisdiction must found the price they charge each other for items that are transferred between themselves.

U.S. Business organization Owned by U.Southward. Person(due south) Living Abroad

Q. I am U.s. citizen and a sole owner of an LLC. I live away, and my business is online simply, without whatever physical connection. What kind of taxation would I have to pay?

Online businesses are taxed just like whatsoever other concern for income revenue enhancement purposes and equally a US citizen you are subject to tax on worldwide income. If you are living abroad, y'all may authorize for an earned income exclusion for wages y'all earn overseas, but profits from your US business concern would still be discipline to land and federal income taxes in the US.

An individual can qualify for a foreign earned income exclusion, but the corporeality of exclusion is $97,600 for 2013 and earnings over that amount in any one yr are taxable.

Q. I am U.S. citizen living abroad. Is there a way for me to run a business concern from abroad and avoid being taxed in the U.S.?

There is the potential to avoid or at least filibuster, The states taxation through setting upwards a non-Usa subsidiary, only that is typically but temporary every bit any earnings would be taxable in the The states if or when those earnings are brought back into the United states of america.

Depending on the long term goals of the taxpayer he might at least defer paying US tax, but if he intends to bring that coin back into the Us at some point it will probably be taxed as foreign profits. At that place are some methods to further defer or avoid Usa tax of repatriated profits, but it is a circuitous area of the tax code that is very specific to the taxpayer's situation and mode beyond what nosotros would attempt to explain hither.

Conclusion

Well, as nosotros mentioned earlier, U.Southward. taxation is anything but trivial. We hope this article was educational enough to requite yous some idea on how U.Southward. taxation works, and what to do next.

Keep in mind ii important points:

no matter what your situation is, it is e'er a adept thought to consult a knowledgeable U.South. taxation expert who will be able to clarify your specific situation, and requite you qualified communication. Knowledge gained from this commodity will already salve you lot some time, and then you can focus on understanding the deeper issues related to your state of affairs. Those $fifty or $100 spent on a 30 minute revenue enhancement consultation might be the best money spent on our business.
chances are at that place is no "right" or "wrong" solution - a few solutions that you would consider to your item situation might all be "more than or less right".

If you think you lot have a tax question that deserves to be answered and published in this commodity by all means email it to us, and nosotros will practice our all-time to answer and publish it. For other, more than specific questions nosotros recommend our 30 minute tax skype or phone consultation that yous can order direct here.

Skillful luck with your business!

DISCLAIMER REGARDING LEGAL ADVICE: This article is not intended to provide any tax communication or direction. None of information independent on this web site is intended to constitute legal or other professional advice, and you lot should not rely solely on the information contained on the site for making legal decisions. When necessary, you should consult with an chaser for specific advice tailored to your situation.

About The Author

Robert Kowalski is a seasoned incorporator and business filing specialist with over 10 years experience consulting emerging companies with their business filing needs. Robert served as the chief editor and 1 of the height contributors to Answers @ MyUSACorporation.com.

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