I'm single owner of DE LLC, non-resident and I need help with the first time tax preparation.

I will answer this is the simplest form I can. Basically in every country to conduct business in you will need to pay taxes in that country. If you have an office, employees or your revenue comes from that country you have to pay taxes. These taxes will include State, Federal and Sales Tax. Moreover, this at the beginning will make you think you are paying double tax since this income also has to be paid with your local government, but it isn't so bad. This could be a great opportunity to build a tax strategy where you can take advantage of multi country taxation which can lower your overall tax bracket. There are several steps you have to do to conduct business in the US, such as incorporating first as a foreign corporation in the state you chose (Preferably one with no state tax) then filing your taxes. Your tax preparer in Canada will have to take this in consideration since there are forms he has to fill out to cancel either you Canadian Income Tax or your US tax preparer to fill out the return not to pay taxes here but in Canada... whichever tax you have to pay depending on the international treaties they have.

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If your concern is from an ethical standpoint or a concern over a segregation of duties, there is no problem at all having your tax person handling your bookkeeping. The bigger issue is something that few people understand about accountants. There are different specialties within accounting, and you should go to the right specialist for the right task. Tax accountants are experts in tax law, filling out tax returns and finding ways to minimize taxes. They must immerse themselves in the field to maintain their expertise. Financial accountants (which include bookkeeping) are experts in debits and credits and keeping all your transaction straight in your accounting software so that you can get good financials each month. Financial accountants have to immerse themselves in your day-to-day accounting so that they can keep it accurate and up to date. Full disclosure, this is the work that my firm specializes in, we don’t do any taxes. Because each type of accountant must immerse themselves in their individual fields of expertise, they don’t have the time to focus on the other expertise. Not that they are both not great accountants, they just have a different specialty. Here’s a good analogy. If you developed a heart condition, would you go see a neurologist? No, you’d go see a cardiologist. They are both outstanding physicians and know a lot about the human body, but the cardiologist spends all their time thinking about, studying, and treating heart conditions and is going to be the best equipped and most knowledgeable about treatments for your heart condition. The last point I’ll make is that tax work is very seasonal and requires incredible focus and incredibly long hours leading up to major tax deadlines. This is not only during the period from January to April 15th, but also leading up to major deadlines on August, September and October 15th. Companies I have worked with that used tax accountants in the past for their bookkeeping find during these periods their tax accountants are forced to put all other work besides taxes on hold until their tax work is complete. What often happens in these situations is that these company’s bookkeeping falls three or four months behind. This can be devastating for a small business that needs to know if they are making money or losing money on a very up to date basis. So my suggestion is to find yourself a good bookkeeper that can handle your books. Your tax person may even be able to suggest a good resource, and deep down may be glad to do so because her first love is taxes, not bookkeeping. My firm could likely handle the work as well. Hope my thoughts above are helpful and addressed your question, but feel free to reach out to me if you have any follow up questions.

Yes you should be reporting the capital contributions. Under the old Form 5472 rules, it's true that only items that impacted taxable income would be reportable transactions. So, a capital contribution by you to the corporation would not be reportable, unless the equity contribution was somehow below or above a fair value contribution in exchange for services that you might provide for the corporation - essentially an imputed reportable transactions. When the IRS changed the Form 5472 rules to require non-U.S. owned single member LLC's, they expanded the reportable transaction definition to include virtually everything. The term “transaction” is defined in Treas. Regs. Section 1.482-1(i)(7) to include any sale, assignment, lease, license, loan, advance, contribution or other transfer of any interest in or a right to use any property or money, as well as the performance of any services for the benefit of, or on behalf of, another taxpayer. So, for example, contributions and distributions would be considered reportable transactions with respect to such entities. These amounts can be reported on Lines 12 and 25 with an explanatory footnote that clarities the amounts are capital contributions and not amounts that impact taxable income.

Regarding US taxation of internet sales. Since you are a foreign entity or person (in regard to the US), and there is an income tax treaty between Canada and the US, you will not be liable for US federal income tax on internet sales unless you have a “permanent establishment” in the US with which the internet sales income is effectively connected. So as long as you do not have a warehouse, physical store, sales office, etc... in the US you don't have to file US returns or remit tax to the US. Amazon should be charging to the customer and withholding any sales tax due to a state in which your products are sold. If you sell through other merchants or directly you may have to deal with this yourself. Regarding incorporation Incorporation is almost always a good idea from a liability standpoint as it prevents a judgement for damages from taking all your property and limits the collection to what is owned by the business, With the facts you have given I would suggest incorporating in Canada unless you have a business reason to establish a physical presence in the US. This will eliminate US taxes and related compliance costs. Once you establish a US presence you will need to begin filing returns in the US even if you are running a net operating loss. If there is no benefit to having a physical presence in the US then the related compliance costs and tax would be an unnecessary expense. Feel free to setup a phone call if you would like to chat for a bit regarding the matter. Thanks