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MenuAre foreign companies, who are not based in the US, liable to pay any kind of tax in the US, when selling digital products via a US sales platform?
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Yes, foreign companies that sell digital products via a US sales platform may be subject to certain taxes in the United States. The tax implications depend on various factors, including the type of products sold, the nature of the business, and the presence of a tax treaty between the foreign company's home country and the United States.
It would depend on a multitude factors. How the business is registered to conduct business in the USA, the state where the sale takes place for the product. Many platforms are set up to help sellers and buyers with part of the sales tax, if applicable. Income tax could be another consideration, depending on how and where the state is established. I hope this helps with the considerations to keep in mind.
Related Questions
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In a startup with a globally-spread remote team, does it still make sense to incorporate in U.S./Delaware vs. somewhere overseas?
Delaware C-Corp I usually Delaware is the best choice for any startup looking for fundraising with a US focus. However, if you are a remote and global team, an overseas or foreign corporation or US tax purposes might make sense. You'd have to talk to an advisor who can dive into your situation, but it would be more difficult for the US owner come tax time, as he'd likely have to file form 5471 to the IRS for any controlled foreign corporation, and form 90-22.1 for any foreign bank accounts. There are a lot of other concerns I didn't hear you raise that entrepreneurs usually have and ask me about, namely banking and merchant accounts/ payment processors. In terms of accepting online payments, any US corporation or LLC is far and away the best option for a company. It's difficult to suggest without knowing more about the company but you might explore Delaware, Wyoming, Hong Kong and other offshore jurisdictions for your legal entity. Each tend to have positives and negatives and there is no one size fits all solution. I do write about issues of incorporation quite regularly on my website FlagTheory.com - so you can read those articles for free, or we can schedule a call - Clarity.fm/incorporation when you have specific questions. Thank you and hope this was helpful!EJ
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Should I collect NY sales taxes for online marketing and web development services offered to NY clients?
Generally, the transfer of tangible personal property is the trigger for a sales tax event. In this case, it may be necessary to review the various aspects of a typical transaction to determine if any portion thereof would be subject to sales tax. However, generally speaking, receipts from the sale “Marketing”, "Media Placement Services" and "Web Site Networks" are not subject to State or local sales and compensating use taxes provided your organization does not sell or otherwise transfer any tangible personal property to its clients in conjunction with these activities or perform any services otherwise taxable under Section 1105(c) of the Tax Law in conjunction with these activities. (See, Advertising Agencies, Technical Services Bureau Memorandum, June 10, 1983, TSB-M-83(16)S. For additional guidance, you may also want to refer to Publication 750, A Guide to Sales Tax in New York State http://www.tax.ny.gov/pdf/publications/sales/pub750.pdf. I hope that you find this information useful. Shawn Powell Joseph Reference TSB-A-97(43)sSP
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If I get a virtual address for my company and I work from home; will I still be eligible for tax credit on my home office?
yes. As long as your main place of work is your home/office.JF
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Are promissory note installments considered capital gains? I'm selling my website and would love insight on the financial details.
Yo are talking apples and oranges. Capital gains are related to your basis not the form of payment. If you are a cash basis taxpayer, you pay taxes when you receive cash beyond your basis. We can help you with structure.JH
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I'm a Canadian selling ecommerce products on Amazon (US only). Need info on cross border tax clarification & if it's time to incorporate (in US or CA)
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. ThanksDM
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