Tax Implications for cross-border operations

[Skytulip]

Hi all, 

Looking to see if any of you opened companies in US (Corporation) as an extension to your main business in your country. 

However, the only reason to open that company is for merchant services such as Shopify, Shopify Payments and PayPal Business US. 

i.e. all of these services are under US Company name that collect money but paid out and eventually go to your home country main business. 

Correctly me if I'm wrong but from what I can see it's doable in perfectly legal. 

But the main question that I have is tax implications by IRS. 

from what I can see in essence there should be no tax obligations in US since it's only a shell company to gain access to these services and we pay all taxes locally.

But I could be wrong and there could be other technicalities. Keen to hear your thoughts.

finally, will this change if we opened a warehouse and hired people in US but still kept main home country business as the central management point? If so how exactly?

Thanks again whoever shares their experiences.

Cheers

Kirill  

[Victor]

Hi @Skytulip,

Thank you for getting in touch. I will start by saying that Shopify cannot provide direct advice when it comes to your tax liabilities, and that if you are unsure on what your obligations are, we would always recommend speaking to a tax or legal professional for guidance. Please bear this in mind as I offer some general advice below.

My understanding is that whether or not you are obligated to register for and remit taxes in the US depends on whether or not you are deemed to have a tax nexus in any state. It's possible that if you have no physical presence in any state—no employees, offices, or warehouses, for example—then you will not be required to register for sales tax in any US state. However, these rules and definitions will very on a state-by-state basis, so whether or not you are required to register for sales tax may come down to which state your corporation is registered and based in. 

I believe if you hired employees and opened a warehouse in the US then yes, you would most likely be deemed to have a tax nexus in the state in question and would be liable to charge and remit taxes in that state, although again, this varies on a state level. Please also be aware that states will typically have economic nexus rules, meaning you may be required to register for sales tax even without a physical presence in a state if your business meets certain economic thresholds (e.g. making a number of sales to customers in a state in a year).

I hope this has helped somewhat, but I nonetheless would encourage you to do your own research and consult with a professional if you are not confident in what your liabilities are from a taxes perspective.

[Skytulip]

thanks for your reply. 

It seems states are becoming very aggressive and hungry for sale taxes as now some states are looking to tax everything who does $100k or 200 orders a year!!!! 

That happened with the 2018 court ruling. 

So to all, be wary and take measures as in the next few years states will force you to collect sales tax even if you run 100% overseas. 

at least income tax is still based of your residency but who knows till when....