Do I need to pay taxes in USA as european company

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- Is the sales agent "dependent", i.e. only working for you => tax
- How big is the brand portfolio of the sales agent (apart from your brand)
- Is the sales agent employed by you, self employed or working for another company
- Are you selling to the agent or directly to the customers

Yes he is working only for the company. He's working as B2B, not employment
Just one brand
Selling directly

I'm 100% sure its ECI at this point, did some research

 

[daniels27]

Yes he is working only for the company. He's working as B2B, not employment
Just one brand
Selling directly

I'm 100% sure its ECI at this point, did some research

Yes, it is taxable in the US.

What is difference between ETBUS/ECI?

There are two terms:

• ETBUS/USTB both meaning "engaged in a trade or business in the United States"
• ECI means "effectively connected income"

You can find the relevant law here:

26 CFR § 1.871-8 - Taxation of nonresident alien individuals engaged in U.S. business or treated as having effectively connected income.

www.law.cornell.edu

(2) Income effectively connected with the conduct of a trade or business in the United States—(i) In general. If a nonresident alien to whom this section applies derives income or gains which are effectively connected for the taxable year with the conduct of a trade or business in the United States by that individual, the taxable income or gains shall, except as provided in § 1.871-12, be taxed in accordance with section 1 or, in the alternative, section 1201(b). See section 871(b)(1). Any income of the nonresident alien individual which is not effectively connected for the taxable year with the conduct of a trade or business in the United States by that individual shall not be taken into account in determining either the rate or amount of such tax. See paragraph (b) of § 1.872-1.

In short, if you are engaged in a trade or business in the United States (ETBUS), you need to pay tax on any income effectively connected (ECI) to that trade or business. Hence, ECI only makes sense in combination with an ETBUS.

Do you have to file US tax return if you have US customers but not ECI?

You only have to file if you have to pay taxes. You can always file a protective 1120-F to protect deductions should the IRS ever question your tax liability. You can file the protective 1120-F up to 18 months after the regular due date and it is still considered timely filed. I would do it.

More US states saying you have nexus if you only make minimum dollars of sales in their state. So you can be liable for state taxes and filings even if not federal. Is there legal way around that?

This is regarding a sales tax nexus. There are different nexus rules for sales tax and for corporate/franchise taxes. There is no real way around the sales tax nexus if it is based on turnover. If you are doing Amazon and website sales, you may want to use two different companies for Amazon and non-Amazon. For Amazon sales, Amazon already pays sales tax on all sales, for website sales, you only need to pay sales tax once you reach a threshold. Now, there are certain states which include the Amazon turnover in the threshold. Hence you can probably go around it for way longer if you serve your website customers through another company,

Yes he is working only for the company. He's working as B2B, not employment
Just one brand
Selling directly

I'm 100% sure its ECI at this point, did some research

Yes, you are ETBUS with ECI.