America Made Easy

Decoding US Tax – What International Investors Need to Know

Doing business in the US means you will at some point be paying US taxes. The old adage certainly runs true that it is always cheaper and easier to do things correct from the beginning.

23rd November 2020 | 3 minute read

International investors certainly do not want to run awry of the Internal Revenue Service (IRS). Unfortunately, this is not the only layer of tax compliance to be concerned about in the US.

US states have their own regulatory and legislative authority. That authority extends to the ability to create their own unique tax regimes. Thus, doing business in the US means navigating compliance with both federal and state level laws, regulations and yes taxes. This can mean multiple filings across multiple states creating a significant compliance requirement for investors as they scale and sell across more and more states.

Any company selling to end consumers will have sales and use tax liability once they surpass certain state thresholds. And you guessed it—those thresholds look different from state to state ranging from annual sales levels to the number of annual transactions. Likewise, once companies have physical or economic nexus based on the level of activity in a particular state they will also have to file a corporate income tax return in that state. That is on top of their annual federal tax return they must file annually regardless of income levels.

Feeling overwhelmed yet? In episode 8 of the America Made Easy Podcast, we try to make sense of US tax with Avitus Director of Tax Services Scott Stevenson. The conversation provides international investors with a lay of the land of how the tax code in the US is managed and segmented while also exploring trends that will impact their business decisions.

Tune in to our 8^th full length episode as we discuss this complicated tax environment and the importance of taking these requirements on early with proactive planning so that tax consequences can be managed and minimized allowing you to function, perform and make profits.

Value Bombs from the Podcast

A proper market evaluation might best be followed by engaging a tax and accounting professional to guide your market entry before you start selling into the market and certainly before setting up a US entity. This will save you time and money from making costly mistakes as it relates to everything from transfer pricing to entity structure.
The changing ecommerce landscape coupled with declining state tax revenues has led to tax policy changes allowing international companies to be taxed on sales and revenues regardless of whether or not that have a physical presence in a particular state.
There are implications for selling across state boundaries. International investors operating a trade or business in the US must file an annual federal tax return with the IRS in addition to filing a return in each state where they have a tax nexus.

Resources Mentioned in the Podcast

Working with Americans: How to Build Profitable Business Relationships

By: Allyson Stewart-Allen and Lanie Denslow

–Download 2 free chapters

-Our listeners can order the book and claim a 20% discount with the code “WWA20” at http://bit.ly/WWA-order-Routledge. Note the code expires on 31 December 2020.

Newable – On your side in the UK

Newable helps companies thrive by providing the essential resources they need to take the next step with their business by offering financing, premises and professional support. Newable works with 22,500 businesses a year at the heart of the UK economy, helping people start, scale and sustain their enterprises. Newable’s purpose is to achieve profit and social impact in equal measure.

Avitus – On your side in the US

For over 20 years, Avitus Group has provided business administration services for more than 3,000 companies in the US. Avitus Group’s Business Solutions includes a suite of specialist services designed to help clients simplify, strengthen and grow their business. From planning your entry into the US market to helping you sustain your business, Avitus offers the combination of customised and comprehensive support you need.