Do I need to pay taxes in USA as european company

[12345]

Hello, let's say an european company is selling Saas in USA and they hire american sales agent (B2B) to boost sales. Is it enough to trigger Effectively connected income and be liable for taxes in the US ?

The company is selling SAAS in many different countries, not just the US

Is hiring one sales agent in USA enough to trigger PE ?

Last edited: May 16, 2024

 

[CyprusLawyer101]

Whether the sales agent is a dependent agent i.e. solely working for you, should have an effect. However consult with a US tax professional for this for an accurate deeback

Last edited: May 16, 2024

 

[12345]

I just called IRS and they confirmed that in the case of hiring an american sales agent the income would be considered as Effectively Connected Income. 40 wait time on the phone but I got the information needed smi(&%

Last edited: May 16, 2024

 

[CyprusLawyer101]

Sounds impressive that you could get free advice from the IRS itself !

 

[Forester]

CyprusLawyer101 said:
Sounds impressive that you could get free advice from the IRS itself !
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It is not much surprising. They are quite cooperative (especially if it concerns conveying a message that you will owe them some money 😉 ).
And seriously, any sane US lawyer or CPA would tell you the same. This is really a very clear case.

Last edited: May 16, 2024
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I am just a simple countryman. Anything I say is only a personal opinion, not a certified advice 🙂

If you think it makes sense, you can like it; if opposite, please, tell me, why I am wrong...

 

[Xshore]

Then you should check the tax treaty to see if you can avoid paying tax in the US.

 

[12345]

Xshore said:
Then you should check the tax treaty to see if you can avoid paying tax in the US.
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I read the tax treaty but this matter is not clarified
I have one additional question. if there is european company that has around 50% of its customers from the us, is it liable for any income tax in the us ? Its saas developed in Europe. No employees, no PE, no presence in the US.

 

[daniels27]

12345 said:
I read the tax treaty but this matter is not clarified
I have one additional question. if there is european company that has around 50% of its customers from the us, is it liable for any income tax in the us ? Its saas developed in Europe. No employees, no PE, no presence in the US.
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I am not aware of any tax treaty having an exemption for sales agents. It is mainly for warehouses and distribution centres. Hence, I would assume that unless they are really, really independent, you do have a PE. The problem here I see that "sales agent" is very broad and can be very dependent but also like a very independent guy who just also promotes it.

 

[12345]

daniels27 said:
I am not aware of any tax treaty having an exemption for sales agents. It is mainly for warehouses and distribution centres. Hence, I would assume that unless they are really, really independent, you do have a PE. The problem here I see that "sales agent" is very broad and can be very dependent but also like a very independent guy who just also promotes it.
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Yes i understand that physical sales agent = PE

I am talking about completely different case
No sales agent and no presense in the US
Revenue from US customers is around 50% of total revenue of the company selling saas. Would it be liable for income tax in the us?

 

[daniels27]

12345 said:
Yes i understand that physical sales agent = PE
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In most cases yes.

12345 said:
I am talking about completely different case
No sales agent and no presense in the US
Revenue from US customers is around 50% of total revenue of the company selling saas. Would it be liable for income tax in the us?
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Generally not.

 

[baio12]

If you don't have PE in US you don't pay tax if company is from treaty country. If from non treaty country like many offshore country then all business activity is US is taxable.

 

[Xshore]

baio12 said:
If you don't have PE in US you don't pay tax if company is from treaty country. If from non treaty country like many offshore country then all business activity is US is taxable.
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yes, if you define "business activity" = ECI.

 

[baio12]

Xshore said:
yes, if you define "business activity" = ECI.
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So is impossible to get legally 0% tax if your customer are in US?

Is there any way to do it like some country that is treaty country but 0% tax?

 

[Xshore]

baio12 said:
So is impossible to get legally 0% tax if your customer are in US?

Is there any way to do it like some country that is treaty country but 0% tax?
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Customers in USA doesn't equal ECI. There's many other treads about this, do a search.

 

[jafo]

12345 said:
I just called IRS and they confirmed that in the case of hiring an american sales agent the income would be considered as Effectively Connected Income. 40 wait time on the phone but I got the information needed smi(&%
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smi(&% rof/%
What exactly did you expect the IRS to say? 🙄

 

[daniels27]

jafo said:
smi(&% rof/%
What exactly did you expect the IRS to say? 🙄
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Especially if you do not give them any details about the so called "sales agent." There definitely are setups that are possible where you may be able not having to pay tax in the US.

 

[JohnLocke]

As in many other cases, I would also advise you here to contact a tax specialist, either a lawyer or an accountant, and present the entire issue to them so they can provide a clear answer.

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[12345]

JohnLocke said:
As in many other cases, I would also advise you here to contact a tax specialist, either a lawyer or an accountant, and present the entire issue to them so they can provide a clear answer.
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Sure but first I wanted to ask on the forum
USA Tax advisors tend to be so annoying, first charge a few hundred usd for short consultation then provide no clear answer at all

 

[daniels27]

12345 said:
USA Tax advisors tend to be so annoying, first charge a few hundred usd for short consultation then provide no clear answer at all
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That's the nature of their personality.

12345 said:
Sure but first I wanted to ask on the forum
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I can recommend this. From my experience, what matters the most is that you have a clear presentation of your case and your targets. If you hide only one thing, the answer becomes meaningless.

Once you have the presentation of your case, you can look for the answer already yourself and rely on the laws and regulations. You can then contact lawyers and pay them for their opinion, but for this question, I personally would not expect too much and also I would expect 3 lawyers claiming A while 3 other ones claim B. (We had this ETBUS discussions here before for FBA and there is no consent among the lawyers. The best advice you will be getting is that the CPA file for their clients so that they do not need to pay tax and the IRS does not challenge it.)

As I mentioned, your question is not very specific. What you need to disclose for a relevant answer:
- 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

If you pay a company with agents that promote 50 brands and you are 1 of them, it is very unlikely that you will have problems with taxes. Likewise if you have 1 guy who buys from you and sells to his clients, you also won't have to pay taxes.

 

[baio12]

daniels27 said:
We had this ETBUS discussions here before for FBA and there is no consent among the lawyers.
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What is difference between ETBUS/ECI?

Xshore said:
Customers in USA doesn't equal ECI.
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Do you have to file US tax return if you have US customers but not ECI?

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?