Branching out a business or even starting one is a really hard job, especially if you choose a foreign country to expand in. Every country has its own set of rules and taxes. That is why it's important to make sure you do the right international tax planning before anything else. Here, we are going to be talking about the different taxes a foreigner has to pay they want to do business in the .U.S.
Now, in no way shape or form are these rules absolute. Taxation laws are always subjected to constant change as they are closely monitored and maintained by the government. Here we are just going to look at the topic from a broader perspective. We highly recommend you to hire a CPA, with some experience in international tax services.
With that being said, U.S. taxation systems are fairly complicated. There are a lot of moving parts in this machine. That is why we highly suggest you seek international tax consulting service. But if we want to summarize it, here are the taxes that you'll have to pay if doing business in the USA:
• Income tax Income tax depends on the type of your company. They are different for LLCs and corporations. For a single-member LLC, the IRS will treat it as a sole proprietorship for tax purposes. For a partnered LLC, the members will have to pay their taxes on their profits, and they will not pay taxes on business income. For a corporation, not only will they have to pay taxes on the general income but also on the dividend that is paid to their shareholders.
• Sales tax Sales tax is paid by the customer for a product or service that they might purchase. It is collected by the seller and then reported to the IRS. This tax is only applicable to retailers and not wholesalers. Sales tax is a state tax. That means that there are some states where there is no sales tax like Alaska, Delaware, Montana, and many more.
• Payroll tax Payroll taxes are payable only if you set-up an office and start hiring employees. But if you hire a contractor, you don't have to pay a payroll tax. Contractors pay their self-employment tax.
• Gross receipt tax It is a tax that is applied based on the total gross revenue of a company. It is quite similar to a sales tax, except for the fact that the seller will be paying tax. States like Delaware, Alabama, Florida and many more implement this tax.
• Franchise tax A franchise tax is yet another state tax charged by some .U.S. states like Delaware. It is charged to certain business organizations such as corporations and partnerships with a nexus in the state. It is entirely based on the capital or the net worth of the company. You have to pay this tax for the privilege of doing business in the respective states.
Now, apart from these, there are a lot of other taxes that can be imposed on your business. Those taxes will depend on what you are selling or what kind of services you are offering. That is why we highly suggest you hire a CPA for all of your international tax planning.