Ask YC: Do we need to file/pay US taxes (Canadian corporation)?
23 comments
> Do foreign corporations need to pay US taxes if they use a US-based credit card gateway?
No.
> Has anyone else gone through this process?
Yes
You can request an EIN here:
http://www.irs.gov/pub/irs-pdf/fss4.pdf?portlet=3
or call:
Internal Revenue Service irs.gov Telephone Assistance for Businesses Toll-Free 1-800-829-4933
You might be able to get an exemption as well, which you can then give to your 'gateway' provider.
> Can foreign corporations collect payment using a US gateway without incurring US taxes?
Yes, absolutely. Your business is taxed in its home location. Even if you would have a US corporation owned by a Canadian one (you may need this in case of opening a US bank account for instance) you will have to file US taxes, but you will not be paying any, you'll need to consult with a tax specialized lawyer for the precise details on that though, how you set things up is critical.
No.
> Has anyone else gone through this process?
Yes
You can request an EIN here:
http://www.irs.gov/pub/irs-pdf/fss4.pdf?portlet=3
or call:
Internal Revenue Service irs.gov Telephone Assistance for Businesses Toll-Free 1-800-829-4933
You might be able to get an exemption as well, which you can then give to your 'gateway' provider.
> Can foreign corporations collect payment using a US gateway without incurring US taxes?
Yes, absolutely. Your business is taxed in its home location. Even if you would have a US corporation owned by a Canadian one (you may need this in case of opening a US bank account for instance) you will have to file US taxes, but you will not be paying any, you'll need to consult with a tax specialized lawyer for the precise details on that though, how you set things up is critical.
You may have to pay taxes on income from US customers. It is best to consult an attorney.
> You may have to pay taxes on income from US customers.
Nonsense. Your moniker serves you well ;)
As long as you do not incorporate in the US you do not pay taxes in the US, when you do the rules change and depending on the precise ownership structure and form of incorporation you then may have to pay taxes. For instance, you will have to pay sales tax to sales done to residents of the state where you incorporate.
It all revolves around the concept of having a 'nexus' in some state in the US. As long as that isn't the case you are not liable for taxes, since there is nothing that could be taxed. As soon as you have an agent or presence in the US that you control that changes.
> It is best to consult an attorney.
That is always good advice.
Nonsense. Your moniker serves you well ;)
As long as you do not incorporate in the US you do not pay taxes in the US, when you do the rules change and depending on the precise ownership structure and form of incorporation you then may have to pay taxes. For instance, you will have to pay sales tax to sales done to residents of the state where you incorporate.
It all revolves around the concept of having a 'nexus' in some state in the US. As long as that isn't the case you are not liable for taxes, since there is nothing that could be taxed. As soon as you have an agent or presence in the US that you control that changes.
> It is best to consult an attorney.
That is always good advice.
Beware! Tax law is full of dragons and thou art crunchy and taste good with ketchup.
If you have an agent or reseller in the US you may be required to collect US taxes from your/their customers, depending on the parties to the contractual relationship and the flow of money.
(Unfortunately professional advice doesn't always give you someone to sue in case of disaster, as advice can be wrong but not negligent. It's a good start though, and insurance is available against some risks as well.)
If you have an agent or reseller in the US you may be required to collect US taxes from your/their customers, depending on the parties to the contractual relationship and the flow of money.
(Unfortunately professional advice doesn't always give you someone to sue in case of disaster, as advice can be wrong but not negligent. It's a good start though, and insurance is available against some risks as well.)
> Beware! Tax law is full of dragons and thou art crunchy and taste good with ketchup.
Or even without :)
> If you have an agent or reseller in the US you may be required to collect US taxes from your/their customers, depending on the parties to the contractual relationship and the flow of money.
This is very true. It mostly applies to sales tax.
> (Unfortunately professional advice doesn't always give you someone to sue in case of disaster, as advice can be wrong but not negligent. It's a good start though, and insurance is available against some risks as well.)
This is also true, and something that plenty of people seem to be unaware of. You and nobody but you are responsible for your taxes. If your accountant or lawyer fuck up YOU are liable for the deficit in taxes, not they.
And that's pretty logical, since you were responsible for your taxes anyway, hiring someone to do some work for you doesn't change that in any way that matters.
You may or may not have a case against them depending on the amount of negligence involved, but usually they're pretty good about covering their asses, and leaving yours exposed.
I've had a (fortunately small) issue like this with a bookkeeper doing our payroll, he forgot a 400 euro deduction for some government fund. That wouldn't have been a serious problem if it didn't take over two years before the fault was detected. So, then you owe x employees400 eurosy months to plug the hole. No fun.
Or even without :)
> If you have an agent or reseller in the US you may be required to collect US taxes from your/their customers, depending on the parties to the contractual relationship and the flow of money.
This is very true. It mostly applies to sales tax.
> (Unfortunately professional advice doesn't always give you someone to sue in case of disaster, as advice can be wrong but not negligent. It's a good start though, and insurance is available against some risks as well.)
This is also true, and something that plenty of people seem to be unaware of. You and nobody but you are responsible for your taxes. If your accountant or lawyer fuck up YOU are liable for the deficit in taxes, not they.
And that's pretty logical, since you were responsible for your taxes anyway, hiring someone to do some work for you doesn't change that in any way that matters.
You may or may not have a case against them depending on the amount of negligence involved, but usually they're pretty good about covering their asses, and leaving yours exposed.
I've had a (fortunately small) issue like this with a bookkeeper doing our payroll, he forgot a 400 euro deduction for some government fund. That wouldn't have been a serious problem if it didn't take over two years before the fault was detected. So, then you owe x employees400 eurosy months to plug the hole. No fun.
If your business has no presence in the United States you should not need to pay any taxes to that government. This topic comes up frequently on the BoS board: http://discuss.joelonsoftware.com/default.asp?biz and a quick search there should provide a ton of resources.
If in doubt, consult an accountant.
If in doubt, consult an accountant.
They clearly have a US presence if they're selling to US customers though.
Rather than asking a Tax Attorney could you ask the IRS? They should know! Bet they won't tell you though.
Rather than asking a Tax Attorney could you ask the IRS? They should know! Bet they won't tell you though.
> They clearly have a US presence if they're selling to US customers though.
I sell to US customers every day and do not have a US presence, please.
> Rather than asking a Tax Attorney could you ask the IRS? They should know!
Absolutely they do.
> Bet they won't tell you though.
Sure they will. And they'll be nice about it too.
I sell to US customers every day and do not have a US presence, please.
> Rather than asking a Tax Attorney could you ask the IRS? They should know!
Absolutely they do.
> Bet they won't tell you though.
Sure they will. And they'll be nice about it too.
Did you mean "should know" as in "are likely to know" or "it would be good if they knew"? Based on my experience with them, I would agree with the latter possibility and disagree with the former.
OTOH I'm also the only person I personally know who wound up filing the simplest US tax form along with a handwritten note describing additional income that was not taxable for a reason that could not be found on any US tax form. For the curious, that reason can be found as article XX in http://www.irs.gov/pub/irs-trty/canada.pdf. (That is a later form of the treaty than the one I was using, but article XX is unchanged.)
OTOH I'm also the only person I personally know who wound up filing the simplest US tax form along with a handwritten note describing additional income that was not taxable for a reason that could not be found on any US tax form. For the curious, that reason can be found as article XX in http://www.irs.gov/pub/irs-trty/canada.pdf. (That is a later form of the treaty than the one I was using, but article XX is unchanged.)
That tax code only applied to you because you had a presence in the US though.
As for the communications with the IRS, compared to similar institutions in other countries they are absolutely stellar.
Please note that that is a relative statement :)
As for the communications with the IRS, compared to similar institutions in other countries they are absolutely stellar.
Please note that that is a relative statement :)
Being that I am a dual US/Canadian citizen, it would have applied to me regardless. I don't know what most other countries do, but I'm definitely annoyed that the USA will try to tax my non-US earnings because I am a citizen.
As for similar institutions in other countries, the only one I have experience with is Canada, and my experience with them has been orders of magnitude better than my experience with the USA. How do you think I tracked down the right article in the US/Canada income tax treaty to avoid double-taxation?
As for similar institutions in other countries, the only one I have experience with is Canada, and my experience with them has been orders of magnitude better than my experience with the USA. How do you think I tracked down the right article in the US/Canada income tax treaty to avoid double-taxation?
There is the 180 day rule, I'm not sure if it applies to you.
I don't know what 180 day rule you're talking of, but I'm very sure it did not apply. A US citizen is taxable in the US for world-wide income. (Though there is a nice tax break for money made as a foreign resident, and there are lots of double-taxation treaties with lots of countries.)
I was in the bizarre situation of being a US citizen living in the US, going to a US school, being paid a scholarship from the Canadian government that was not taxable in the US. To make things worse I was actually a dual citizen in a country that barely acknowledged the possibility of such. In short I was that bureaucratic nightmare called "an exception they don't have any forms for".
I was in the bizarre situation of being a US citizen living in the US, going to a US school, being paid a scholarship from the Canadian government that was not taxable in the US. To make things worse I was actually a dual citizen in a country that barely acknowledged the possibility of such. In short I was that bureaucratic nightmare called "an exception they don't have any forms for".
> In short I was that bureaucratic nightmare called "an exception they don't have any forms for".
That can have it's advantages too :)
I misremembered by the way, it's called the 183 day rule (it's been a decade, apologies). Anyway ,here is some info on it, it seems that you may be exempted from Canadian taxes under that rules, because you are spending less than 183 days per year in Canada:
http://www.google.com/search?q=canada+taxes+183+day+rule
But maybe the specifics of the scholarship change that again.
That can have it's advantages too :)
I misremembered by the way, it's called the 183 day rule (it's been a decade, apologies). Anyway ,here is some info on it, it seems that you may be exempted from Canadian taxes under that rules, because you are spending less than 183 days per year in Canada:
http://www.google.com/search?q=canada+taxes+183+day+rule
But maybe the specifics of the scholarship change that again.
The rule is (or at least was that that time) that a Canadian citizen receiving Canadian source income is always taxable in Canada.
However the sum was so small that I didn't owe any taxes on it. I still filed though.
However the sum was so small that I didn't owe any taxes on it. I still filed though.
We just went through this.
We decided to charge in USD. We have a lot of international users, and while people generally know where their own currency stands vis a vi the Greenback, we surmised that they wouldn't be nearly as familiar with where they stand against the Loonie.
We initially went with the Canadian cc processor Moneris. They support recurrings, although their API support sux. Watch out too for the application approval process which was v slow and v painful.
We do not see the cc numbers. They are passed along to Moneris directly.
Moneris could only support Visa and MC transactions for USD, which was pretty limiting (credit cards are not used nearly as much in countries like Germany and Brazil) so we also went ahead and hooked up a pay by Paypal.
Shortly after we set everything up, Paypal started offering its cc processing service to Canada. They have much better API support then Moneris (although PP’s web UI sux), and since we had already set up the PP payment option, it was a no brainer to move it all over to PP. So PP now processes our cc as well.
Similar to Moneris, we do not see the cc numbers at all. They are passed along to PP directly.
(We took a look at Amazon, but they were not offering their 'Easy Pay' service in Canada.)
If you are a Canadian registered, there is no need to worry about US taxes.
We decided to charge in USD. We have a lot of international users, and while people generally know where their own currency stands vis a vi the Greenback, we surmised that they wouldn't be nearly as familiar with where they stand against the Loonie.
We initially went with the Canadian cc processor Moneris. They support recurrings, although their API support sux. Watch out too for the application approval process which was v slow and v painful.
We do not see the cc numbers. They are passed along to Moneris directly.
Moneris could only support Visa and MC transactions for USD, which was pretty limiting (credit cards are not used nearly as much in countries like Germany and Brazil) so we also went ahead and hooked up a pay by Paypal.
Shortly after we set everything up, Paypal started offering its cc processing service to Canada. They have much better API support then Moneris (although PP’s web UI sux), and since we had already set up the PP payment option, it was a no brainer to move it all over to PP. So PP now processes our cc as well.
Similar to Moneris, we do not see the cc numbers at all. They are passed along to PP directly.
(We took a look at Amazon, but they were not offering their 'Easy Pay' service in Canada.)
If you are a Canadian registered, there is no need to worry about US taxes.
Thanks for the info (I'm one of the co-founders of PagerDuty).
Which PayPal product are you using? Website Payments Pro? We'd like to chat with someone who's gone through the process of setting this up already. We are also trying to evaluate which provider to use. Can you please send me an email (alex [at] pagerduty.com)?
Which PayPal product are you using? Website Payments Pro? We'd like to chat with someone who's gone through the process of setting this up already. We are also trying to evaluate which provider to use. Can you please send me an email (alex [at] pagerduty.com)?
Done!
Beware of account termination fees with moneris.
It's probably a good idea to find a good accountant or tax lawyer who knows this stuff and pay them to give you an authoritative answer.
FWIW: we've just started using Beanstream, which is a Canadian gateway that I think has what you're looking for.
No you don't need to.
Check out PayPal Web Payments Pro Canada for a Canadian processor
[deleted]
Long version: We're about to begin collecting payment at our Canadian-based startup (pagerduty.com), but have run into a bit of a snag. All of the Canadian payment processors we've found that support recurring billing require us to handle the CC numbers during the initial signup process. This creates a PCI compliance requirement that we're keen to avoid.
We'd like to use a US gateway that allows recurring billing without requiring PCI compliance (e.x. Braintree), but unfortunately they are all asking us to provide an Employer Identification Number issued by the IRS. Apparently, it isn't difficult for foreign corporations to get an EIN, but we're unsure what sort of tax obligations filing for an EIN will create.
Has anyone else gone through this process? Can foreign corporations collect payment using a US gateway without incurring US taxes?