Selling Digital Stuff to USA - Tax implications

happywarmgun

My company is finding we're selling increasingly more stuff to the USA (bespoke software, and moderations of cloud software they have bought).

All our customers are business (we're B2B), so it has always been pretty clear that under the general rule I don't charge VAT for those transactions.
It's never been that big a deal. I invoice, they pay by international bank transfer, it goes through the books like any other sale, and we pay corporation tax on the profit it contributes to. It used to be ten or twenty grands a year worth.

This year it's going to be more. I'm wondering if there is any US tax implications? I vaguely remember if it was the other way around at a certain turnover the UK would expect the foreign company doing what I'm doing to register for VAT. But I can't find anything whatever about the US having similar rules. I just don't want to get hit by a surprise tax bill from the US govt. at some point in the future. Does anyone know what I should be doing? Google is not my friend on this one....

Savvy_Sue

happywarmgun wrote: »

Google is not my friend on this one....

What about your accountant? If you don't have one, or they're equally lost, look for someone with expertise in the USA. I googled "uk usa accountancy specialist" with my city and found a few: you might get all you need from a chat, or you might need to pay for a one-off consultation. Although frankly I'd expect my accountant to do some research!

antrobus

Doing Business in the US


https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/301336/Tax_Considerations_UK_Technology_Companies.pdf

Pennywise

Savvy_Sue wrote: »

Although frankly I'd expect my accountant to do some research!

Depends really. It could cost you more to pay your accountant for his time to do a lot of googling that you could do yourself. Could well be cheaper to go directly to someone who knows it and can give you quick answers in a fraction of the time it would take you or your accountant to research it. Best to pay for half an hour at £300 per hour from a specialist than 2 hours at £100 per hour from a general practitioner.

happywarmgun

Antrobus: Thanks - that document is the closest thing to being helpful I've yet seen. As I read it, as we're based in the UK, have no physical presence in the USA, are a corporate entity, aren't trading in anything that has any special rules, and have filled in and signed the W8BEN form and supplied it to the customer, then we wont be subject to any withholding tax, nor should we expect to get charged any later....


Re: asking my accountant. He'd charge me for doing the same googling I'm doing and frankly I don't think he's that tuned into nuances (he's good at making sure my book keeping is A1, not so good at general advice - and to be honest, for what he charges I'm happy with that). Re, asking a specialist - the reason I come to a money saving expert forum (clue in the title), is to avoid paying for specialist advice. It isn't a unique set of circumstances, there must be a ton of small/medium businesses who have the same issue, and I thought I'd ask to see if some kind soul would share the answer before I pay.

Sincere thanks to Antrobus for finding that doc (which has still been written in a way to make it sound more complex than it probably actually is!). I'd still be interested if there is anyone else on the board who is facing this and handles it in a different way?

beansOnToast_3

Are you selling directly to US business (e.g. from your own website) or do you sell through a US based marketplace?

Either way, in general terms, if you don't have a US presence in terms of an office or staff you don't have to pay any US tax.

But in my case selling through US based marketplaces (e.g. Apple App Store, Amazon.com) I had to get a US EIN (Employer Identification Number) and file a W8BEN form with each marketplace that declared that we had no US presence and we were a UK business and were as such covered by a double taxation treaty that meant we'd only pay tax here. Getting the EIN involved a phone call to the IRS but was straightforward. Filing the W8-BEN was all done electronically and ensured that the marketplace didn't withhold any taxes before paying us.

Good luck with your business. Now is a great time to be selling to the US in Dollars.

Scarpacci

As far as a value-added tax goes, I think the key there is the U.S. doesn't have VAT but a much more limited in scope sales tax. As I understand it, somebody selling digital goods from one U.S. state into another would not even have to pay sales tax to all the other states. Let alone somebody from outside the U.S. having to pay sales tax into the U.S. Bearing in mind, that tax varies between local areas even within each state.

So, my understanding is, there is simply not a reverse of the situation where somebody selling services into the UK might be required to register for VAT here. The U.S. does not have that sort of wide ranging value added tax on services that could be applied to people selling services into the country.

The U.S. does have income tax, of course, but as has been mentioned it only takes a W8-BEN form to confirm you do not have a presence in the U.S. and then that's no longer a concern. The companies you are dealing would withhold some of your earnings until you can assert you're not a U.S. tax payer.