I'm NOT looking for professional advice. (yet) I'm just interested to know if someone can help point me in the right direction.

I think my company may be in a bit of trouble in this area.

1) We are a Canadian incorporated company. We're NOT registered in the US in any way.

However, we:

2) Own about 20 servers in a datacenter in the US. (So we have physical assets located in the US.)

3) We hire 3 people who live in the US on a contractpr basis. However, I think they work pretty much only for us, which might technically make them employees.

My accountant has told me he believes we have a US business presence and therefore we should seriously investigate filing US tax returns.

Ack!

That would open up a whole can of worms I don't want.

Can anyone point me to links that would describe what the IRS considers to be a "US Business Presence" with regards to a foreign corporation?

Thanks.

check out the business section of their site. I fell pretty confident that you do have a US presence. But, do your research.

http://www.irs.gov/businesses/index.html

Originally posted by Ackoo
check out the business section of their site. I fell pretty confident that you do have a US presence. But, do your research.

http://www.irs.gov/businesses/index.html

Yes, I just spent around 20 minutes digging around that exact website, but I couldn't find any answers. That's when I decided to come here and ask for thoughts and specific links.

Ask your accountant what why he thinks you need to pay taxes. Ask him for specific links. Or get a second opinion from another professional

Why not just call the IRS and ask them. They will give you specific information and laws that will show if you do or don't need to file. This is not a place you want to make a mistake.



Robert

Folks, I realize I could hire someone or seek professional advice, etc...

What I'm asking for here is for LINKS to any information that I can use to get a basic understanding.

I'm not interested in paying a professional adviser $150+ per hour for basic information that I could possibly find by making a few postings and asking for general links.

I've tried calling the IRS 5 times over the last few days, and I get no answer to ANY of the numbers they have posted on their site. It might be that I'm calling from canada, but it just rings and rings and rings.

If you don't have any links to share, then please don't bother to post and tell me to talk to my accountant (duh) or call the IRS (duh), or other obvious methods.

I'm looking for LINKS to websites or pages that can help me find basic information about what constitutes a "US Business Presence". Once I have at least the basics, then I can go to the professionals for specifics and at least be somewhat knowledgeable.

Thanks.

If you don't have any links to share, then please don't bother to post and tell me to talk to my accountant (duh) or call the IRS (duh), or other obvious methods.

Sorry just trying to help.. You did not note that you had or hadn't called the IRS so just trying to help :rolleyes:

Sorry if you think this is another DUH but this is what I found on the IRS site >>

http://www.irs.gov/businesses/small/international/article/0,,id=96352,00.html

Originally posted by GWDGuy
http://www.irs.gov/businesses/small/international/article/0,,id=96352,00.html

Ya, I saw that link too. Problem is that this isn't about an individual, it's about a corporation/business doing "business" in the US. If I was an employee of an american company then this would apply to me...

.. There doesn't appear to be much information on the IRS website for companies outside the US who are doing business in the US.

I'll maybe try calling the 1800 number with Skype and see if that works.

Cheers!

Originally posted by mrzippy

2) Own about 20 servers in a datacenter in the US. (So we have physical assets located in the US.)

3) We hire 3 people who live in the US on a contractpr basis. However, I think they work pretty much only for us, which might technically make them employees.

My accountant has told me he believes we have a US business presence and therefore we should seriously investigate filing US tax returns.

Ack!

That would open up a whole can of worms I don't want.

Can anyone point me to links that would describe what the IRS considers to be a "US Business Presence" with regards to a foreign corporation?

Thanks.

2)
---
The International Requirement of a “Permanent Establishment”

<8> The OECD uses the concept of a “permanent establishment” (“PE”) for determining the nexus/threshold for taxing business profits of non-residents for international transactions. A PE is the international analogy to physical presence or substantial nexus and is currently defined as “a fixed place of business through which the business of an enterprise is wholly or partly carried on.”15 The OECD has clarified how it considers a PE should be applied to e-commerce operations. It concluded that neither web sites, nor web site hosting, nor an Internet service provider will typically constitute a PE for the enterprise using those services.16

<9> The Technical Advisory Group (“TAG”) of the OECD proposed a modification of the PE definition to provide that a computer server cannot, in itself, constitute a PE. The rationale is that these activities do not involve human intervention by personnel. They explained that “[t]he importance of the human contribution to the setting up, operation and maintenance of the business will be greater and the contribution of the places where the automated equipment is located will be smaller.”17 There is support for this modification, especially for servers conducting e-commerce,18 but “[t]he conclusion reached by the TAG is that while this option should not be pursued at this time, the application of the current rules to functions performed with the use of servers and software should be monitored to determine whether it raises practical difficulties or concerns, which could lead to further study of these alternatives or combinations or variants thereof.”19
---
excerped from http://www.lctjournal.washington.edu/Vol1/a005Royalty.html

3)
Employee Statements:
Must comply with employer's instructions about when, where, and how to work.
Trained by employer.
Services are part of business operations.
Work done personally.
Has assistants hired by employer.
Has continuous relationship with employer.
Work hours set by employer.
Works full-time for one employer.
Work done on employer's premises or designated site.
Must follow set order of work.
Submits regular reports.
Paid by the hour or salary.
Business and travel expenses paid by employer.
Tools and equipment paid by employer.
Has no investment in facilities used.
No profit or loss incurred.
Works for one firm at a time.
Services are not generally available.
Can be fired at any time.
Can quit at any time without liability.
The firm has filed a W-2 for the worker in the past.
The employer's and individual's intent.
Regular payments for work (weekly, monthly).
An unincorporated worker.

Contractor Statements:
Determines place and sequence of work.
Train on their own.
Services may not be related to employer's services.
Others can do work if the contract is completed.
Employs own assistants.
Work by the job.
Sets own hours.
Services offered to the public.
Generally works off-site.
Can set own schedule.
Files report when job ends; interim reports possible.
Paid by the job.
Pays own business and travel expenses; part of cost of job.
Furnishes own tools and equipment.
Has significant investment in facilities used.
Can make a profit or suffer a loss.
Works for several companies at one time.
Makes services available to general public.
Cannot be fired if results satisfy contract.
Must complete job according to contract specifications.
Never considered an employee.
A contract for the work to be completed.
Payment at completion of the job.
An incorporated worker.

The more statements of whichever group are true might be an indication as to wether the people working for you should be classified as employees or independant contractors.

--
"I am not a lawyer, if my advice destroys your life, too bad," standard disclaimers apply. Thank you, please drive through.

That is excellent information. Thanks!

Other things to consider - do you pay social security taxes, medicare taxes, unemployment insurance, etc? There are so many unanswered questions here & I have to wonder what your accountant actually wanted.

It might be worth it to get a second opinion and that way you know for sure where you stand on all grounds. Relying a message board to get advice on something this important could get you into more legal troubles.

Everyone can interpret a sentence a different way. That is why we have attorneys to actually tell us what they mean :)

Originally posted by coreybryant
There are so many unanswered questions here & I have to wonder what your accountant actually wanted.

It might be worth it to get a second opinion and that way you know for sure where you stand on all grounds. Relying a message board to get advice on something this important could get you into more legal troubles. If you would please read my posts again, you will see that I am not "relying" on anything said here.

That would be just stupid.

I'm merely seeking LINKS so I can get some preliminary information so that when I do meet with the PROFESSIONALS I have some basic understanding of what is happening.

Good, you never know with some people on these forums. I did not want to take anything for granted since you said you were not interested paying $150 to a professional.

Having said that, you might check out Foreigners in U.S. Tax Return (http://www.jamesdance.com/Pages/Tax%20Guide.htm) and International Taxpayers (http://www.irs.gov/businesses/small/international/index.html). You might also check the Secretary of State where your servers / employees reside in to see if there are any legalese in that particular state

3) We hire 3 people who live in the US on a contractpr basis. However, I think they work pretty much only for us, which might technically make them employees.

If they are hired as independant contractors then the employer is not responsible for collecting any taxes, providing benefits etc. There is a definite distinction under law for what consitutes an independant contractor versus an employee.

The previously mentioned small business center links has lots of information. Might also look in the Industry Canada website for information for businesses doing business in the US.

Also search these forums for the terms independant contractor and US taxes for foreign countries will liekyl return a hit or two.