AutoFile for Non-U.S. Based Clients: What You Need to Know with Sidr Tax

Requirements for Non-U.S. Based Users

1. Federal Employer Identification Number (FEIN):

Non-U.S. entities must obtain an Federal Employer Identification Number (FEIN) from the Internal Revenue Service (IRS). This number is necessary for tax purposes and is used to identify your business entity in the U.S. You can apply for an FEIN online, by fax, or by mail through the IRS.

Alternatively you can also work with free or paid services to apply for an FEIN on your behalf (e.g. LegalZoom, Incfile, BizFilings.)

2. U.S. Bank Account:

To utilize AutoFile, Sidr Tax requires you to have a U.S.-based bank account. This account is necessary for direct debit of the tax amounts due. Opening a U.S. bank account as a foreign entity typically requires an FEIN, and you may need to visit the U.S. to complete this process, depending on the bank's policies.

3. State Tax Registrations with Sidr Tax’s Assistance:

You must register with each state where you have established tax nexus. Each state has its own set of forms and requirements.
Sidr Tax also offers registration services on it's platform ensuring you obtain the necessary state tax IDs.

4. Nexus Status

Economic Nexus - Sales and Transaction Thresholds:

Many U.S. states have adopted economic nexus laws following the South Dakota v. Wayfair, Inc. Supreme Court decision. These laws stipulate that if a business has a certain level of economic activity in a state, it must comply with that state’s tax regulations. The most common thresholds are:

$100,000 in sales within the state over the course of a calendar year
200 transactions within the same timeframe.

These thresholds can vary by state, so it's important to regularly review the specific requirements of each state where your business operates to ensure compliance.

Physical Nexus - Having a Physical Presence:

A physical presence, or physical nexus, in a state also establishes tax obligations. This presence could be anything from a retail store to an office or a warehouse. Here are some common examples of physical presence that create tax liability:

Warehouses: Owning, leasing, or utilizing a warehouse in a state for storing goods.
Offices: Maintaining an office where business activities are conducted.
Employees or Agents: Employing salespeople, agents, or representatives operating within a state.

Why Compliance Matters

Failing to comply with tax laws once nexus is established can lead to penalties, interest on unpaid taxes, and other legal complications.

It’s essential for non-U.S. businesses to:

Monitor Their Activities: Keep track of sales and transactions by state to determine when thresholds are met.
Understand Local Laws: Be aware that tax laws are subject to change and can vary significantly from state to state.
Seek Expert Advice: Consult with tax professionals or use services like Sidr Tax to navigate these complexities.

How Sidr Tax Helps

Sidr Tax simplifies the tax compliance process for non-U.S. based clients through its AutoFile feature and registration assistance.

Here’s how:

Automated Tax Calculations: Sidr Tax automatically calculates the tax owed for each transaction based on current local and state tax rates, ensuring accuracy and compliance.
Seamless Filing and Remittance: AutoFile automatically files your tax returns and remits the collected tax to the appropriate tax authorities on your behalf, eliminating the need for manual submissions and reducing the risk of errors.
Support and Guidance: Our team is available to assist with the setup process, registering with state tax authorities, and backfiling for you, ensuring that you meet all requirements to use AutoFile effectively.

Updated on: 05/08/2024