Hi Phil

I own a BC corporation and I’m starting to do some business in California. I sell online goods to residents of California and I plan on expanding the business to other states on the west coast and perhaps the east coast if things go well.

Can you tell me if I need to pay tax in the US to the IRS? I earned some income from the US in 2010 and I don’t want to be caught offside.

Thanks

(a) a place of management;

(b) a branch;

(c) an office;

(d) a factory;

(e) a workshop; and

(f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.

If you don’t have a place of business in the US that meets any of these definitions you’ll probably be ok. However I usually like to file a “protective return” with the IRS to ensure that the treaty disclosure has been filed. You would report your US source earnings on an 1120-F tax return and take a “treaty deduction” for the same amount using a form 8833. Also note that you’ll have to obtain a employer identification number from the IRS in order to file the appropriate returns.

You’ll also have to consider any possible State tax issues that may arise as a result of State nexus.

Hope that helps and feel free to give me a call if you have any further questions.