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EIN number for non-US businesses

By / In US SALES TAX / May 8, 2023

If you’re wondering what an EIN is, it’s a unique nine-digit number issued by the Internal Revenue Service (IRS) that serves as a Federal Tax Identification Number for businesses and other entities operating in the United States. Without an EIN, businesses cannot legally register for sales tax, which can lead to potential legal consequences. Non-US companies selling in the US also need to obtain an EIN number. Even when a business doesn’t plan to hire employees and only does distant sales it is steel needs an EIN number to register for sales tax.  If you need to obtain an EIN, you can order it together with your first sales tax registration.

Ready to Order Your EIN?

 

What is EIN?

EIN is an employer identification number.

An EIN is a unique nine-digit number issued by the IRS to identify businesses and other entities operating in the United States for tax purposes. It is also referred to as a Federal Tax Identification Number.

Here’s a list of the entities that require an EIN in the United States:

  • C corporations;
  • S Corporations;
  • Limited Liability Companies (LLCs);
  • Limited Partnerships (LPs);
  • Partnerships;
  • Estates;
  • Trusts;
  • Non-profit organizations, such as charities, religious organizations, and educational institutions;
  • Farmers cooperatives;
  • Plan administrators;
  • Sole proprietors with employees.

 

One more example of why a foreign business may need EIN Is to make a customs clearance for import into the United States (a shipment over $2,500) you need either a Social Insurance Number, EIN, W-EIN, or a Customs Assigned Number.

 

EIN certificate. How long will it take to get an EIN?

Normally foreign businesses applied for an EIN number get a certificate from 1 to 5 weeks. In the beginning, it might be a fax version and later a paper version by post.

 

EIN reporting

Simply selling goods to the United States customers does not normally require businesses to pay US income tax. There’s a concept called ETBUS (Engaged in Foreign Trade or Business in the US). To be considered ETBUS, businesses need to meet several requirements:

  • Have at least one dependent agent in the United States. A dependent agent is one who works so closely with you that his or her actions can be considered yours;
  • That dependent agent should be furthering your business in the United States, i.e., the job is not limited to admin tasks).

 

A company will be required to pay US income tax if they are ETBUS. But if a business has no employees, it is almost certainly not ETBUS.

Foreign sellers will, however, have to pay sales tax in any state they have economic Nexus or store goods.

Also, the United States has tax treaties with a lot of countries which will likely make you “exempt from withholding tax on certain items of income your business receive from sources within the United States”.

 

Once a year businesses selling to the US need to file  Form 1120-F with the IRS, in this case, it is for information purposes because no tax is due  as soon as business is a foreign corporation”.

Form 1120-F

 

Who isn’t required to file information returns?

Business has no obligations to file Form 1120-F if any of the following situations apply:

  • Business is not engaged in a trade or business;
  • Business is engaged in a trade or business and the payment was made to another business that is incorporated, but was not for medical or legal services;
  • Amount of all payments made to the person or unincorporated business is less than $600 in one tax year.

 

Why is an EIN necessary for sales tax registration?

Reasons for obtaining an EIN:

  • Identification: An EIN is a unique nine-digit number assigned by the IRS to identify a company for tax purposes. This number is used on all tax forms, including sales tax registration forms;
  • Legitimacy: An EIN provides legitimacy to a company. When a company applies for an EIN, the IRS verifies its legal status and ensures that it meets all the requirements to operate.
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