What is the most tax-efficient legal entity a non-US resident can establish to do business (e-commerce) in the US?

Answer by A Quora admin:

First a disclaimer, there are a lot of nuances to US taxation of non-US residents for income generated in the US, so I highly recommend you work with a US tax professional who can become familiar with your unique set of facts.  One small change in the business could change any of the following general tax recommendations.

First off you are selling tangible goods to US customers which will be considered Effectively Connected Income or ECI, which is taxable in the US for federal tax purposes.  I typically recommend that my non-US clients set up a C Corporation when they are going to have ECI or US source income, because a corporation is a separate tax entity from the owners and files its own tax returns and pays its own taxes.  For the most part any other type of entity will mean the individual owners are going to have to file US non-resident tax returns and pay the tax themselves.  Please note that an LLC can elect to be taxed as a C Corporation for federal tax purposes which accomplishes the same result as forming a C Corporation and in some situations with some specific states an LLC electing corporate status may be your preferred form of entity.

The corporate tax structure can also offer the owners some additional US tax savings opportunities depending on your specific facts by taking advantage of the fact that service income provided by non-US residents is typically not taxable in the US.

That covers federal taxation and in many cases state taxation in the US will follow the form of federal taxation, but there are a few other state specific considerations.  First Delaware is probably not the best choice for you to incorporate in, due to Delaware state level franchise and income taxes.  Typically a better choice is Wyoming, Nevada or Texas for a closely owned corporation.  Neither of those three states has a state level income tax and they all have more favorable franchise tax than Delaware.  Each has its own advantages depending on your particular facts.

Finally on the state level you will have to consider state sales tax.  Due to the nature of how Amazon structures its agreement with sellers, you will be subject to state sales tax in potentially several different states. Amazon will tell you which states you will be required to register in for sales tax purposes and you should be aware that in at least some of those states when you register for sales tax, you will also be notifying the state that you are potentially subject to income tax in that state and will thus be required to file an income tax return for those states usually based on a ratio of sales to customers in the state. I believe the last time I checked there were 9 states where Amazon may potentially create this issue for you.

What is the most tax-efficient legal entity  a non-US resident can establish  to do business (e-commerce) in the US?