How to file taxes correctly after registering a US company? What are the risks associated with zero declaration?

Reasons why zero declaration cannot be made

Zero declaration refers to declaring to the tax bureau that the company has  no financial activities without generating any operating income or expenses.  This declaration method is applicable to companies that have not actually operated  during the fiscal year. If your US company has never started operating and  is preparing for write off, you can apply for zero declaration. If your US  company engages in any of the following forms of profit or operational behavior,  it cannot be declared zero:

The company's bank account has fund flow records;

The company is involved in import and export business and has import and export  records with customs and logistics companies;

The company has had purchase and sale transactions of goods or services with  customers or suppliers in the United States;

The company hires employees in the United States;

The company uses or authorizes others to use intellectual property such as  patents, trademarks, designs, etc. in the United States.

What are the risks associated with zero declaration?

The US Internal Revenue Service has a very strict review process. For zero  declaration companies, the US Internal Revenue Service will audit the company's  income through multiple channels such as bank account information and customs  records. If the documents provided by the company do not meet the conditions  for zero declaration, it will be considered as tax evasion or withholding.  In addition to requiring the tax bureau to pay the unreported taxes, it may  also incur late fees, fines, and even legal consequences! At the same time,  the company's credit record in the US tax system will also be affected for  future company investments, financing, etc.

How to file taxes correctly after registering a US company?

The tax system in the United States is relatively complex and diverse, mainly  including corporate income tax, sales tax, and import tariffs. How should everyone  distinguish and pay? Xiao Mao will explain in detail~The following content  is a must-have for American company bosses!

Federal corporate income tax for corporate income tax

Subject of collection: Regardless of whether the company engages in business  activities or generates revenue, as long as it is registered in the United  States, it is required to pay federal corporate income tax in the United States.

Tax rate and tax incentives: The federal corporate income tax rate is uniformly  21%. To avoid double taxation, companies can offset or deduct the income tax  already paid overseas in the United States.

State of Enterprise Income Tax Enterprise Income Tax

Tax target: If a company generates revenue in the corresponding state in the  United States, it needs to declare the actual revenue to the tax bureau.

There are 51 states in the United States, each with great autonomy, so your  US company needs to file tax returns according to the requirements of the tax  bureau in the registered state, with different tax rates in different states.

For example, California has a minimum state tax of $800. In cases of zero  declaration or actual declaration (loss), a minimum state tax of $800 must  be paid. Conversely, if the calculated state tax amount is higher than the  minimum state tax amount of $800, the state tax will be paid based on the actual  calculated state tax amount.

There are two options for tax declaration time:

1. According to the annual declaration: regardless of the date of company  registration, the deadline for tax reporting is the last day of the current  year, which is December 31st;

2. According to the annual declaration: declare according to the establishment  time until the last day of the month before the registration month of the next  year;

Regardless of which method of declaration is chosen, it must be completed  within three and a half months after the tax reporting period.

Once again, it is emphasized that if a company is established in a state with  the lowest state tax but has no business, it must declare zero to the tax bureau  and pay the lowest state tax. When there is business, the net profit calculated  based on the actual declared corporate income can be used to pay federal and  state taxes.

If the calculated state tax amount is higher than the minimum state tax amount,  the actual calculated state tax amount shall be paid. If it is less than the  minimum state tax amount, it shall be paid according to the franchise tax amount.  Reminder from Xiao Mao: Except for North Carolina, the lowest state tax in  the state must be paid regardless of the circumstances.

Sales tax

Sales tax is a type of tax levied on the sale of goods or services, collected  by the seller from the buyer and declared and paid to the tax bureau. In the  United States, sales tax is essentially a state tax levied jointly by the state  government and the local governments under its jurisdiction, including counties,  cities, and districts.

Target of collection: Sellers who sell on third-party platforms. Sales tax  is the tax collected by the government from consumers when merchants sell products,  and then regularly declared and paid to the state government.

Tax rates and reduction policies:

If the customer company only sells on Amazon, Wal Mart and other platforms,  the sales tax platform will collect and remit the taxes on behalf of the customer.  After the platform has withheld and remitted the taxes, there is no need to  declare the platform sales separately. However, independent websites or offline  retailers do not have the function of collecting and paying taxes on behalf  of others. They need to apply for a sales license from the state where the  retail is located, declare sales tax, and pay sales tax.

The sales tax rates vary greatly among states in the United States, generally  ranging from 2.9% to 7.25%. Some states will also impose a certain percentage  of tax burden on top of this basic tax rate. There are also some states that  do not levy sales tax, such as Delaware, Alaska, Montana, and New Hampshire.  Delaware is one of the preferred places for cross-border sellers to register  US companies.

Declaration time: Monthly/Quarterly/Annual, depending on the requirements  of each state.

Import tariffs

Tariffs are taxes levied by the government on imported goods, mainly of the  following types:

1. Ad valorem tariff: levied proportionally based on the value of the goods.  If the value of the goods is $1000 and the tax rate is 10%, the tariff is $100.

2. Specific tariff: A fixed amount is levied based on the quantity, weight,  or volume of the goods. For example, a tariff of $100 per ton of steel and  $1000 per ton of imported 10 tons are required.

3. Compound tariff: Combining ad valorem and volume based tariffs, levied  both in proportion to value and quantity. For example, if a commodity is worth  $800 and has a quantity of 50 units, the tariff is $40 (5% of the value)+$500  ($10 per unit)=$540.

4. Tariff quota: A low tax rate is applied to a certain quantity of imported  goods, and a high tax rate is applied to the excess. For example, a tax rate  of 5% is applied to an agricultural product within 1000 tons, and a tax rate  of 20% is applied to the excess.

For cross-border e-commerce sellers, the United States currently has a tax  exemption policy. When consumers purchase imported goods worth $800 or less,  they can be exempted from tariffs. However, this policy is about to change  and you can consult the latest policy before proceeding.