# Online purchase of service from US company



## fmarchioni (Mar 24, 2015)

Hi all!
I'm running an IT course training company in Italy. A company from USA (Colorado) has requested to purchase a training session. The USA company purchases on our site (In Italy) the training and the payment is processed by our Payment gateway.
Do I need to make any declaration or statement to IRS or ask to pay taxes just on my residence country to any USA institution ?
Thanks


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## Bevdeforges (Nov 16, 2007)

What matters is not where the customer is coming from, but where you are physically located while doing the work. So, you treat the revenue from a US company exactly like you'd treat any other revenue from customers - declare it in your country of residence.

However, if you are a US citizen residing overseas, you also have to continue to file US income taxes, declaring your worldwide income each year. If by "running an IT company" you mean you set it up and own it, there may be other US filing requirements, depending on how the company is set up and organized. 
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

It's all online, with no physical activity (on your part) in the United States? If so, nothing extraordinary is required. It's much the same thing as if you ran a shoe shop, an American tourist visited your shoe shop, bought a pair of shoes, then flew back to the United States.

Your U.S. situated customer will probably not want to pay VAT if legally avoidable, but presumably you already know how to handle that (if avoidable).

If the training is something very odd that's illegal under U.S. law -- training the U.S. company how to do a better job refining and distributing cocaine, for example -- then that'd be a problem.


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## fmarchioni (Mar 24, 2015)

Thank you very much for the clear and kind reply.

Just a further note, if the customer requests to come to USA for the training and hold it in its premises , does the scenario change ? From my searches, I have found that tax is due in case:

_"If an international seller owns inventory in a state and uses a third party fulfillment service (such as Amazon’s FBA service) that international seller has nexus to the state where inventory is situated and fulfilled from. The seller has a physical presence (owns inventory) in the state and is using an agent to perform a service on their behalf. "_

Being guest in their premises and without an office/warehouse in USA I think I should fit in this description.
Thanks for shedding some light on this.

Thanks a lot again
Francesco


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## BBCWatcher (Dec 28, 2012)

Probably not. The U.S. and Italy have a tax treaty, and the U.S. tax code for businesses is generally based on the principle of having a "permanent establishment" in the U.S. The text you alluded to is consistent with that general principle. ("Permanent establishment" has a particular definition, and that definition may not always mean "permanent" in the common dictionary meaning.)

In general, if you have an employee staying in a regular hotel, visiting a client in the U.S., and providing training to that client for a relatively short period of time (weeks or a couple months, say), at the client's location, that's probably not a "permanent establishment" for U.S. federal income tax purposes, so there are no particular U.S. tax consequences. The employee still needs to make sure his/her activities are consistent with his/her visa (or visa waiver privileges), as always. A B-1 visa is _probably_ OK, especially if the training is short-term and your employee avoids performing practical, hands-on work for the client.

There was a case recently when a major Indian IT outsourcing firm was caught abusing B-1 visas (and tax waivers). Its employees were allegedly sent to the U.S. to either deliver and/or receive training, but they actually often performed IT work for clients (and with the firm's knowledge), clearly crossing the line. The firm was heavily fined.

That said, some states might be more strict in their tax views. The State of New York's tax agency, for example, is rather infamously strict about how it views business activities within its borders. New York, and every other state, still has to respect the U.S.-Italy tax treaty, but within the treaty limits they might have a slightly different view than the federal view. States also have sales taxes, though they'd also generally follow the "PE" principle.

In the unlikely event U.S. taxes are owed on this particular activity, presumably your business will be able to take those foreign taxes as foreign tax credits back in Italy.


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## fmarchioni (Mar 24, 2015)

Thank you very very much sir for sharing your knowledge.
Have a great day ahead!
Kind regards
Francesco


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