Ask YC: Do we need to file/pay US taxes (Canadian corporation)?

Long version: We're about to begin collecting payment at our Canadian-based startup (pagerduty.com), but have run into a bit of a snag. All of the Canadian payment processors we've found that support recurring billing require us to handle the CC numbers during the initial signup process. This creates a PCI compliance requirement that we're keen to avoid.

We'd like to use a US gateway that allows recurring billing without requiring PCI compliance (e.x. Braintree), but unfortunately they are all asking us to provide an Employer Identification Number issued by the IRS. Apparently, it isn't difficult for foreign corporations to get an EIN, but we're unsure what sort of tax obligations filing for an EIN will create.

Has anyone else gone through this process? Can foreign corporations collect payment using a US gateway without incurring US taxes?

Nonsense. Your moniker serves you well ;)

As long as you do not incorporate in the US you do not pay taxes in the US, when you do the rules change and depending on the precise ownership structure and form of incorporation you then may have to pay taxes. For instance, you will have to pay sales tax to sales done to residents of the state where you incorporate.

It all revolves around the concept of having a 'nexus' in some state in the US. As long as that isn't the case you are not liable for taxes, since there is nothing that could be taxed. As soon as you have an agent or presence in the US that you control that changes.

> It is best to consult an attorney.

That is always good advice.

Or even without :)

> If you have an agent or reseller in the US you may be required to collect US taxes from your/their customers, depending on the parties to the contractual relationship and the flow of money.

This is very true. It mostly applies to sales tax.

> (Unfortunately professional advice doesn't always give you someone to sue in case of disaster, as advice can be wrong but not negligent. It's a good start though, and insurance is available against some risks as well.)

This is also true, and something that plenty of people seem to be unaware of. You and nobody but you are responsible for your taxes. If your accountant or lawyer fuck up YOU are liable for the deficit in taxes, not they.

And that's pretty logical, since you were responsible for your taxes anyway, hiring someone to do some work for you doesn't change that in any way that matters.

You may or may not have a case against them depending on the amount of negligence involved, but usually they're pretty good about covering their asses, and leaving yours exposed.

I've had a (fortunately small) issue like this with a bookkeeper doing our payroll, he forgot a 400 euro deduction for some government fund. That wouldn't have been a serious problem if it didn't take over two years before the fault was detected. So, then you owe x employees400 eurosy months to plug the hole. No fun.