A Taiwan Investor---Whose company is Located in Taiwan, wants to open a C
Corp in California. The Taiwan Investor will own all stock in the C Corp
located in California.
The California company's function is to buy products for the Taiwan Company
and transport those goods to Taiwan at cost. Thus the California company will
show a loss --- no profit.
The California company will hire local purchasers in California for all
purchasing.
How should the California company be formed? As a holding company? or just an
independant company on their own?
What are the Federal Tax implications?
What are the California Tax implications?
If the California Company gets a wholesale permit---and purchased goods
without paying sales tax----will the California Company need to pay Sales tax
since it is only transferring the goods to the Taiwan Company? Or will
California still consider this a sale of goods?
BizResearcher | Window Shopper |
9/26/2012 - 11:27 am
You will need to check with the agency in California that registers
businesses. In many states, a C corp cannot be fully owned by a non-U.S.
citizen. Rather, majority ownership must be held by a U.S. citizen or legal
resident.
SeattleCPA | Window Shopper |
9/26/2012 - 10:10 am
I doubt CA can collect sales taxes on sales of product to a parent in
Taiwan...
Taiwan would be jurisdiction that could levy an excise tax on the sale or use
of the item sold.
Another example: CA can't collect sales taxes on the US sub's sales to buyers
in Washington state. Washington state gets to collect the sales tax or force
buyer to pay a use tax.
At least that's what I think. You'll want to confer with a CA tax accountant.
Stephen L. Nelson, CPA, Author QuickBooks for Dummies, Redmond, Washington
kmurray | Community Moderator |
9/26/2012 - 9:09 am
Hi,
SBA has resource partners like SCORE, Women’s Business Centers and Small Business Development Centers located across the country that provide free business counseling to individuals looking to start or expand a small business. They should be able to provide some insight aboutt these questions. Visit SBA Direct to find your local SBA resource partners by entering your zip code. And, as Stephen mentioned, the services of a qualified accountant will be very helpful here. Good luck!
Sec. 482 of the Internal Revenue Code says that the transfer prices the C
corp uses need to be fair... so you're probably not going to be able to run
the business at a loss. You'll have to set the prices high enough to produce
a reasonable profit. California and IRS will then tax that profit.
BTW, you need a good accountant who knows international tax to help you
navigate this area... it's something that quickly gets complicated. And the
penalties for goofing up in this area can be pretty brutal.
Stephen L. Nelson, CPA, Author QuickBooks for Dummies, Redmond, Washington
Sec. 482 of the Internal Revenue Code says that the transfer prices the C corp uses need to be fair... so you're probably not going to be able to run the business at a loss. You'll have to set the prices high enough to produce a reasonable profit. California and IRS will then tax that profit.
BTW, you need a good accountant who knows international tax to help you navigate this area... it's something that quickly gets complicated. And the penalties for goofing up in this area can be pretty brutal.
Stephen---thank you for your help.
And I would guess that CA would also want the California Corporation to
collect Sales Taxes for the products purchased for the Taiwan Corporation as
well?
BizResearcher | Window Shopper | 9/26/2012 - 11:27 am
businesses. In many states, a C corp cannot be fully owned by a non-U.S.
citizen. Rather, majority ownership must be held by a U.S. citizen or legal
resident.
SeattleCPA | Window Shopper | 9/26/2012 - 10:10 am
Taiwan...
Taiwan would be jurisdiction that could levy an excise tax on the sale or use
of the item sold.
Another example: CA can't collect sales taxes on the US sub's sales to buyers
in Washington state. Washington state gets to collect the sales tax or force
buyer to pay a use tax.
At least that's what I think. You'll want to confer with a CA tax accountant.
kmurray | Community Moderator | 9/26/2012 - 9:09 am
SeattleCPA | Window Shopper | 9/25/2012 - 4:57 pm
corp uses need to be fair... so you're probably not going to be able to run
the business at a loss. You'll have to set the prices high enough to produce
a reasonable profit. California and IRS will then tax that profit.
BTW, you need a good accountant who knows international tax to help you
navigate this area... it's something that quickly gets complicated. And the
penalties for goofing up in this area can be pretty brutal.
myexport | Window Shopper | 9/25/2012 - 7:40 pm
And I would guess that CA would also want the California Corporation to
collect Sales Taxes for the products purchased for the Taiwan Corporation as
well?
Join The Discussion
You must be logged in to join the discussion. If you already have an SBA Community account, Log In to join the discussion.
New users, Register for a new account and join the conversation today!