Tag Archives: e-commerce. e-commerce tax planning

Saving Taxes in the E-commerce & the Cloud (Virtual) Computer World

cloud computer tax, tax planning, saving taxes, international tax planning,

E-commerce businesses are saving taxes with cloud computer tax planning.

E-commerce tax planning and Cloud tax planning uses unique tax laws.  As a result, saving taxes in this century’s cross-border business environment is easier than ever.  

Small businesses are saving taxes with eCommerce tax planning and cloud computer tax planning.  

The cloud has level the playing field between small business and big business.  Amazon is leading the way.

 Small businesses can benefit from cloud computer tax planning.  

Cloud tax planning allows big state and federal tax savings.  A popular term for this is “third wave” tax planning.  The second wave was most of last century and a little of the 1800s.  The first wave is from  10,000 BC to the late 1800s.  This explains the loophole.  Our tax laws were designed in the early 1900s.  While the laws are more complicated, the basis framework is unchanged.

We all have heard people say that things are not what they used to be.  This is particularly true in American business.  In 1910, electricity was not in the White House.  Cars were laughed at with jokes like “Get a horse!” 

Phones were rare, and there was no air travel.  U.S. E-commerce tax laws are written for last century’s business.  E-commerce tax planning provides significant tax savings.   Here is what has gone wrong for the Government and good for small business.

  Who is this man?    He is Robert Lee Doughton.   He was the powerful chairman of the U.S. Congressional committee that writes the tax laws.

This man designed and wrote our international tax laws. His education was only high school. His father fought with General Robert E. Lee (General of the Confederate States of America).  He was named after the General.  He was born in 1863. His view of international commerce was via steamship

In 1939, he wrote the international tax laws that govern today’s international taxation in America.[1]  Most of the congressional representatives who wrote the 1939 tax code were born before 1900.    Their view of the world was what you see in many silent movies … and so was their tax law.

Their idea of technology was steamships and the telegraph.  It is this world vision that governs how the U.S. taxes international business and investment today.

On this link, you can view my forty-minute of my presentation of the California Society of Certified Public Accountants on profiting from Congress’s failure to innovate.

Successful E-commerce international tax planning revolves around a major flaw in American tax law caused by the speed of change (more on this link).  

If you need to up the quality of your tax planning, then contact me, Brian Dooley, CPA, MBT, at [email protected]

[1] Congress renamed the tax code in 1986 to the “Internal Revenue Code of 1986.” As I wrote this, I realize that 1986 was just at the end the “second wave” of business. The tax consequences of leaving the economics of the second wave and moving into the economics of the third wave are discussed in this video.

 

What You Need to Know to Do Business in the United Kingdom

Saving taxes, United Kingdom claims U.S. LLC is a tax haven company.

Saving taxes with international tax planning in the UK

The U.K. is a fantastic European headquarters.  Of course, they left the EU and despite this, the U.K. is my first choice.   Both Switzerland and The Netherlands would like to be your headquarters.   But they are missing the tax infrastructures that best fits the American tax laws.

The Big Tax Strategies of the U.K. are:
1.   They treat the U.S. limited liability company (LLC) as a passthrough.  The U.K. is the only country that has the identical treatment as the United States.   The cornerstone of small business international tax planning is the foreign tax credit.  

The foreign tax credit is the method of avoiding double taxation.   For example, you earn a $1,000 in the U.K. and the tax is $2,000 (the U.K.  has a low tax rate).   The U.S. tax on the $1,000 is $3,900.   The $3,900 is reduced by the $1,000.

U.S.-U.K. Income Tax Treaty and the Friendship, Commerce and Navigation  (FCN) Treaty Tax Planning and Strategy

This is big.  You can use domestic (I prefer Nevada) LLC for your international business.  An early  1900 treaty (FCN) allows the LLC the same rights in the U.K. as a U.K. company.

The British Inland Revenue changed their regulations to match the IRS regulations regarding the American LLC.    This allows the income tax treaty’s permanent establishment clause to protect you from U.K. taxation.    While the foreign tax credit does mitigate U.K. taxes, it is nice to be exempt from taxation.

The U.S. LLC Without a U.K. permanent establishment is treated as if it was only doing business in the U.S.    As you read below, the word term that is vague is “office”.    When tax treaties were envisioned, an office would have staff completing orders along with a “place of management”.  With E-commerce websites placing orders, I suggest that the computer server is kept in the U.S. 
The term “permanent establishment” includes:
a) a place of management;
b) a branch;
c) an office;
d) a factory;
e) a workshop; and
f) a mine, an oil or gas well, a quarry, or any other place of extraction of natural
resources. 

The term “permanent  establishment” does not to include:
a) the use of facilities solely for the purpose of storage, display or delivery of
goods or merchandise belonging to the enterprise;
b) the maintenance of a stock of goods or merchandise belonging to the
enterprise solely for the purpose of storage, display or delivery;
c) the maintenance of a stock of goods or merchandise belonging to the
enterprise solely for the purpose of processing by another enterprise;
d) the maintenance of a fixed place of business solely for the purpose of
purchasing goods or merchandise, or of collecting information, for the enterprise;

Avoiding IRS Form 5471 Controlled Foreign Corporation

Form 5471 is a complex tax return.  CPA fees start at $5,000.  Next, tax planning for the controlled foreign corporation is tricky.   Even the best tax planners can miss the target.

Using the foreign tax credit to reduce your taxes is by far the best way.   When a domestic LLC is used you do not file the Form 5471.  Matter of fact, if you are the only owner, you do not file any IRS form.  The LLC  files a partnership return,  Form 1065, when more than one person owns the LLC.