Tax obligations for an E-commerce, US-based LLC if the owners live in the US vs. UK.

E-Commerce can seem like a complicated type of business for tax planning purposes.  Due to the possibility of worldwide sales, it can be unclear as to which taxing jurisdiction the business falls in.  Use this chart to compare tax obligations for an E-commerce, US-based LLC if the owners live in the US vs. the UK.  

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US 

UK


Income Taxes

Income from an E-commerce business that is organised as an LLC will not be subject to corporate taxes.  Income will be reported on the owner’s individual return.  

The LLC will still be taxed by the US, but subsequent UK tax is usually avoidable as a result of the US/UK double tax treaty.  Total tax obligation should remain the same. 


Deductions

All normal operating expenses are deductible when calculating taxable income.

All normal operating expenses are deductible when calculating taxable income.


Sales Tax/VAT

You only have to collect sales taxes from customers in US states where your company has a significant “presence” (i.e. the state you live, any state you have a warehouse in).  Read more here to find out where your business should charge sales tax:  https://www.taxjar.com/guides/intro-to-sales-tax/#determining-sales-tax-nexus

Value-added tax (VAT) should only be charged and collected when selling to other EU countries.  This tax can be paid to HMRC each year.  However, sales tax should still be collected from customers in any state where the business has a “presence” and paid to the IRS. 


Tax on Royalties

o withholding tax on domestic royalties.

Due to a treaty between the US and the UK, there is not withholding tax on any royalties paid to the business.

 

To conclude, tax liability should not be dramatically different if the E-commerce business owner moves to the UK from the US.  As long as they already have a good grasp on deciding when to charge sales tax, the transition to the UK should go smoothly.

Contact us for expert tax advice for US expats