Glossary
U.S. Trade or Business (USTB)
Definition
A U.S. trade or business is regular, continuous and considerable activity in the United States carried on for profit. A foreign person engaged in one generally owes U.S. tax on the income effectively connected with it.
No simple test
The Internal Revenue Code does not define the term with a bright-line rule. Courts and the IRS look at facts such as the regularity of activity, whether it is conducted for profit, and whether it happens in the United States, directly or through employees and agents.
Common examples
- Providing services while physically in the United States.
- Operating a store, restaurant or office with U.S. activity.
- Regularly buying and selling goods through a U.S. presence.
- Some real estate activity, depending on its scope.
Why it matters
If a foreign person is engaged in a U.S. trade or business, the related income is ECI and generally requires a U.S. return. Treaties may limit tax when there is no permanent establishment, but a filing may still be required.
Practical example
For example, suppose Mei, who lives in Singapore, operates an online store through a U.S. LLC, with a U.S. warehouse and local staff. This activity could well amount to a U.S. trade or business, so the profits may be ECI.
General information, not tax advice
This page provides general educational information about U.S. federal tax rules. It is not individualized tax, legal or accounting advice, and it does not create a client relationship. Results depend on each taxpayer's specific facts.
Written by Roger I. Chirino, founder of Chirino USA Accountants & Advisors P.A.
Supported by licensed CPAs, IRS Enrolled Agents (EAs), and experienced U.S. tax professionals focused on cross-border compliance and planning.
Related questions
When is a foreign-owned LLC engaged in a U.S. trade or business?
Does a foreign-owned LLC with a U.S. bank account owe U.S. tax?
Does storing inventory in the United States create a U.S. tax obligation?
Does a foreigner selling through Shopify owe U.S. tax?
Does a foreign owner of a U.S. LLC need to file Form 1040-NR?
Do foreign online sellers have to collect U.S. sales tax?
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