Foreign Entity Business taxes for the United States
We occasionally get requests for a W-8 BEN-E tax form from website owners who are ecommerce sellers, specifically those using WooCommerce, or other eCommerce platforms, and have been required to present this form to identify themselves as a foreign company in the U.S. For your convenience we’ve made this form available through your client portal, but we wanted to make sure you understood it first.
Disclaimer: It is important that we state this for legal purposes. This is general information , and should not be seen as professional advice pertaining to your unique business situation. This information is for educational purposes only. Your tax circumstances may be different than those implied here. Please speak to a tax professional in your country before making any decisions. Otherwise, apply it at your own risk.
Now that we’ve gotten the legalese out of the way, let’s explore the fundamentals of form W-8BEN-E for your eCommerce business.
The U.S. requires any foreign entity who does business, or earns any kind of income in the US, to identify themselves as such. U.S. tax law states that certain payments, including payments for goods and services, made by U.S. companies to foreign business partners, are subject to 30% withholding tax. To enforce the law, U.S. companies are obligated to turn into withholding agents and are required to withhold that tax percentage from payments made to foreign companies.
U.S. vendors collect and keep the form in their records. If ever audited, the United States’ Internal Revenue Service (IRS) will ask the vendor to present that form to verify the tax status of the company that received the payment. The form also exempts vendors from reporting 1099 to the IRS. Form 1099 reports all payments made to other entities so that IRS can identify businesses that don’t file their taxes properly.
Any U.S. company making payments to non-U.S entities is required to obtain this form. If a vendor, supplier, or business partner does not ask for the form, you can also present it when you will be initiating the business relationship. It will help you avoid potential delays in receiving your payment and possible issues with the IRS.
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