Doing Business in the United States Without a Physical Presence: What Foreign E‑Commerce Companies Need to Know

For many foreign entrepreneurs and companies, the United States represents an attractive market. A common question we encounter at THEVOZ & Partners is whether a non‑U.S. business can access that market—often through a U.S. entity such as an LLC—without establishing any physical presence in the United States, particularly in the context of e‑commerce.

The answer is nuanced and depends on a core concept in U.S. tax law: whether the foreign business is considered engaged in a “U.S. trade or business” (“USTB”).

The Fundamental Rule: Taxation Depends on a U.S. Trade or Business

The United States taxes a foreign company on its U.S.-source business income only if that company is engaged in a U.S. trade or business, and only to the extent that the income is effectively connected with that activity. A U.S. trade or business generally requires that activities in the United States be regular, continuous, and profit‑oriented. However, there is no single statutory definition, and the determination is highly fact‑specific, based on case law and Internal Revenue Service interpretations. This framework is essential when analyzing modern business models, particularly digital and cross‑border structures.

The E‑Commerce Scenario: No Physical Presence, No USTB?

For purely online businesses, the law has evolved in ways that are often favorable to foreign entrepreneurs. In most cases, a foreign company that sells goods or services to U.S. customers through a website—but operates entirely from outside the United States—will not be considered engaged in a U.S. trade or business. The reasoning is straightforward. If neither the company nor its agents conduct business activities within the United States, there is generally insufficient nexus to create a USTB.

The following example illustrates this point clearly: a foreign e‑commerce company that runs its website abroad, ships products from abroad, and has no U.S. presence is unlikely to be treated as conducting a U.S. trade or business. This principle explains why many digital businesses can access the U.S. marketplace without becoming subject to U.S. income tax on their business profits.

Does Using a U.S. LLC Change the Analysis?

Forming a U.S. LLC is often seen as a practical step for operational or commercial reasons. However, from a tax perspective, the mere existence of a U.S. entity does not automatically create a U.S. trade or business for the foreign owner. The key question remains where the actual business activities occur. If the LLC is essentially a pass‑through or administrative vehicle, and all core business operations (management, marketing, fulfillment) are conducted abroad, the foreign owner may still avoid being classified as engaged in a USTB.

That said, the structure must be carefully implemented. If the LLC begins to carry out substantive business activities in the United States, the conclusion may differ.

The Critical Risk Factors: Presence and Agency

While the absence of physical presence is favorable, certain factors can quickly change the analysis.

First, the presence of employees or agents in the United States can create a U.S. trade or business. Even independent representatives, if acting on behalf of the foreign company and exercising meaningful authority, may be subject to U.S. taxation.

Second, hosting arrangements and operational support in the United States must be carefully evaluated. Although mere website hosting typically does not create a USTB, the analysis may shift if the service provider performs functions resembling those of an agent, such as entering into contracts on behalf of the foreign company.

Third, operating the business from within the United States—whether directly or through service providers—may lead to a finding that the company conducts a U.S. trade or business, even if key infrastructure is located abroad.

In short, the distinction between passive access to the U.S. market and active business activity within the United States is decisive.

The Treaty Overlay: Permanent Establishment

For companies resident in treaty jurisdictions (such as Switzerland), an additional layer of protection may apply. Under U.S. tax treaties, business profits are generally taxable in the United States only if they are attributable to a “permanent establishment” (PE) in the United States.

In many e‑commerce models, the absence of a fixed place of business or dependent agent in the United States means that no PE exists. As a result, even if certain U.S. trade or business considerations arise, the treaty may limit or eliminate U.S. tax liability.

Practical Takeaways for Foreign Entrepreneurs

Foreign businesses seeking to enter the U.S. market remotely should focus on structuring their operations to minimize U.S. presence. Activities that are purely digital and conducted outside the United States are less likely to trigger U.S. tax exposure.

At the same time, particular attention should be paid to the role of U.S. service providers, logistics arrangements, and any individuals acting on behalf of the business within the United States. Small operational decisions—such as granting contractual authority to a U.S. representative—can have significant tax consequences.

Conclusion

The U.S. tax system generally allows foreign e‑commerce businesses to sell to U.S. customers without being taxed in the United States—provided that they do not cross the line into conducting a U.S. trade or business. However, that line is fact‑intensive and can shift quickly depending on how the business is structured and operated. Careful planning is therefore essential, particularly when using U.S. legal entities or engaging U.S.-based service providers.

If you are considering expanding your business into the United States, our firm regularly advises clients on structuring cross‑border operations between the U.S. and Europe in a tax‑efficient and compliant manner.