Plain-language notes on U.S. tax deadlines, IRS letters, cross-border reporting and running a small business, written by the CPAs who handle these questions every day.
A factory producing in China and selling FOB China to Costco generally has foreign-source income under §863(b) and usually no U.S. income tax. DDP, U.S. inventory, U.S. staff or a U.S. office can create effectively connected income and a Form 1120-F filing, which is why many factories supply through a U.S. subsidiary.
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A Chinese factory producing at home and selling FOB into Walmart's buying system, with no U.S. permanent establishment, generally owes no U.S. income tax and gives a W-8BEN-E. A U.S. subsidiary delivering in the U.S. pays 21% federal tax, files Form 5472 and needs transfer pricing. U.S. staff or stock can change the answer.
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Articles are general information, not tax or legal advice for your specific situation.
