Your French company sells in the US: at what point does your presence become a US tax issue?
Two French companies generate exactly the same revenue in the United States. The first sells from France, with its teams and operations based there. The second has a sales representative based in Miami, performs some services there, and holds regular client meetings in the US.
Same American revenue. But not necessarily the same tax consequences.
Indeed, in the United States, there is no sales threshold above which a French company automatically becomes subject to federal taxation.
What matters most is the reality of your presence on the ground: who works in the United States, what these people can do on behalf of the company, where the services are performed, whether you have premises, stock or other permanent resources.
Your tax exposure therefore depends on how your business is actually conducted in the United States: the presence of teams, commercial powers, services performed on-site, premises, or inventory. And to this federal analysis are then added the specific rules of each US state.
This article deliberately presents simplified situations to explain the main mechanisms. The applicable taxation depends in particular on the nature of the activity, the countries involved, the individuals present in the United States, their roles, the contracts, the premises used, and the France-United States tax treaty.
Selling to American customers is not enough to create a tax base in the United States.
A French company does not automatically become taxable in the United States simply because it generates revenue there. This is the first point to clarify.
Let's take a French service or SaaS company. Its teams work in France. The services are performed from France. It has no employees, no office, and no operational organization in the United States.
The fact that his clients are American does not, in itself, mean that his profits become taxable in the United States. For services rendered, the IRS looks, among other things, at where the work is actually performed to determine the source of income. Services performed outside the United States are generally considered to generate foreign income.
This is also one of the reasons why an American customer may request a W-8BEN-E from their French supplier to document the tax status of the foreign company.
But the situation begins to change when the company no longer just sells in the United States and begins to conduct part of its business from the United States.
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The first real change: you start working physically in the United States
The IRS uses the concept of US Trade or Business, often abbreviated USTB, to determine whether a foreign company is actually conducting business in the United States.
There is no universal threshold such as: $500,000 in revenue = US tax presence.
The analysis is based primarily on the reality of the activity carried out on site: presence of employees, services performed in the United States, frequency of travel, commercial role of the teams, and resources used locally...
The IRS clarifies that the presence of employees working in the United States for a foreign company can contribute to characterizing a company as conducting business in the U.S. A foreign company that directly provides services on U.S. soil can also be considered as carrying on business there.
In practical terms, sending an executive to a trade show in New York on a one-off basis does not have the same impact as having a salesperson based in Miami year-round...
The number of days spent there matters, but the nature of the activities carried out during those days matters just as much.
Having an employee in the US does not automatically create a permanent establishment… but their role is extremely important.
This is exactly the logic we saw during the first American recruitment. Let's imagine two situations:
In the first scenario, an American employee primarily provides support and passes on business opportunities to the French team.
In the second scenario, a US-based sales director negotiates terms with clients, regularly engages the French company, and concludes contracts on its behalf.
Physical presence exists in both cases. However, the tax risk is not necessarily the same. The France-United States tax treaty stipulates, in particular, that a company can have a permanent establishment in the United States when it has a fixed place of business there: office, branch, place of management, workshop, etc.
It also provides for an important case: a person who acts on behalf of the company and has and usually exercises the power to enter into contracts in its name may lead to the company being considered as having a permanent establishment in the United States.
In other words, for a salesperson based in the United States, the analysis focuses primarily on their concrete tasks: what they can negotiate, decide, or commit to on behalf of the French company. Their level of autonomy and decision-making power are therefore key elements.
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Having a business in the United States does not always mean paying corporate income tax there.
When a French company begins to operate effectively from the United States, the US tax authorities may consider that it is conducting business there. But a second rule then comes into play: the tax treaty between France and the United States.
This convention stipulates, in simplified terms, that the profits of a French company remain taxable in France until it establishes a sufficiently structured presence in the United States to constitute a permanent establishment. This presence may take the form of a permanent office or a person on the ground with significant authority to bind the company.
However, if an establishment is recognized as a permanent establishment, the United States can tax the portion of profits related to the activity carried out in its territory.
Therefore, there are several possible stages: your US activity begins to create US obligations, without immediately resulting in taxation of all your profits in the United States.
Even when a tax treaty allows a company to avoid US corporate income tax, certain reporting obligations may still apply. For example, a French company may find it advantageous to file a US "protective return" to formalize its tax position.
For the executive, the key point to remember is simple: having a presence in the United States can create tax or reporting obligations even before having to pay any US tax.
What are the signs that should make you review your situation in the United States?
Here are some situations that should trigger a more detailed analysis:
You are recruiting an employee or salesperson to be permanently based in the United States.
A local person regularly negotiates or concludes contracts for your French company.
Your French teams regularly provide services physically at American clients' premises.
you have an office, workspace or premises used permanently for your business
you store goods or have assets in the United States
Your business becomes significant in one or more US states.
Not all of these situations automatically create the same tax liability. But they show that the company has moved from a simple export strategy from France to a genuine operational presence in the United States.
Note: The federal and state governments in the United States do not follow exactly the same rules.
The France-United States tax treaty mainly concerns American federal taxation.
It does not automatically prevent a US state from applying its own tax rules.
States notably use the concept of nexus, that is, the link which allows a State to consider that a company falls within its tax scope.
And this nexus can sometimes exist without an office or subsidiary. This is a particularly important point.
Some states use criteria related to the presence of employees, agents, assets, or economic activity. In Florida, for example, the presence of employees or agents engaged in commercial activity, the use of an office, or certain services performed on-site can create a nexus.
Other states also take into account the level of revenue generated from their clients. New York, for example, has a revenue threshold that can, depending on the circumstances, create an economic nexus for the corporate franchise tax.
The Multistate Tax Commission also points out that the permanent establishment rules provided for in international tax treaties do not automatically apply to US states.
This is why a France-US analysis must always distinguish between US federal taxation and the obligations specific to the states in which you conduct your business.
And what about sales tax?
Yet another issue. Indeed, a French company may have to collect sales tax in certain states without having a permanent establishment or even a significant physical presence in the United States.
Since the South Dakota v. Wayfair ruling, states that apply a sales tax can use economic nexus rules based in particular on the level of sales made to their residents.
In other words, no permanent establishment does not automatically mean no sales tax.
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Some concrete examples
Situation | What you need to look at |
You invoice American clients from France, without anyone or premises in the US. | Generally low exposure to federal corporate income tax, but sales tax and state rules should be checked. |
Your manager is making some business trips to the US | Duration, frequency and actual nature of activities |
You are recruiting an American employee | Position, commercial power, payroll and state where he works |
A US sales representative regularly negotiates and signs contracts for the French company. | Much greater risk of permanent establishment |
You are opening a permanent office | USTB analysis + permanent establishment + government bonds |
Your teams perform the services directly in the United States. | US income and economic activity to analyze |
You store products in the US | State taxation, sales tax and the real role of inventory in business activity |
This chart primarily illustrates one thing: there is no single moment when a company "becomes a US taxpayer." Tax obligations arise gradually, depending on how the business develops.
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Should an American company be created as soon as this presence increases?
Not automatically. Creating a C-Corp or an LLC is a structuring decision, not a magic solution to make tax issues disappear.
A French company can perfectly well begin selling in the United States without a subsidiary. However, when the business becomes long-term (local employees, American contracts, regular local operations, multiple state-level tax obligations), an American structure may become more appropriate for organizing the activity.
At this stage, the most important thing is to choose the organizational structure that best aligns with the realities of your business in the United States and with your future development. This is when it becomes relevant to compare maintaining operations directly managed by the French company with creating a C-Corp or an LLC.
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The right time to look at the tax issue is before the US presence becomes obvious.
Having your first American clients doesn't necessarily require you to overhaul your entire structure.
But when you start adding people, business functions, services, or material resources in the United States, the tax question deserves to be addressed before the organization is already established.
At Blendy, we support French companies that are developing their business in the United States by looking at the whole picture: French company, activity carried out in the US, employees, invoicing, federal and local obligations, and then possible creation of an American structure.
Because the line between "we sell in the United States" and "we have a business in the United States" isn't a single number. It depends primarily on how you started working there.
Is your American business starting to go beyond simply selling from France?
Now is a good time to check what your US presence actually changes from a tax perspective.
Sources:
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