State and Local, Income and Other Taxes

Federal and state taxes

Expanding to the U.S. is often a natural progression for Canadian businesses seeking to access a lucrative and larger marketplace. More often than not, Canadian businesses are familiar with the possibility of paying U.S. federal income tax on their business profits. However, without careful consideration of U.S. state and local taxes, unexpected and significant tax liabilities await.

Canada-U.S. Income Tax Convention: What you need to know

While the Canada–U.S. Income Tax Convention (the “Treaty”) offers protection from U.S. federal income tax for certain activity in the U.S., individual states are not party to the Treaty and are not obligated to extend Treaty protections. Often Canadian businesses are surprised to find that while they may not have a U.S. federal income tax liability, they have significant U.S. state income and/or sales and use tax liabilities. This can result from states’ taxation of a business enterprise’s apportioned worldwide income.

How we can help you

Andersen is focused on advising clients on both the U.S. federal and state tax implications from their business activity by creating solutions which minimize overall cross-border tax exposure. Our cross-border tax team has experience structuring ownerships and investments in the U.S. so as to minimize our clients’ exposure to apportionment of worldwide income as well as advised on when a duty to collect sales tax exists.

You can have confidence that Andersen’s state and local tax expertise will guide you through the various U.S. state and local taxes as part of our overall goal to minimize your cross-border tax exposure.