Expanding your business into the U.S.? Here’s Your Crash Course to Getting Started

State tax authorities do not significantly distinguish between foreign and domestic out-of-state businesses. Instead, they focus on whether a business has taxable activity (“nexus”) within the state.

Most state Departments of Revenue require any business—regardless of location—to register if nexus thresholds are met, typically through the state’s Department of Revenue.

Determine Where You Are “Doing Business”

Before registering, businesses must evaluate where they are “doing business.”

While physical presence—such as employees, inventory, or an office— has traditionally created obligations, many states now impose requirements based on economic activity alone. Sales thresholds may establish tax responsibilities even without a physical footprint.

For many foreign entities, this is the first—and often most overlooked—point of exposure.

Register or Qualify to Do Business (Certificate of Authority)

Once business activity is established, companies must register with the appropriate state agencies, typically by obtaining a Certificate of Authority through the Secretary of State.

This establishes the entity as a “foreign” business authorized to operate in the state.

Without this registration:

• The business may not be permitted to operate
• Contracts may be difficult to enforce
• Penalties and prior-period obligations may apply

This step forms the legal foundation for operating in the U.S.

Obtain an EIN from the Internal Revenue Service

Businesses must obtain an Employer Identification Number (EIN) before completing tax registrations.

The EIN serves as the business’s federal tax ID and is required for:

• Filing federal tax returns

• Registering with state tax agencies
• Opening U.S. bank accounts

An EIN does not grant authority to do business.

Comply with Federal Tax Rules for Foreign Entities

Foreign businesses must also evaluate potential U.S. federal tax obligations based on their level of activity in the United States.

Register for State and Local Taxes

After securing legal authority and a federal tax ID, businesses must register with applicable state and local tax agencies.

This enables companies to collect and remit sales tax, register for employer-related taxes, and meet jurisdiction-specific reporting requirements.

Each state maintains its own processes, systems, and filing requirements. In many cases, separate registrations are required across multiple agencies, adding complexity to an already fragmented system. Even where no tax is due, failure to file required returns can result in penalties and limit future tax positions.

Additional resources:

• Sales Tax vs. Use Tax: Do You Know the Difference?
• Introduction to Nexus and State Tax Obligations

Complete Registration and Compliance Requirements

Before beginning operations, businesses may need to obtain any industry-specific licenses and permits required by state or local authorities. While not mandatory, opening a U.S. bank account can also help streamline operations, support tax compliance, and improve financial transparency.

After registration is complete, businesses must maintain ongoing compliance by filing required tax returns, submitting annual or biennial reports, renewing registrations and licenses as needed, and maintaining accurate business records and documentation.

Most compliance issues arise after initial registration. Failure to meet ongoing requirements can result in penalties, revoked registrations, or loss of good standing—potentially disrupting operations.

Contributor: Megan Bryarly

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Tips for the Taxpayer

In recent years, states are becoming more insistent in the world of sales and use taxes with both regulation changes and enforcement. It is more important than ever for businesses to be aware of how sales tax affects them. Without an understanding of the varieties of sales and use tax, there is more potential for mistakes and audits. Businesses need to have policies and procedures in place that help them determine where, how much, and from whom to collect. Many companies may not have the knowledge, expertise, or time to build this foundation. An expert resource may be the best choice to help manage the world of sales and use tax and guarantee your business is tax compliant.

How Can We Help?

Allyn’s experienced tax team provides comprehensive compliance and consulting for large US and global corporations. We handle all Federal, multi-state, and local tax needs.

Key Services:

• Filing Sales and Use tax returns in all U.S. jurisdictions.
• Routine nexus reviews and proactive compliance improvement.
• Business registration (Secretary of State & Department of Revenue).
• Tax process management and audit defense.

Our dedication to customer service is rated 350% higher than industry averages. Contact us for a customized solution: tax@allynintl.com.

About Allyn International

Allyn International provides high quality, customer centric services and solutions for the global marketplace. Allyn's core products include transportation management, logistics sourcing, freight forwarding, supply chain consulting, tax management and global trade compliance. Allyn clients range from small local businesses to Fortune 500 firms. Allyn conducts business in more than 20 languages and has extensive experience in both developed and emerging markets. Highly trained experts are positioned throughout North and South America, Europe and Asia. Allyn’s regional headquarters are strategically located in Fort Myers, Florida, U.S.A., Shanghai, P.R. China, Prague, Czech Republic, and Dubai, U.A.E. For more information, visit  www.allynintl.com.