What taxes an India-based pvt ltd company needs to pay in the US at local/state/federal level?

Hey Shekhar, this is a common scenario for Indian companies offering digital services to customers in the US. Let me break down your questions step-by-step:

1) Taxes in the USA for India-based Pvt Ltd offering online ads to US customers

Key Point: Since your company has no physical presence (no office, employees, or assets) in the US, the tax situation is generally simpler.

• Federal Taxes:

  • If you do not have a “Permanent Establishment” (PE) or “nexus” in the US, generally you are not liable for US federal income tax on the revenue earned from US customers.

  • Your company is essentially selling services remotely from India, which usually does not create a taxable presence in the US under most US tax treaties, including the India-US Double Tax Avoidance Agreement (DTAA).

• State and Local Taxes:

  • Many US states have “economic nexus” rules for sales tax on goods and digital products, but since your service is online advertising (a service) and you have no physical presence, the liability depends on specific state laws.

  • Some states tax digital advertising services, but for income tax, without a physical presence, usually no state income tax applies.

  • However, some states require sales tax collection on digital services. You may need to check if your services fall under taxable services in particular states (e.g., California, New York).

  • If so, you may need to register for sales tax collection in those states and remit taxes accordingly.

• Registration Requirements:

  • Typically, if no physical presence or nexus, you do not need to register for federal income tax.

  • For states where sales tax applies, you may need to register as a sales tax vendor.

  • Consult a US tax advisor for nexus evaluation by state.

• Withholding Tax:

  • No US withholding tax applies on payments for services rendered outside the US.

2) GST Applicability in India on International Digital Services

• Under Indian GST law, export of services is treated as a zero-rated supply.

• Your online advertising services to US customers qualify as exports of services because:

  • The supplier (your company) is in India.

  • The recipient is located outside India.

  • Place of supply is outside India.

  • Payment is received in convertible foreign exchange.

• Therefore, GST on export services is charged at 0%, meaning:

  • No GST is payable on the revenue from US customers.

  • You can claim input tax credit on inputs used to supply these services.

Summary Table

Recommendations:

• Consult a US tax advisor for specific state nexus and sales tax rules.

• Ensure proper invoicing and documentation showing export of services from India.

• Register on GST portal as exporter and file zero-rated export returns.

• Maintain records of foreign currency receipts and remittances.