Do Canadian Businesses Need a U.S. Corporation to Sell to American Customers?

Do I need a U.S. corporation to sell in the U.S. If you are a Canadian business owner expanding into the U.S., you are asking the right question early. Many Canadian businesses can sell to U.S. customers without forming a U.S. entity, but U.S. obligations can still apply depending on how you sell, ship, and operate.

Do Canadian businesses need a U.S. corporation (LLC or C-Corp) to sell to American customers?

Quick answer

No. A Canadian business does not need a U.S. corporation just to sell to U.S. customers.

But selling into the U.S. can still create U.S. requirements, even without a U.S. entity, including:

• State sales tax registration and collection rules (nexus)
• Withholding documentation (often W-8BEN-E, and sometimes an EIN)
• Customs and importing responsibilities for physical goods (including who acts as importer of record)
• Payroll and state registrations if you hire employees  in the U.S.
• U.S. corporate filing exposure in certain fact patterns (including Form 1120-F, corporate income tax returns)

This guide explains the decision framework for Canadian e-commerce brands, SaaS and digital service providers, Amazon FBA sellers, manufacturers using U.S. distributors, and founders hiring in the U.S.

TLDR

Do I need a U.S. corporation to sell in the U.S.? Usually no, but you may still trigger U.S. sales tax, withholding documentation, customs, payroll, or corporate filing exposure based on your footprint.

• You can often sell to U.S. customers using your Canadian corporation.
• The question is not only “Do I need a U.S. corporation?” The real question is “What U.S. obligations have I triggered based on how I sell, ship, and operate?”
• A U.S. entity usually becomes the practical choice when you have inventory in the U.S., people in the U.S., or a growing U.S. operating footprint.
• The highest impact work is usually:
  1. confirm state sales tax nexus exposure
  2. set up withholding documentation correctly
  3. validate customs and importing responsibilities
  4. confirm whether U.S. corporate filings could apply
  5. plan payroll properly if you hire in the U.S.

If you want clarity, book a 15-minute U.S. expansion review with TMP Corp and we will map your obligations and next steps.

Want a clear U.S. expansion plan without guessing?
In a free 15-minute call, we’ll map what you triggered (sales tax nexus, documentation, customs, payroll, and possible filing exposure) and tell you what to do now vs later.

Book a 15-minute U.S. expansion review

The 5-question decision framework TMP uses

If you want a clear, repeatable way to decide whether a U.S. corporation is necessary, use these five questions. This framework is also aligned with what AI search results tend to summarise.

If you are asking, do I need a U.S. corporation to sell in the U.S., these five questions will tell you where the real triggers are.

Question 1: Where is your inventory?

• Inventory only in Canada
• Inventory stored in the U.S. (Amazon FBA, U.S. 3PL, U.S. warehouse)

Inventory in the U.S. is one of the biggest triggers for state sales tax obligations, and it can increase the need for a structured U.S. compliance plan.

Question 2: Do you have people in the U.S.?

• No U.S. employees or contractors
• U.S. contractors
• U.S. employees
• A U.S. office or ongoing on-the-ground business activity

People on the ground is often the turning point where a business moves from “selling into the U.S.” to “operating in the U.S.”

Question 3: Are you triggering state sales tax nexus?
Sales tax is state-by-state. You can trigger registration obligations without a U.S. corporation and without a physical office.

Nexus can be created by:

• physical presence, like inventory, employees, a warehouse, or in-person work
• economic presence, like sales or transaction counts thresholds in a state

Question 4: Are U.S. payers or platforms asking for tax documentation?
If platforms, payment processors, or U.S. customers request tax forms, you want the documentation set up correctly so payments are not delayed and withholding is not applied incorrectly.

Question 5: Does your activity create U.S. corporate filing exposure?
This is not the same as having U.S. customers.

A Canadian corporation can have U.S. customers and still have no U.S. corporate filing requirement. But certain operating footprints can change the analysis, especially when there is meaningful business activity carried out in the U.S.

If you answer “yes” to more than one question, a U.S. entity becomes more likely as a practical solution, but the final decision should be based on a full fact review.

Key terms 

• Sales tax nexus: The connection that can require you to register, collect, and remit sales tax in a state. It can be triggered by physical presence (inventory, warehouse, employees) or economic thresholds (sales or transaction volume).
• U.S. trade or business: A plain-English way to describe business activity that is meaningfully carried out in the U.S., not just having U.S. customers. If your operations happen in the U.S., filing obligations can become relevant.
• Permanent establishment (PE): A concept used in tax treaties to evaluate whether a business has a sufficient on-the-ground presence (like an office or dependent agent activity) that can affect income tax exposure.
  Withholding documentation (W-8BEN-E): A form U.S. payers or platforms often request to confirm you are a foreign business. If it is missing or incorrect, payments can be delayed or withholding can be applied by default.
  

What “selling to the U.S.” actually means

“Selling to the U.S.” is not one thing. Your requirements can change completely depending on your model.

Common ways Canadian businesses sell into the U.S. include:

• Shipping products from Canada directly to U.S. customers
• Selling through online marketplaces
• Using Amazon FBA or a U.S. 3PL, which means inventory is stored in the U.S.
• Selling SaaS subscriptions or digital services to U.S. customers
• Invoicing U.S. clients for services performed primarily from Canada
• Working with U.S. distributors or retailers
• Hiring U.S. employees or contractors

Two businesses can have the same revenue and completely different U.S. requirements because their operational footprint is different. That is why the best answer is always fact-driven.

Do I need a U.S. corporation to sell in the U.S. if I am just getting started?

Most Canadian businesses can make their first U.S. sales without forming a U.S. entity, especially when:

• You ship from Canada and do not store inventory in the U.S.
• You have no U.S. employees and no U.S. office
• You are testing demand or selling at early stage volume
• Your contracts and delivery are handled from Canada
• You are prepared to evaluate sales tax nexus properly and keep clean records

In these cases, forming a U.S. corporation too early can add unnecessary compliance work. It can also distract from what usually matters first, which is confirming whether you have triggered state sales tax requirements, documentation needs, or customs friction.

A better early-stage approach is:

• confirm your current U.S. obligations
• fix any gaps while your volume is still manageable
• choose an entity structure only when the facts justify it

Sales tax nexus for a Canadian company selling to U.S. customers

This is where many Canadian businesses get caught off guard, particularly e-commerce brands and Amazon FBA sellers.

Sales tax is not income tax
Sales tax is collected from customers and remitted to states. Income tax applies to business profits.

You can have sales tax obligations without having U.S. income tax obligations. You can also have sales tax obligations without a U.S. corporation.

What is nexus?
Nexus is the connection that creates a legal requirement to:

• register in a state
• collect sales tax from customers in that state
• remit it on a filing schedule
  

Nexus typically shows up in two ways:

Physical nexus

Common triggers include:

• inventory stored in the state
• a warehouse or fulfillment center
• employees or contractors working in the state
• ongoing in-person business activity beyond occasional travel

If you use Amazon FBA or a U.S. 3PL, inventory can be stored in multiple states, which is why a nexus review becomes urgent quickly.

Economic nexus

Many states require remote sellers to register once they exceed a sales threshold, a transaction threshold, or both.

Economic nexus is one of the reasons Canadian sellers can have U.S. sales tax requirements even when they have no U.S. entity and no U.S. office.

Common misconception

“If I form a U.S. corporation, sales tax is handled.”
Not true. Sales tax obligations are driven by nexus. Entity structure does not replace the nexus analysis.

If you want to turn uncertainty into a clear state-by-state plan, TMP Corp offers a state-by-state nexus assessment and registration roadmap.

Need a clear nexus plan by state?
If you have inventory in the U.S. (Amazon FBA or a 3PL), marketplace sales, or growing U.S. volume, a quick nexus review can clarify where you may need to register and collect sales tax.

What we do in a nexus assessment:

• Identify which states may have physical or economic nexus triggers based on your facts
• Map what comes next (registration timing, collection start dates, filing cadence)
• Flag common pitfalls that cause late registrations or messy cleanups

We’ll confirm what applies to your exact footprint and what can wait

Request a state-by-state nexus reviewBook a 15-minute cross-border hiring review

U.S. corporate filings and Form 1120-F, when it becomes relevant

This is the section where generic online advice often becomes too confident.

Key point

Having U.S. customers is not the same as carrying on business in the U.S.

A Canadian corporation can sell to U.S. customers without being required to file U.S. corporate tax returns. However, the analysis changes when the facts suggest an operating footprint in the U.S.

When a deeper review is usually warranted

Here are patterns that commonly trigger a proper analysis:

• a U.S. office or fixed place of business
• U.S. employees performing core business functions
• regular, ongoing business activity physically occurring in the U.S.
• agents or representatives in the U.S. who routinely negotiate or conclude contracts on your behalf
• operational footprints that look like a U.S. operation rather than remote selling

What is Form 1120-F in plain English?

Form 1120-F is the U.S. federal income tax return of a foreign corporation when it is effectively engaged in a US trade/business, even if the income from the US trade/business is exempt from US taxation through a tax treaty.

This does not mean every Canadian business selling into the U.S. needs to file it. It means you should not assume “no U.S. entity” equals “no U.S. filings” without reviewing your facts.

If you want support with this analysis and the ongoing filings that can come with it, you can learn more about U.S. corporate tax filings for Canadian-owned companies.

Need clarity on whether U.S. corporate filings could apply?

If you have U.S. employees, regular on-the-ground activity, a U.S. office, or agents negotiating contracts in the U.S., it is worth doing a quick fact review before assuming there are no filing obligations.

What we do in a 1120-F risk review:

• Map your U.S. footprint based on how you sell, where work happens, and who is doing it
• Identify whether your fact pattern suggests corporate filing exposure
• Outline what to document and what to change now to reduce future clean-up

Learn more about U.S. corporate filings support

W-8BEN-E, EINs, and avoiding withholding or payment delays

For many Canadian businesses, the first sign of U.S. compliance is not a tax notice. It is a platform, customer, or payment provider asking for tax documentation.

What is W-8BEN-E?
W-8BEN-E is commonly used by foreign entities to document foreign status for U.S. withholding and reporting rules. It is generally provided to the payer or platform as part of onboarding or compliance, rather than filed like a normal tax return.

Why it matters
If documentation is missing or incorrect, one of two things can happen:

• payments are delayed until the issue is corrected
• default withholding treatment is applied to certain payment types

The risk here is not only tax. It is cash flow disruption.

Do Canadian businesses need an EIN if they stay as a Canadian corporation?
Often, yes, depending on your activity and your platform requirements.

Many cross-border workflows eventually require an EIN for items like:

• documentation and onboarding with U.S. platforms and financial institutions
• certain withholding or reporting setups
• U.S. payroll and employment registrations
• tax filings if applicable based on your footprint

The practical advice is simple: set up documentation early, before U.S. sales or U.S. platform dependency grows large enough that a delay impacts operations.

Getting asked for W-8BEN-E or an EIN and want to avoid payment delays?
If a platform, payer, or payment processor is requesting documentation, getting it set up correctly can prevent onboarding friction and incorrect default withholding.

What we do in a documentation setup review:

• Confirm which forms apply for your situation and who needs them
• Confirm whether an EIN is required based on your platform and workflow
• Put the documentation in place so onboarding and payments stay smooth

We will tell you what to do now, what can wait, and what to avoid so you do not create rework later.

Book a free 15-minute consultation

Customs and importer of record, what founders overlook

If you sell physical goods, shipping is not just logistics. It affects:

• duties and clearance
• delivery experience
• returns and exchanges
• customer satisfaction
• predictable margins

Importer of record (IOR)

Someone must act as the importer of record on shipments. Depending on your model, it may be:

• the customer
• your business
• a customs broker under a defined arrangement

Your choice impacts whether customers receive surprise fees at delivery, and how smoothly returns can be processed.

A practical warning about assumptions

Many founders have heard that low-value shipments under a certain threshold are easy. In reality, customs rules and de minimis policies can change and enforcement can shift.

If physical goods are a meaningful part of your U.S. growth plan, treat customs as a workstream to validate, not a detail to solve later.

Hiring in the U.S., when a U.S. corporation becomes the practical choice for Canadian businesses

If there is one moment when “Should we form a U.S. entity?” becomes a practical business decision, it is usually hiring.

Once you have U.S. employees, you are often dealing with:

• payroll withholding and reporting
• state payroll accounts
• unemployment registrations
• workers’ compensation requirements
• state-level compliance based on where the employee works
  

Even in cases where a U.S. entity is not strictly required, it is often the practical structure because it supports payroll, benefits, and ongoing compliance in a cleaner way.

If you are expanding a cross-border team, TMP Corp supports U.S. payroll setup and ongoing filings for cross-border teams.

Hiring in the U.S. and not sure what needs to be set up first? Once you have a U.S. employee, the compliance calendar usually starts moving quickly. Payroll withholding, state registrations, and ongoing filings can stack up fast if the structure is not set up cleanly from day one.

What we do in a cross-border hiring setup review:

• Confirm whether you need a U.S. entity now, or if another structure can work based on your plan
• Map the payroll and state registration requirements based on where the employee works
• Set up the compliance workflow (accounts, filings, and deadlines) so it does not become reactive later

We will tell you what to do now, what can wait, and what to avoid so you do not create a cleanup project later.

Book a 15-minute cross-border hiring review

Talk to us about U.S. payroll setup

Common scenarios and what to review

Scenario A: Canadian e-commerce brand shipping from Canada to U.S. customers

Often you can start without a U.S. corporation.

What to review:

• sales tax nexus by state
• customs and importer of record approach
• documentation requests from platforms or payment processors
• customer experience, duties, returns, and delivery timelines

Scenario B: SaaS or digital services sold to U.S. customers

Often you can sell without a U.S. entity at the start.

What to review:

• whether any U.S. on-the-ground activity exists
• W-8BEN-E requests and documentation setup
• EIN needs depending on payers and platforms
• whether hiring plans shift the structure decision

Scenario C: Amazon FBA or a U.S. 3PL

This is where many businesses accidentally build U.S. footprint fast.

What to review:

• which states hold your inventory
• where your nexus exposure exists today
• how quickly registrations and collection obligations need to be addressed
• whether your U.S. operations now justify entity formation

Scenario D: Manufacturer using U.S. distributors

You may not need a U.S. corporation immediately, but structure matters.

What to review:

• contracting and where the selling activity occurs
• customs responsibilities and importer of record
• whether U.S. sales staff or agents change the analysis
• whether customers or procurement processes require a U.S. entity

Scenario E: Founders expanding into U.S. hires

A U.S. entity often becomes the practical path.

What to review:

• payroll setup and state registrations
• entity structure aligned with long-term plans
• the compliance calendar for ongoing filings and reporting

A practical action plan for the next 30 days

If you are currently selling to the U.S., or preparing to, here is a realistic plan that prevents the most common issues.

Week 1: Map your footprint

• list where inventory is stored and fulfilled from
• list any U.S. contractors, employees, or on-the-ground activity
• list U.S. sales channels, payment processors, and platforms

Week 2: Identify sales tax exposure

• determine which states may have nexus triggers based on inventory or volume
• assess whether you need registrations and a collection plan

If you want a structured roadmap, start with a state-by-state nexus assessment and registration roadmap.

Week 3: Confirm documentation readiness

• confirm whether W-8BEN-E is needed for any payer or platform
• confirm whether an EIN is required for documentation or operational workflows
• set a documentation process so onboarding does not delay payments

Week 4: Decide whether entity formation is necessary now

• if you have U.S. inventory, U.S. hires, or expanding operations, review entity options
• if you are still shipping from Canada with limited footprint, focus on compliance and scaling readiness

If you are unsure, a short consult can clarify the correct path without overbuilding structure too early.

The 12-question checklist

Answer yes or no:

1. Do you store inventory in the U.S. (Amazon FBA or a U.S. 3PL)?
2. Do you ship from a U.S. warehouse?
3. Do you have a U.S. employee now, or plan to hire within 6 to 12 months?
4. Do you have U.S. contractors performing core business work?
5. Do you have a U.S. office or regular on-the-ground business activity?
6. Has any payer or platform requested W-8BEN-E?
7. Have payments been delayed or withheld due to missing documentation?
8. Are your U.S. sales rising enough that nexus thresholds may apply in one or more states?
9. Is a customer or distributor requiring you to have a U.S. entity?
10. Do you need U.S. payroll infrastructure?
11. Are banking or payment processors pushing you toward a U.S. structure?
12. Would separating U.S. operations from Canadian operations reduce operational complexity?

If you answered yes to multiple items, you are at the point where a structured review can save a lot of future cleanup.

How TMP Corp helps (free 15-minute consult)

Selling into the U.S. can feel simple at the start, and become complex quickly when you scale.

In a short consult, TMP Corp can help you map:

• whether a U.S. entity is required now, or simply the practical next step
• state sales tax nexus exposure and a state-by-state plan
• W-8BEN-E and EIN setup to reduce payment friction
• U.S. corporate filing exposure based on your operating footprint
• hiring and U.S. payroll readiness if you are adding U.S. team members

Book a free 15-minute consultation with TMP Corp to get clarity on your U.S. expansion requirements and next steps.