E-Commerce in the USA – Navigating to Success
Even prior to the pandemic, the e-commerce industry was growing fast. E-commerce companies further thrived in 2020 as stay-at-home orders, mask mandates, and other pandemic-related anxieties pushed US consumers online with higher frequencies. In fact, Digital Commerce 360 estimates that the pandemic accelerated the e-commerce industry by two years1. We are finding more companies who have been using social media and direct shipping from manufacturers now need to get closer to their customers. They are now housing inventory in the USA and clearing e-commerce transactions and credit cards in the USA.
At BILTgroup, we understand the legal, tax, and business issues that can become obstacles to your success. We have hands-on experience handling the peculiarities and business challenges faced by both new and established e-commerce businesses. Let us put our experience to work to help you establish your e-commerce business, go to market, avoid costly mistakes, provide sound tax planning and help you succeed. One mistake can undue nine successes. We stop that from happening.
1. There is more to it than just forming a company.
Forming a company, whether an LLC or corporation, requires careful planning, but that is just the beginning. A business entity does nothing itself. It needs agents and employees to (1) register it with tax officials (IRS and state(s)), (2) open a bank account, (3) hire a fulfillment house (e.g. 3PL); hire employees and contractors, and so on. There is a lot to do, and if you are not on the ground in the USA, it is very difficult, especially with banking.
Whether you are starting from scratch or expanding your operations – we can assist you in selecting the ideal structure and location for your new business entity. Not only will we draft incorporation documents, help you find a registered agent, and customize bylaws that work for your business plans, but we will also help you find a tax-efficient business structure that works for your growth plans. These initial business formation and structuring decisions involve the consideration of a multitude of factors, including (but not limited to):
– Relevant state income tax rates;
– Local sales tax rates;
– The location of your customers;
– The location of your intended customers; and
– The location of your warehouses.
Here at BILTgroup, we make business formation and structuring easy. We go beyond the standard entity set-up assistance and tax planning – we also assist you with the practical aspects of starting a business such as: obtaining an EIN, opening a bank account, finding virtual office space, obtaining a non-P.O Box mailing address, seeking out and collaborating with relevant specialists as needed, connecting you with necessary resources, and serving as a sounding board for all your business related anxieties.
2. Taxes – there are a lot of different taxes.
The US Supreme Court ruled in the 2018 Dakota v. Wayfair case that state states can require businesses to collect and remit sales tax if the business meets certain thresholds. Depending on the state, this threshold can be met either by performing a certain number of transactions or by achieving a particular dollar amount in gross sales. When a business passes a sales threshold, then the business has economic nexus with the state, resulting in sales and use tax implications.
E-commerce businesses specifically need to be particularly mindful of their level of interactions with customers in each state. Unlike physical storefronts, digital storefronts reach doorsteps across a multitude of jurisdictions. Keeping track of your economic presence can be overwhelming without the right tools – we are here to not only help you become of your where you have an economic presence but also make sure that you are compliant with the requirements of that jurisdiction.
3. Keep it organized and don’t miss deadlines.
To effectively manage businesses, organization is key. You have enough on your plate already with tasks such as logistics, product development, marketing, and customer service. Let us make your life easier and ensure that you don’t have a deadline that sneaks up on you! We routinely draft tax calendars that incorporate all the tax and business compliance obligations triggered by your business. Understanding from the start of your business the totality of your tax and business compliance obligations ensures that you don’t have any negative surprises – leaving you more time to focus on growing your e-commerce business.
4. We can help your business navigate import and export complexities.
Bringing your product into the United States requires proper packaging and customs declarations. Customs agents are very concerned about counterfeits and products that do not properly disclose their origin and place of manufacture. If you get this wrong, your goods will be held up in the port and possibly confiscated.
Does your e-commerce business involve the import or export of goods? It’s no secret – international trade is not easy! We can help you avoid common pitfalls, saving you both time and money. Common pitfalls to watch out for include:
– Lack of knowledge on exchange rates;
– Lousy relationships with customs officials;
– Not being familiar with how to avoid or handle bribery disputes (or other gems found within the Foreign Corrupt Practices Act);
– Not understanding relevant import restrictions or tariffs;
– Failing to conform to packaging, marking, and language laws;
– Lack of familiarity with INCOTERMS;
– Bad record-keeping; and
– Failing to verify the reputation and legitimacy of a supplier or customer.
An ounce of prevention is worth a pound of cure, but whether you want to talk to someone to ensure your processes are kosher or if you have already found yourself in a jam, we are here to help.
5. Doing business with yourself.
Globalization presents not only tremendous opportunities for businesses – it also presents significant challenges. Often, businesses expand to different locations through the formation of a new entity in that new jurisdiction. Often this new entity relies on the management, branding, and administrative support from another older more established entity. Determining the exact cost of transactions between related entities within a company – known as transfer pricing – is not only very important for accurate accounting for your business but mandatory for most multinational businesses to report. The first hurdle then becomes establishing and memorializing your transfer pricing process into a transfer pricing agreement.
We are here to help you not only stay within compliance but find a process that best meets your business needs!
6. We have your back.
Here at BILTgroup, we enjoy seeing e-commerce companies thrive. No question is too small and no challenge is too big – we are ready to partner with your e-commerce business.
1 “Coronavirus adds $105 billion to US e-commerce in 2020.” Digital Commerce 360. 16 June 2021. <https://www.digitalcommerce360.com/article/coronavirus-impact-online-retail/>