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taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1575
Experience:  Licensed CPA, MA, MST with 31 years' experience. Teach Accounting and Tax courses at Masters level.
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US taxation issue I have been doing business in CA with a

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Hi,US taxation issue
I have been doing business in CA with a foreign partner to sell some stuff in ebay. My partner have an ebay account, and a paypal account. When he gets an order, he informs me of the order, and I ship the items to the buyer.When we started the business, I asked about us taxation issues here to set up sales tax in CA, because my entity is in CA, and one CPA here recommends my partner to collect CA sales tax. So he did it.Recently paypal is asking if my partner is not us person or entity and is not subject to US taxation, or a US person or entity and subject to US taxation.I thinks the partner should check "not us person or entity and is not subject to US taxation."
We have collect some sales tax, so should we return the buyers later? What does it affect our business? We don't need to collect them any more? I don't need to report the sales within CA?Please let me know.

Welcome to Just Answer! Thank you for giving me the opportunity to assist you! I will do my best to help!

Ebay is not referring to sales tax. They are asking if your partner is subject to income tax, or US withholding tax. Many times a foreign person is required to have up to 30% withholding tax on income that is connected to a US trade or business.

Additionally, do you have a partnership agreement with this foreign individual? If he is truly your partner, you should be filing a Form 1065 partnership tax return to report the income that you jointly earn, and he would pay tax on his share. Also, if you do have a partnership, and he is a foreign partner, you must file a Form 8804, even if there is a loss or no income for him to report. You also need to file a Form 8805 and 8813.

I hope this answers your question. If you have any more, please feel free to ask and I will be happy to answer.

Thanks! Have a great week!


taxmanrog and 3 other Tax Specialists are ready to help you
Customer: replied 1 year ago.
Hi,I attached photos from paypal, questioning us taxation for reference.
My partner is not a business entity, but an individual, helping me sell some stuffs, and getting extra money. We don't have a partnership agreement. After finishing sales, we divide the transaction. When the sales occurs within CA, he sets up his paypal account to collect sales tax, and I am going to pay the sales tax next year.
For example, when we make sales of $100 within CA, we collect $108 with the tax, and the partner transfers $75+$8 to me to let me pay the sales tax next year. The partner gets $25, and he will report it to his country.
I hope you would understand our business more.