Your First US Customer Just Created a Tax Question

The contract is signed, the invoice is out, and a set of obligations you did not sign up for has started running in the background. None of it is catastrophic if handled early. All of it is expensive to fix retroactively.

The Two Separate Questions

Founders collapse these into one, and they have different answers. Income tax: does your company have a US taxable presence, and does the Canada-US treaty protect you from it? Sales tax: do you have economic nexus in a state, which is a state-level question the treaty does not touch at all.

Income Tax and Permanent Establishment

Under the treaty, business profits are generally taxable in the US only if you have a permanent establishment there: a fixed place of business, or a dependent agent habitually concluding contracts on your behalf. Selling remotely from Canada typically does not create one. A US-based salesperson closing deals, or an office, can. Note that treaty protection is claimed, not automatic, which means a US return may still need to be filed to claim it.

State Sales Tax

Since economic nexus rules took hold, many states impose a registration and collection obligation once you pass a revenue or transaction threshold in that state, with no physical presence required. Thresholds vary by state. Software and digital services taxability varies more. This is the obligation most Canadian founders discover two years late, and the liability accrues from the date nexus was triggered.

Also on the List

• Payroll and personal tax exposure if anyone travels to the US to work, including founders.
• Employer obligations before hiring any US-based person, contractor classification included.
• Transfer pricing and intercompany agreements if you set up a US subsidiary.

What to Do in the First Ninety Days

1. Have W-8BEN-E ready before the first invoice.
2. Track US revenue by state from the first dollar. You cannot assess nexus without it.
3. Get a permanent establishment read before hiring or placing anyone in the US.
4. Revisit annually, and whenever you add US headcount or cross a revenue milestone.

General information for Canadian founders, current to 2026. It is not tax advice and does not account for your specific facts. Rates, thresholds and rules change, confirm the current figures before acting.