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Nexus in Delaware

Asked by: Monir  — 4 March, 2012

I own a single member LLC in Delaware. I am a non resident alien, and all my business income and services are sourced outside the US. I don’t pay any US federal taxes, only state franchise tax. I am thinking of getting a virtual office in Delaware with a real presence. I have no property right to this address nor can I really use it, except for mail forwarding and stating it to my bank etc. If I get this virtual address service with a real address does this constitute having a real presence in the State and thus a nexus making me have to pay for taxes to the state? Thanks.

Answered by: admin  — 4 March, 2012

Dear Monir,

There are basically two questions that need to be answered, each related to a different type of tax:

1. Federal Income tax: this tax is paid on income produced by the company in the US. If you are producing such income you would be liable to pay income tax, regardless of whether you have any physical presence in the US or not. So having a virtual office in Delaware or not is irrelevant to this particular type of tax.

2. Sales Tax: the question of nexus is actually more related to sales tax, in other words having a nexus in a given state would require you to collect sales tax on retail sales to residents of that state. Again, in your case it is irrelevant, because Delaware has no sales tax, and as far as I understand you don’t sell anything in the US anyway.

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