Is a UK company required to file Form 1099 in the US?

UK companies often mistakenly believe that, because they are not US companies, they are not subject to US tax filing obligations. But UK companies doing business in the US often have the same, or similar, tax filing obligations of US domiciled business entities.

Form 1099 is just one example. A 1099 is a report, filed annually with the IRS of payments made to certain payees in the prior calendar year. If a UK company is engaged in a “trade or business” in the US, and the company pays certain US contractors more than $600 per year, then it must file a 1099. For more about the 1099, see our article here.

Unfortunately, US law contains no clear definition of what constitutes engaging in a US trade or business. Generally, a foreign company is engaged in a US trade or business if it engages in “considerable, continuous, and regular” activities within the US. The trade or business must be more than sporadic. Casual or incidental transactions are not sufficient.

A UK company, for example, that sells inventory shipped from a US based third-party warehouse (including Amazon FBA) or that regularly renders services while on US soil would almost certainly meet the test. However, even regular sales to US customers shipped from the UK – at least where title to the goods transfers on US soil – would likely constitute a US “trade or business” activity. This could easily happen, for example, if your contract states that the customer acquires title at some point after delivery.

Selling in the US through an independent sales agent will not in itself constitute a US trade or business. However, this is only true if the sales agent is truly independent. If the agent only works for you, and is legally and economically dependent on you, then the agent’s activities are your activities for the purpose of determining whether you are engaged in a US trade or business.