Selling services from abroad and shipping physical products into the US are treated very differently by tax authorities and by customs. This guide walks through what changes for each, plus a practical checklist you can work through before you take your first US order.
Services vs products: the basic split
If you deliver services remotely, such as software, consulting, or design work, and you have no US employees or physical presence, your US LLC mostly deals with income tax and possibly service based sales tax in a few states. If you ship physical goods into the US, you add customs, import rules, product liability exposure, and a more complex sales tax picture. The table below is a quick summary, but always confirm details with the relevant state or federal agency.
| Area | Services delivered from abroad | Products shipped into the US |
|---|---|---|
| Sales tax trigger | Usually only if you have a physical or economic presence in a state | Almost always, once you cross a state's economic threshold |
| Customs and import duty | Not applicable | Applies on most shipments, duty depends on the product |
| Product liability insurance | Rarely needed | Strongly recommended |
| Returns handling | Not applicable | Needs a US or nearby return address |
| Federal tax complexity | Lower, mainly Form 5472 and pro forma 1120 for a foreign owned single member LLC | Can increase if you hold inventory in the US |
Sales tax and nexus
Nexus is the connection that gives a state the right to make you collect its sales tax. There are two common types. Physical nexus comes from having a location, employees, or inventory in a state. Economic nexus comes from crossing a sales or transaction threshold into that state, even with no physical presence.
For a service business with no US staff and no US inventory, you may only trigger nexus in a handful of states, and some states do not tax services at all. For a product business, once you sell into a state past its threshold, you likely need to register, collect, and remit sales tax there. Thresholds and rules differ by state and change over time, so check the tax department site for each state where you have real sales volume. Do not guess based on one state's rule and assume it applies everywhere.
This is one of the areas where the Run and Scale plans help, since transaction tracking with AI categorization and live financial reports make it much easier to see where your sales are landing state by state, so you know where to check nexus rules before it becomes a problem.
Customs and importer of record at a high level
When goods cross into the US, someone has to be the importer of record, the party responsible for duties, taxes, and compliance with customs rules. If your LLC is the importer of record, it takes on that responsibility directly. If you use a freight forwarder, marketplace fulfillment program, or a third party logistics provider, check their terms carefully, since some of them act as importer of record on your behalf and some do not.
Duty rates depend on the product category and country of origin, and paperwork requirements vary by shipment size and type. This is a specialized area, and mistakes can hold up shipments or trigger penalties. Work with a licensed customs broker for anything beyond very small, occasional shipments, and confirm current rules on the US Customs and Border Protection site rather than relying on general guidance.
Product liability insurance
If you sell a physical product in the US, product liability insurance is worth having even if you feel your product is low risk. US product liability claims can be expensive to defend even when they are not successful, and many marketplaces and retail partners require proof of coverage before they will list your product or place a purchase order. Get quotes early, since underwriting can take time, and factor the cost into your pricing.
Services businesses generally do not need this type of policy, though professional liability or errors and omissions coverage can make sense depending on what you deliver.
Returns address
US customers expect an easy return process. A return address outside the US usually means slow returns, high shipping costs for the customer, and a higher chance of complaints or chargebacks. Most product sellers set up a US based returns address, either through a fulfillment partner, a warehouse, or a mail handling service. A virtual mailing address, like the one included in every PowerLaunch plan, works for business correspondence and official mail, but check whether your logistics partner needs a separate physical returns location for handling actual product returns.
Marketplaces handling tax for you
Many marketplaces, including large ones you likely already know, now collect and remit sales tax on your behalf for orders placed through their platform, under what is often called marketplace facilitator law. This reduces your own sales tax registration burden for those specific sales, but it does not remove your obligation for sales made through your own website, a different marketplace, or direct wholesale orders. Keep records that show which sales were marketplace facilitated and which were not, since state auditors will ask for this breakdown if you are ever reviewed.
When US inventory changes the federal picture
Holding inventory in the US, for example in a fulfillment warehouse, generally strengthens your nexus in that state and can affect how your business is viewed at the federal level too, particularly around whether income is treated as connected to a US trade or business. This is a meaningful shift from a pure drop shipping or remote service setup, and it is worth a conversation with a licensed tax professional before you commit to US based inventory. For a foreign owned single member LLC, the core federal filing, Form 5472 with a pro forma 1120 due by 15 April, still applies regardless of your business model, and under the current 2026 interim FinCEN rule, US formed companies are exempt from BOI reporting. Rules do get revisited, so check FinCEN's site if you want the latest position.
Practical checklist
- Confirm whether you are selling a service, a product, or both, and map out where physical presence or inventory exists.
- Check economic nexus thresholds in the states where you have meaningful sales volume.
- Decide who will be importer of record for any shipments into the US.
- Get product liability insurance quotes if you sell physical goods.
- Set up a US returns address through a fulfillment partner if needed.
- Track which sales are marketplace facilitated and which are not.
- Talk to a licensed tax professional before holding US inventory.
- Keep Form 5472 and pro forma 1120 on your calendar every year, due 15 April.
What to do next
If you want your LLC formation, registered agent, and tax filings set up correctly from the start, sign up at powerlaunch.solutions/signup and choose the plan that matches how much bookkeeping and filing support you need. If you are still deciding between a services model and a product model, or you want to talk through sales tax and inventory questions first, book a free 20 minute consultation at powerlaunch.solutions/book.
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