A status describing when a non-U.S. person or entity has sufficient business activity in the U.S. to be considered as “doing business” there for tax purposes.
What is Engaged in Trade or Business in the United States (ETBUS)?
Engaged in Trade or Business in the United States (ETBUS) is an Internal Revenue Service (IRS) concept that determines whether a non-U.S. person or company is considered to have a U.S. trade or business (USTB). If a foreign individual or entity is classified as ETBUS, they may be required to file a U.S. tax return and pay tax on effectively connected income (ECI)—income linked to their U.S. activities.
A person or company is generally considered ETBUS if they:
- Have regular, continuous, and substantial business activity in the U.S.
- Maintain a physical presence, such as an office, store, warehouse, or factory in the U.S.
- Have employees, agents, or representatives conducting significant business activities in the U.S.
- Provide services or sell products in the U.S. beyond isolated or occasional transactions.
Example:
- A foreign-owned LLC storing goods in a U.S. fulfillment center and selling to U.S. customers is ETBUS.
- A non-U.S. consultant who travels to the U.S. for multiple projects during the year may also be ETBUS.
- On the other hand, a foreign company that only ships goods to U.S. buyers from outside the U.S., with no physical presence or agents in the country, may not be ETBUS.
Being ETBUS matters because it triggers U.S. tax filing obligations. Once you are considered ETBUS, you must determine whether your earnings are ECI and calculate tax accordingly. Tax treaties between the U.S. and other countries may provide exceptions or thresholds—often based on whether you have a permanent establishment (PE) in the U.S.—but they don’t eliminate the need to analyze your activities carefully.
For non-U.S. founders, understanding ETBUS is key to avoiding unintentional U.S. tax obligations. Many e-commerce, consulting, and investment activities can create ETBUS status without the owner realizing it.
