In the prior post in this series, we discussed U.S. federal and state taxation requirements for international cannabis companies. This post focuses on when a foreign company should or must register as doing business in a U.S. state, either by registering their foreign company directly in that state or by forming an affiliate or subsidiary company in that state.
Other than registration with the U.S. Internal Revenue Service (“IRS”) to fulfill U.S. tax obligations, there is no federal business registration in the U.S. because registration is done at the state level. The criteria for whether you need to register in a U.S. state depends on the laws of each state regarding when a business is considered to be “doing business” in that state. This determination is independent from whether you owe income tax or another tax based on your U.S. sales in a state.
For instance, in Washington, California, and New Jersey, only selling product through a broker or maintaining a bank account at a financial institution is not enough to require registration in those states. But doing anything more than maintaining a bank account, selling product through a broker, or doing other minimal business activities requires registration in those
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