A Chinese seller can face a US permanent-establishment question even without forming a US company. The review turns on the actual business: whether the seller has a fixed place of business, what local staff do, and whether an agent can drive or sign contracts. A warehouse used only to store, display or deliver goods is generally excluded. That result needs to be revisited where the warehouse handles wider operating work.
A fixed place can become a business base
A permanent establishment generally means a fixed place of business through which an enterprise carries on all or part of its business. Offices, places of management, branches, factories and workshops are typical examples. For a cross-border seller, the label on the lease is not decisive. The practical questions are whether the enterprise can use the location on a continuing basis and where orders, pricing, customer communications, after-sales work and inventory coordination are carried out.
Storage-only warehouses have a limited exclusion
Under the treaty text, a warehouse used only for the storage, display or delivery of goods is an excluded situation. A warehouse that also handles order processing, after-sales work or inventory deployment requires a separate review. The warehousing agreement, system permissions, staff duties and actual workflow should be read together before a conclusion is reached.
Construction and installation projects need a time record
Construction sites, construction, assembly or installation projects, and related supervisory activities, create a permanent establishment when they continue for more than six months. Keep project records that show the activities performed and their continuity.
Check what the agent or 3PL does in the contracting process
Review whether the agent or 3PL regularly concludes contracts in the enterprise's name.
Sales tax nexus is a separate state-level issue
Sales tax nexus is a state-level concept. It is not the same as a permanent-establishment question for income tax purposes, so the two analyses should not be treated as interchangeable.
Related pages
For marketplace selling issues, see US Amazon sales tax nexus. For US corporate income tax filing, see US Form 1120 for foreign-owned companies. For state registration considerations, see US sales tax state registration.
Permanent establishment FAQs
Does using a third-party warehouse automatically prevent a permanent establishment?
No. The warehouse name and the service provider's identity are only part of the facts. Its use, inventory control and actual business functions also need review.
If a local agent does not sign the contract, is there no risk?
Not necessarily. Under the US treaty the question is whether a dependent agent habitually concludes contracts in the enterprise's name, so look at who negotiates price, approves discounts and sets delivery terms, not just whose signature is on the page.
Need to understand your cross-border tax risk? Use the FOOYEE risk check tool.
Start risk check