What Is an EIN and Why Is It Important?
An Employer Identification Number is a nine-digit number issued by the United States Internal Revenue Service. Its primary role is to identify businesses for tax purposes, and it is functionally similar to the Australian Business Number, or ABN. However, while the ABN applies within Australia, the EIN is used exclusively for interacting with US federal tax systems and financial institutions.
For foreign entities entering the US market, the EIN acts as a gateway to several important services. Whether you’re selling goods through a US-based ecommerce platform, opening a business bank account in the United States, or forming a legal entity like an LLC, the EIN is typically required.
Your business may also need an EIN to complete tax documentation required by US payment processors or marketplaces, such as Form W-8BEN or W-8BEN-E, which help determine your status as a foreign entity and potential exemptions from tax withholding.
When Does an Australian Business Need an EIN?
You may need to apply for an EIN even if your company is based entirely in Australia and has no physical presence in the US. The IRS requires foreign businesses to obtain this number in a variety of scenarios. Here are several common situations in which an EIN would be required:
Selling Goods on US-Based Ecommerce Platforms
If you intend to sell products through online marketplaces such as Amazon, Walmart, or Etsy, you will almost certainly need to provide an EIN during the registration process. These platforms often require vendors to submit IRS tax forms, which cannot be completed without a valid EIN.
Registering a US-Based Business Entity
If you choose to incorporate your business in the US by forming an LLC or corporation, you’ll need to obtain an EIN as part of the registration process. This is true regardless of whether you have a physical office or employees in the country.
Opening a US Bank Account
US financial institutions generally require foreign businesses to provide an EIN when opening a corporate bank account. Even if you don’t plan on banking locally, many US-based payment processors and business service providers will request this information as part of their onboarding process.
Hiring Employees or Contractors in the United States
If your company has employees located in the US or works with independent contractors who require tax documentation, the EIN becomes a necessary part of the payroll and tax reporting process.
Filing Tax Returns or Paying Withholding Tax
If your business earns US-sourced income that is subject to taxation, you’ll need an EIN to file the appropriate forms with the IRS. This could include income derived from US investments, real estate, or partnership arrangements with US-based entities.
What Makes the Process Different for International Applicants?
Unlike domestic US businesses, which can apply for an EIN online using the IRS’s electronic system, foreign applicants must take a more manual route. The online application form is not available for entities whose principal place of business is outside the United States.
Instead, non-US businesses are required to submit a paper application and contact the IRS by phone to complete the process. This method may seem outdated, but it remains the standard procedure. The good news is that the process is free and can typically be completed during a single phone call.
How to Apply for an EIN from Australia
Applying for an EIN from outside the United States involves several key steps. The process is not overly complicated, but attention to detail is important. Missing or incorrect information can lead to delays or rejections. Below is a step-by-step overview tailored for Australian business owners.
Step 1: Fill Out Form SS-4
Form SS-4 is the official application for an EIN. This form is used by the IRS to collect information about your business, such as its legal name, structure, location, and purpose for applying.
You can download Form SS-4 directly from the IRS website. The form includes instructions, but as an international applicant, there are specific fields that may not apply to you or may require alternative answers.
For example:
- Line 1: Legal name of the entity applying
- Line 6: Country and state of incorporation (list your Australian state)
- Line 7a: Name of responsible party (typically the business owner or principal officer)
- Line 9a: Type of entity (such as corporation, partnership, or sole proprietorship)
- Line 10: Reason for applying (common responses include “Complying with IRS withholding regulations” or “Banking purposes”)
Be sure to complete the form in full and review it for errors. A clean, accurate SS-4 will help ensure a smooth phone call with the IRS.
Step 2: Decide Whether to Use a Third Party Designee
Form SS-4 includes a section where you can authorize another person to receive your EIN on your behalf. This is known as the Third Party Designee. While it’s not mandatory to appoint one, doing so can be helpful if you have a representative in the US or if someone else is handling your tax affairs.
If you choose not to designate a third party, leave the relevant section blank. However, don’t forget to sign the form. Unsigned applications will not be processed.
Step 3: Call the IRS
Once your SS-4 form is complete and signed, the next step is to call the IRS. The department responsible for international EIN applications can be reached at:
If the number is not toll-free and will require international calling access. Operating hours are Monday through Friday, 6:00 a.m. to 11:00 p.m. Eastern Time.
Expect to wait on hold for some time, especially during peak hours. Once connected, you will be asked to answer questions from the SS-4 form, verify your information, and confirm the purpose of your application.
The IRS representative will process your application in real time and assign your EIN over the phone. Be sure to write it down carefully, as it may be your only record of the number until the confirmation letter arrives.
Step 4: Receive Your EIN Confirmation Letter
After your EIN is issued, the IRS will mail a confirmation letter, also known as CP 575. This letter serves as official proof of your EIN and is often required when setting up bank accounts, registering for taxes, or signing contracts with US partners.
Typically, the letter is mailed to the address listed on your SS-4 form. For international addresses, delivery may take several weeks. In some cases, IRS agents may be able to fax the letter to you upon request, but email delivery is not standard practice.
Make sure the address listed on your application is accurate and complete to avoid issues with delivery.
What to Do After Receiving Your EIN
Once you have your EIN, you can begin taking steps to establish or grow your presence in the United States. This could include registering for US sales tax, opening a business bank account, or signing up for ecommerce platforms that require tax identification numbers.
However, it’s important to remember that holding an EIN comes with responsibilities. You may be required to file annual tax returns with the IRS or submit specific forms depending on your business activities. Failing to do so can result in fines, penalties, or the revocation of your EIN.
As such, it’s a good idea to consult with a tax professional or advisor who is experienced in cross-border compliance, particularly one who understands both Australian and American tax systems.
Common Challenges and Misconceptions
Applying for an EIN from overseas is a relatively simple process, but many entrepreneurs run into avoidable challenges. Here are some of the most frequent issues that arise:
Misunderstanding Eligibility
Some business owners assume they are ineligible for an EIN because their company is not based in the US. This is incorrect. The IRS allows foreign entities to apply, and the process is specifically designed for international applicants.
Using Unofficial Third-Party Services
While there are services that offer to apply for your EIN on your behalf, many charge high fees for what is otherwise a free and straightforward process. If you choose to use such a service, verify its legitimacy and avoid sharing sensitive data with unverified sources.
Providing Incomplete or Incorrect Information
The IRS expects full and accurate responses on Form SS-4. Leaving out critical information or entering incorrect details can lead to delays. Always double-check your entries before making the call.
Expecting Immediate Written Confirmation
While your EIN is provided over the phone, the written confirmation can take several weeks to arrive, especially for international addresses. It’s important to keep your handwritten record safe until the letter arrives.
US Tax Responsibilities for Australian Businesses with an EIN
Once an Australian business obtains an Employer Identification Number, or EIN, from the United States Internal Revenue Service, it enters the jurisdiction of US federal taxation. Receiving an EIN is not simply a formal step to register for ecommerce platforms or open a bank account—it also means your business may be expected to file annual tax documents, report income, and in certain cases, pay federal or state taxes.
Navigating the US tax system as a foreign entity can be challenging without proper guidance. Unlike Australia’s relatively centralized tax environment, the US system includes multiple layers of tax obligations. Understanding your responsibilities will not only help you stay compliant but also avoid unexpected penalties or delays in your operations.
Why the IRS Requires Tax Reporting from Foreign Businesses
The United States taxes income that is sourced within its borders, regardless of where the business is located. When your business conducts operations in the US, sells to US customers, or earns revenue through US-based platforms, the government considers this taxable activity. By issuing your business an EIN, the IRS creates a formal record that enables it to track and assess any tax obligations you may incur.
Even if you are not subject to paying US taxes directly, you may be required to file informational forms to prove your exemption status or declare that income was not effectively connected with a US trade or business. Failure to submit required filings may result in withholding taxes or other consequences.
Determining US Tax Residency and Nexus
Before diving into forms and deadlines, it’s important to assess whether your business has a tax presence—or nexus—in the United States. Nexus is a legal concept used to determine whether a foreign entity has sufficient ties to a country or state to justify taxation.
Federal Tax Nexus
A business may be considered engaged in a US trade or business if it has employees, agents, inventory, or operations within the US. The presence of a physical office, warehouse, or distribution center generally triggers federal tax nexus.
However, even businesses with no physical presence can be deemed to have nexus based on the nature of their activities. For example, if your company earns revenue through services performed in the US or partners with US entities for revenue-sharing agreements, you may be classified as having federal nexus.
State Tax Nexus
In addition to federal tax obligations, US states impose their own tax rules, which vary significantly. Some states require out-of-state businesses to file income tax returns or collect sales tax if they meet economic thresholds, such as a certain number of sales transactions or gross revenue from customers in that state.
As an Australian business owner, you must analyze whether your sales activities in specific states meet their nexus standards. States like California, New York, and Texas have more aggressive policies toward foreign sellers.
Common Tax Forms for Foreign Businesses
Once you determine that your business has US tax responsibilities, the next step is to understand which forms you are required to file. This depends on your legal structure, income type, and the nature of your business activities.
Form 1120-F: US Income Tax Return of a Foreign Corporation
This is the primary income tax form used by foreign corporations to report income earned in the United States. Even if your business did not generate income, filing this form can preserve your rights to carry forward losses or deductions.
Form 1120-F includes schedules to report income effectively connected to a US trade or business, deductions, and taxes owed. It is typically due on the 15th day of the sixth month after the end of your tax year, with extensions available if needed.
Filing this form is important even if you believe your business qualifies for an exemption. The IRS uses it to determine whether tax treaty benefits apply and whether your business has a permanent establishment in the US.
Form 5472: Information Return of a 25% Foreign-Owned US Corporation
If your business forms a US entity such as a corporation or single-member LLC and you own at least 25 percent of it, you must file Form 5472. This form discloses transactions between the US entity and its foreign owner or affiliates.
Examples of reportable transactions include loans, service payments, capital contributions, or the purchase of inventory. Failure to file Form 5472 can result in automatic penalties starting at several thousand dollars per year. This form is filed together with Form 1120 or 1120-F and must be submitted even if the US entity had no income.
Form W-8BEN and W-8BEN-E
These forms certify the foreign status of individuals or businesses receiving US income. As an Australian business, you may use Form W-8BEN-E to claim tax treaty benefits and prevent unnecessary withholding on payments received from US clients or platforms.
Once submitted to your payer or platform, the form remains valid for three years. It should not be sent directly to the IRS unless specifically requested.
Sales Tax Filings
If your business meets economic nexus thresholds in certain states, you may be required to register and collect sales tax from customers. Each state has its own filing requirements, payment portals, and frequency schedules.
Sales tax is generally not remitted to the IRS, but directly to the state’s department of revenue. You may need to file monthly, quarterly, or annual returns depending on your volume of sales.
Tax Treaties Between the United States and Australia
Australia and the United States have a tax treaty that aims to prevent double taxation and reduce the risk of being taxed by both countries on the same income. Understanding this treaty can help your business take advantage of exemptions and lower rates.
Avoiding Double Taxation
Under the treaty, certain types of income—such as royalties, interest, and business profits—are only taxable in one country unless specific thresholds are met. For instance, the US may not tax business profits unless you have a permanent establishment, such as a fixed office or dependent agent in the US.
To claim treaty benefits, you must reference the appropriate article of the treaty when completing your tax forms, particularly Form W-8BEN-E or Form 1120-F. Documentation must support your eligibility for treaty-based positions.
Reduced Withholding Rates
The treaty may also reduce the withholding rate applied to payments made by US entities to your Australian business.
Instead of a standard 30 percent withholding, you may qualify for a lower rate depending on the nature of the income. Properly completed W-8BEN-E forms must be provided to the payer in advance to benefit from reduced rates.
Paying US Taxes as a Foreign Entity
If your business is required to pay taxes in the US, there are several methods available to complete the transaction. These include the IRS online payment portal, wire transfers, credit or debit cards, or payments through authorized third-party processors.
Paying Without a US Bank Account
Although having a US-based bank account simplifies payments, it is not strictly necessary. The IRS accepts card payments, although you may incur international processing fees. Wire transfers are also possible, but they may require coordination with your financial institution and proper referencing of your EIN and tax form.
To avoid delays or misapplication of funds, ensure that all payments are properly labeled with your business name, EIN, and form type.
Estimated Tax Payments
If your business expects to owe more than a certain amount of tax in a given year, you may be required to make estimated quarterly payments. These are typically due in April, June, September, and January and are designed to help businesses avoid large year-end tax bills or penalties.
Use Form 1120-W to calculate estimated taxes for corporations, and ensure payments are made on time using the appropriate IRS channels.
Record-Keeping and Compliance Requirements
Maintaining accurate and complete records is crucial for any business operating internationally. In the event of an audit or inquiry, you may be required to provide documentation showing how income was earned, how expenses were calculated, and how tax positions were justified.
Records that should be kept include:
- Contracts with US partners or clients
- Invoices and receipts for US-based transactions
- Copies of tax forms filed with the IRS or state authorities
- Proof of payments made to the IRS
- Correspondence related to tax treaty claims
Retain these records for a minimum of seven years to comply with both US and Australian standards.
Penalties for Non-Compliance
Failing to meet US tax obligations can result in substantial penalties, even if your business is based overseas. The IRS enforces strict rules around late filings, incorrect information, and non-filing of required forms.
Examples of penalties include:
- Late filing penalties for Form 1120-F or 5472
- Automatic fines for not submitting W-8BEN-E to payers
- Withholding of income or payments due to missing forms
- Disqualification from tax treaty benefits due to inadequate documentation
For foreign-owned US corporations, the penalty for not filing Form 5472 can exceed ten thousand dollars per year per form. These penalties can increase the longer the non-compliance continues.
When to Seek Professional Advice
While it’s possible to manage many tax responsibilities independently, cross-border taxation often involves complex decisions that can affect your long-term strategy. If your business is expanding in the United States or planning to establish a permanent operation, working with a tax professional who understands both Australian and US tax systems can help minimize risks.
Look for advisors experienced in international taxation, especially those familiar with Form 1120-F filings, US-Australia tax treaty interpretation, and state-specific sales tax compliance. The cost of advice is often outweighed by the savings in taxes, penalties, and administrative overhead.
Managing Ongoing Compliance and Financial Operations After Establishing a US Presence
Securing an Employer Identification Number and understanding your US tax responsibilities is just the beginning for any Australian business entering the United States market. The ongoing management of your business presence—covering legal compliance, accounting practices, financial systems, and long-term operational strategy—is just as critical as the initial setup.
Expanding into the US can offer significant growth opportunities, but staying compliant in a foreign jurisdiction requires a thoughtful approach. Business owners must continue meeting federal and state filing requirements, adapt to local financial standards, and structure operations to avoid unnecessary complications or penalties. This series explores how to maintain compliance and manage your finances effectively after establishing your US presence.
Choosing the Right Legal Structure for Long-Term Operations
Once your business becomes active in the US, the legal structure you choose can influence your tax burden, liability exposure, and regulatory obligations.
Corporation vs LLC vs Branch Office
Foreign businesses commonly choose among three main structures: forming a US corporation, registering a limited liability company (LLC), or operating as a foreign branch.
A corporation is treated as a separate legal entity and files its own tax return. It offers liability protection and is often favored by investors, but it may be subject to double taxation unless structured carefully.
An LLC provides more flexibility in terms of management and taxation. It can be treated as a disregarded entity for tax purposes if it has a single foreign owner, but still must file Form 5472 and maintain proper records.
Operating as a branch means your Australian business registers to operate directly in the US without forming a new entity. This may expose your home country business to greater liability and more complex reporting requirements, particularly under Form 1120-F.
Consider State Laws
Each US state has its own rules governing business entities. Factors to consider include:
- Formation and registration costs
- Annual reporting requirements
- Minimum taxes or franchise fees
- Foreign qualification if operating in multiple states
Popular states like Delaware, Nevada, and Wyoming offer business-friendly environments, but your choice should also consider where your customers and physical operations will be based.
Maintaining Proper Financial Records in the US
One of the most critical aspects of ongoing compliance is keeping detailed and accurate financial records that meet US standards. Inadequate bookkeeping can result in fines, missed deductions, or rejection of tax treaty claims.
Implement US GAAP Where Applicable
Although small foreign-owned businesses are not required to comply with US Generally Accepted Accounting Principles (GAAP), aligning your practices with these standards can help avoid misstatements and ensure transparency. US GAAP governs revenue recognition, expense classification, depreciation schedules, and inventory valuation.
This is especially important if your business is planning to scale, attract US investors, or apply for loans from US-based financial institutions.
Track Cross-Border Transactions Separately
Any transactions between your Australian and US operations must be carefully documented. These may include:
- Service agreements between the two entities
- Cost-sharing or revenue allocation
- Loans or advances
- Transfers of intellectual property
Each transaction should have a clear commercial justification and be conducted at arm’s length, particularly if your business is audited under US transfer pricing rules.
Bank Reconciliation and Monthly Reporting
Regular bank reconciliations, profit-and-loss statements, and balance sheets help ensure that you are prepared for filing deadlines. Maintain clear monthly records for:
- Sales revenue from US customers
- Cost of goods sold, including shipping and customs
- Operating expenses
- Payroll or contractor payments
- Sales tax collected and remitted
These records should be stored securely and retained for at least seven years in case of future audit.
Understanding State-Level Compliance
Many Australian businesses are surprised to learn that US states operate like mini-countries, each with its own laws, filing deadlines, and tax systems. Staying compliant at the state level is just as important as meeting federal obligations.
Registering in Multiple States
If your business sells goods or services across state lines, you may be required to register with the secretary of state or department of revenue in each relevant jurisdiction. This is particularly important if you have employees, inventory, warehouses, or frequent delivery operations in a specific state.
Failing to register properly may result in penalties, back taxes, or restrictions on your right to enforce contracts in that state.
Filing State Income Taxes
Many states impose corporate or franchise taxes on businesses earning income within their borders. These returns are separate from federal taxes and are typically due annually. Some states, such as California, impose minimum taxes regardless of profit levels.
Always check whether your business meets the filing threshold for each state you operate in and whether it is entitled to any exemptions.
Managing Sales and Use Tax
Sales tax compliance is one of the most common pain points for international sellers. With more than 12,000 tax jurisdictions across the US, rates and rules can vary dramatically from one location to another.
Your business must:
- Determine where it has economic nexus
- Register for a sales tax permit before collecting tax
- File returns and remit payments on the required schedule
- Track exempt transactions and retain exemption certificates
Failing to collect sales tax when required can result in the liability being shifted to your business, often with added interest and penalties.
Hiring and Paying Workers in the US
As your US business grows, you may consider hiring employees or engaging contractors locally. Doing so introduces new responsibilities related to tax withholding, benefits, and labor law compliance.
Classifying Workers Correctly
US law makes a clear distinction between employees and independent contractors. Misclassifying a worker can lead to back taxes, penalties, and legal claims.
Employees must have payroll taxes withheld from their wages, while contractors are responsible for their own tax payments. If hiring employees, your business must obtain an Employer Identification Number (if not already secured) and register with relevant state workforce agencies.
Payroll Tax Obligations
When you employ US-based workers, you must withhold and remit the following taxes:
- Federal income tax
- Social Security and Medicare (FICA)
- Federal Unemployment Tax (FUTA)
- State income tax (where applicable)
- State unemployment insurance
These taxes are typically reported on IRS Forms 941 and 940, along with W-2s for each employee at year-end. Contractors must be issued Form 1099-NEC if paid over a certain threshold in a calendar year.
Worker’s Compensation and Insurance
Most states require employers to carry workers’ compensation insurance, even for small numbers of employees.
You may also be required to offer certain benefits or adhere to paid leave laws depending on the state. It’s advisable to consult with a local HR advisor or employment attorney before hiring US staff.
Annual Reporting and Renewal Requirements
Maintaining your US business entity requires ongoing filings and renewals, often separate from tax filings.
Annual Reports to State Agencies
Nearly all US states require businesses to file an annual or biennial report confirming contact information, business purpose, and ownership details. These reports are typically filed with the Secretary of State and come with a filing fee.
Missing these deadlines can result in administrative dissolution of your entity or the inability to legally operate in the state.
Registered Agent Obligations
US entities must maintain a registered agent in each state where they are registered. The registered agent receives legal and tax documents on behalf of your company. You must ensure that this agent remains active and updated with your current contact information.
If your registered agent resigns or becomes unreachable, your business could fall out of good standing or miss critical legal notices.
Tax Deadlines and Extensions
One of the best ways to stay compliant is by tracking your annual tax deadlines and filing dates. While many foreign business owners are used to the Australian financial year ending in June, US filings typically revolve around the calendar year.
Key Federal Deadlines
- Form 1120 or 1120-F: Due by the 15th day of the fourth month after your fiscal year ends. For calendar-year entities, this is April 15.
- Form 5472: Filed with Form 1120, for reporting foreign ownership transactions.
- Form 1042 and 1042-S: Due March 15, for withholding on payments to foreign persons.
- Form 1099-NEC: Due January 31, for reporting payments to US contractors.
Extensions are available for many forms, but they must be filed before the original due date.
State Tax Deadlines
Each state sets its own deadlines for income, sales, and franchise taxes. These may differ from federal due dates, so maintain a separate calendar for each jurisdiction in which you are active.
Tools for Managing Compliance and Finances
As your US operations grow, so will the complexity of your compliance needs. Leveraging appropriate tools and platforms can help you manage tasks such as:
- Automating sales tax calculations and filings
- Generating compliant US invoices
- Reconciling cross-border bank accounts
- Issuing payroll or contractor payments
- Filing reports with state and federal agencies
These systems can integrate with your Australian financial software, reducing errors and giving you a consolidated view of your business performance.
Preparing for Audits and Legal Inquiries
The IRS and state tax authorities have the power to audit foreign-owned businesses operating in the US. Proper documentation and ongoing compliance are your best defense.
In the event of an audit, you may be asked to provide:
- Copies of tax returns
- Proof of income and expenses
- Evidence of transfer pricing methodology
- Business contracts and service agreements
- Records of payments to employees and contractors
Having clean, accessible, and well-organized records can make the audit process significantly smoother and less disruptive to your operations.
Conclusion
Expanding your Australian business into the United States opens the door to a vast and lucrative market, but it also brings a complex set of responsibilities. From applying for an EIN and choosing the right business structure to understanding intricate tax rules and maintaining financial compliance, each step plays a critical role in building a sustainable and legally sound US operation.
The journey begins with understanding how and why to obtain an EIN, not just for logistical purposes like opening bank accounts or integrating with platforms, but also for formal entry into the US tax system. Once that step is completed, businesses must grasp their federal and state tax responsibilities, which may include filing income tax returns, claiming treaty benefits, and managing obligations such as Form 1120-F and 5472.
But compliance does not end with tax filings. Managing an ongoing US business presence requires careful financial record-keeping, awareness of state-specific rules, and proactive oversight of employment, payroll, and sales tax collection. The decentralization of the US system makes it vital to track multiple jurisdictions, each with its own deadlines and regulations.
What ties this all together is strategic foresight. Australian business owners must not only ensure compliance but also plan for growth, scalability, and risk management. Leveraging the right tools, legal frameworks, and professional guidance helps reduce the administrative burden and avoid costly missteps.
Ultimately, success in the US market depends not only on the value of your product or service but also on your ability to operate within its regulatory framework. With the right knowledge and systems in place, Australian businesses can establish a strong, compliant, and profitable presence across the Pacific.