The Remote Enterprise Assessment

Your company is registered in Estonia, your team works from four countries, and your customers are mostly American. Somebody has told you that you might have a U.S. tax presence, and you have no way to judge whether that is true. This is a method for finding out on your own evidence, before you pay anyone to look.

You are testing two things, not one

Nearly every confused conversation in this area comes from collapsing two separate questions into one word, "presence."

The first question is domestic. Is the enterprise engaged in a trade or business within the United States, and if so, what income is effectively connected with it? IRC §864(b) supplies the starting definition and expressly includes the performance of personal services within the United States. IRC §864(c)(2) then tests whether U.S.-source periodic income is effectively connected, using the asset-use test and the business-activities test, and IRC §864(c)(3) sweeps most other U.S.-source income into effectively connected treatment once a trade or business exists. The statute gives no bright-line threshold. The case law is a facts-and-circumstances inquiry into whether activity is considerable, continuous and regular, of which Lewenhaupt v. Commissioner, 20 T.C. 151 (1953), aff'd 221 F.2d 227 (9th Cir. 1955), remains the canonical illustration.

The second question is treaty-based. If your jurisdiction has an income tax treaty with the United States, does the enterprise have a permanent establishment there? Under the business profits article, a resident of the treaty partner is generally taxable on business profits only to the extent attributable to a permanent establishment. Article 5 of the 2016 U.S. Model Income Tax Convention defines that as a fixed place of business through which the business is wholly or partly carried on, excludes activities of a preparatory or auxiliary character, and adds a dependent agent rule where a person habitually exercises authority to conclude contracts binding on the enterprise.

You can fail the first test and still be protected by the second. You cannot rely on the second without a treaty and without disclosing the position. Run both.

Domain one: people

Walk your headcount, not your org chart. For each individual who performed any work while physically inside the United States during the year, record the dates, the city, the nature of the work, and who paid them.

What to look for. Sales activity and contract negotiation weigh heavily. Engineering and back-office work performed from a U.S. location is still services performed in the United States under IRC §861(a)(3), which sources the resulting compensation to the U.S. The narrow de minimis exception in that section requires all three of its conditions at once: presence not exceeding ninety days in the taxable year, aggregate compensation of $3,000 or less, and a foreign employer not engaged in a U.S. trade or business. It rarely fits a modern founder's travel pattern.

Separately, test each individual against the substantial presence test in IRC §7701(b)(3): thirty-one days in the current year and a weighted 183 days counting all current-year days, one third of first-preceding-year days and one sixth of second-preceding-year days. A person who crosses that line becomes a U.S. resident for income tax purposes, which is a different and larger problem than a corporate presence question. The closer connection exception is claimed on Form 8840 and requires fewer than 183 actual days in the year, a tax home abroad, and no pending green card application.

Evidence to keep: passport stamps or border records, calendar exports, a per-person day count spreadsheet reconciled annually, and employment or contractor agreements identifying the place of performance.

Domain two: place

List every U.S. address associated with the business, including ones you consider trivial: registered agent addresses, mail-forwarding services, coworking memberships, a customer's office you use when visiting, and a home office belonging to a U.S.-based worker.

Treas. Reg. §1.864-7 defines an office or other fixed place of business as a fixed facility such as a place, site or structure through which the trade or business is carried on, and it does not require continuous use. It also says that using another person's office, even a related person's, does not itself create one where the activities there are relatively sporadic or infrequent. A registered agent address is generally a statutory service address rather than a business facility, but a coworking desk used daily by a salesperson is a different fact.

Evidence to keep: the lease or membership agreement, the badge or access log if one exists, the number of days per month the space was actually used, and photographs or floor plans where the space is shared.

Domain three: property

Inventory what the business owns, leases or controls inside the United States. Three categories behave differently.

• Real property. Governed by its own regime under IRC §897 and withheld on under IRC §1445. This is a separate analysis and does not turn on the trade-or-business question.
• Tangible business property. Inventory at a fulfillment center, equipment, tooling, vehicles. Record who holds title, who bears risk of loss, and whether the facility is operated by a third party under a services contract or leased to you.
• Computing infrastructure. Owned servers in a colocation cage, leased dedicated hardware, and purchased cloud capacity sit on a spectrum from most to least likely to matter. The law here is unsettled and should be recorded as an open item rather than resolved by assumption.

Evidence to keep: colocation and hosting contracts showing whether specific hardware is at your disposal, fulfillment agreements, title documents, and a schedule of U.S.-situs assets with acquisition dates.

Domain four: contracts

This is the domain most self-assessments skip, and it is where dependent agent exposure lives. For your ten largest U.S. customer contracts in the year, answer four questions: who found the customer, who negotiated the commercial terms, who signed, and where was the signer physically located.

Treas. Reg. §1.864-7(d) attributes a dependent agent's office to the principal where the agent has authority to negotiate and conclude contracts in the principal's name and regularly exercises it, or regularly fills orders from a stock of merchandise. Frequency matters: the regulation requires the power be exercised with some frequency over a continuous period, and occasional exercise does not qualify. An agent of independent status acting in the ordinary course of its own business is excluded. The treaty analogue in Article 5(5) of the U.S. Model reaches a person who habitually concludes contracts binding on the enterprise, and the Treasury technical explanations read that as covering contracts relating to essential business operations even where they are not signed in the enterprise's name.

A U.S.-based commission salesperson who negotiates pricing and hands the deal to a founder abroad for signature is the fact pattern to examine closely. Title-passage formalities are not the whole test.

Evidence to keep: signature authority matrices, delegation-of-authority policies, the executed contracts themselves with signature blocks and dates, and CRM records showing who ran each negotiation.

Domain five: money

Trace where value is created and where cash lands. Build a one-page map showing: the entity that contracts with the customer, the entity that employs each function, the bank accounts that receive revenue, and the intercompany agreements between them.

What to look for. Intercompany service agreements that have never been priced or documented. Payments from the U.S. entity to related parties abroad, which carry their own reporting obligations. Payments to foreign persons for services, which raise sourcing and withholding questions in their own right. Revenue booked to an entity that employs nobody performing the work.

Evidence to keep: intercompany agreements with effective dates, transfer pricing documentation if any exists, bank statements identifying counterparties, and a reconciliation between the revenue map and the statutory financial statements.

Scoring what you found

Score each domain green, amber or red, and write one sentence justifying each rating with a document reference. The output is not a conclusion. It is a defensible file.

Domain	Amber signal	Red signal
People	Occasional founder travel for meetings	Any individual regularly working from a U.S. location, or approaching the IRC §7701(b)(3) day count
Place	Coworking used a few days per year	A leased or continuously used facility
Property	Purchased cloud capacity only	Owned or dedicated hardware, U.S. inventory, or any U.S. real property interest
Contracts	U.S. person generating leads only	A U.S. person negotiating or concluding customer contracts
Money	Documented intercompany agreements	U.S.-facing revenue with no corresponding documented function

Preserving your position, and what to do next

Two filings exist precisely for the uncertainty this exercise produces. Where a foreign corporation is unsure whether it is engaged in a U.S. trade or business, Treas. Reg. §1.882-4(a)(3)(vi) permits a protective Form 1120-F filed by the deadline in Treas. Reg. §1.882-4(a)(3)(i), reporting no effectively connected income, which preserves the right to deductions and credits if the position is later challenged. Treas. Reg. §1.874-1(b)(6) provides the individual analogue. Where the answer depends on a treaty, IRC §6114 requires disclosure of the treaty-based return position, made on Form 8833; IRC §6712 imposes a penalty of $1,000, or $10,000 for a C corporation, for failure to disclose, subject to waiver.

Rerun the five domains annually, and again whenever you hire in the United States, sign a U.S. lease, or change who signs customer contracts. Bring the completed file, not a summary of it, to any professional review; the firm's diagnostic is designed to start from exactly this material. Related analysis sits on the IRS exposure analysis pillar. This is general information about published law, not a determination of any particular enterprise's status.