If you are a non-U.S. resident and you own a U.S. LLC that sells digital products, you might wonder if you need to pay U.S. taxes. This is especially true if you’re selling to another LLC that is also owned by someone who is not a U.S. resident.

The good news is: most of the time, you do not owe U.S. taxes if you meet a few simple rules. In this article, we will explain what those rules are, what the IRS expects, and how to use forms like W‑8BEN or W‑8BEN‑E to avoid up to 30% withholding on digital product income.

What Is a U.S. LLC?

An LLC, or Limited Liability Company, is a type of business structure. It is popular because it is easy to set up and it protects the owners (called “members”) from personal liability. That means if the company gets sued or goes into debt, your personal assets are usually safe.

A U.S. LLC is simply an LLC that is registered in the United States. You can set one up even if you live in another country and have never been to the U.S.

What Are Digital Products?

Digital products are things that are sold online and delivered through the internet. 

Examples include:

• E-books
• Online courses
• Software
• Digital art or templates
• Music or audio files
• Online Coaching
• E-commerce
• Any business that sells online

Many people use a U.S. LLC to sell these types of products. And sometimes, they sell them to another business that is also owned by someone outside the U.S.

Do You Owe U.S. Taxes If You Sell Digital Products?

In most cases, no. If you are a non-U.S. resident, and your LLC sells digital products to another non-U.S. resident’s LLC, you usually do not owe U.S. taxes.

Here’s why:

1. You Are Not Living or Working in the U.S.

If you do not live or work in the United States, you are not considered a U.S. taxpayer. The IRS (Internal Revenue Service) only taxes people and businesses that have a connection to the U.S.

2. You Have No Office or Employees in the U.S.

If your LLC does not have an office, employees, or warehouses in the U.S., the government considers your business to be run from outside the country.

3. Your Products Are Delivered Remotely

If your digital products are created, sold, and delivered over the internet without anyone working in the U.S., then your business does not count as a “U.S. Trade or Business.”

What Is a “U.S. Trade or Business”?

A U.S. Trade or Business (USTB) means your business is active in the U.S. in a real way. Examples include:

• Hiring employees who work in the U.S.
• Having an office or store in the U.S.
• Shipping products from a U.S. warehouse
• Performing services inside the U.S.

If your LLC does none of these, then it is not a U.S. trade or business. This means your income is not “effectively connected” to the U.S., and so the U.S. government doesn’t tax it.

What Is “Effectively Connected Income” (ECI)?

Effectively Connected Income, or ECI, is money your business makes that is connected to work done in the U.S. This income is taxed by the IRS.

Examples of ECI include:

• A website developer who builds sites while living in the U.S.
• A speaker who gives paid talks inside the U.S.
• A warehouse that ships products from U.S. soil

But if you are not doing any work in the U.S., then your income is not ECI.

6 U.S. Taxes You Do NOT Owe

If you follow the rules and stay out of the U.S., here are six types of U.S. taxes you don’t have to pay:

1. Federal Income Tax

You don’t owe this if your LLC has **no U.S. trade or business** and no **ECI**.

2. State Income Tax

No state tax is owed unless your LLC has a physical presence (like an office or workers) in that state.

3. Sales Tax

Most states do not charge sales tax on digital B2B transactions, especially when there’s no connection to the U.S..

4. Self-Employment Tax

You do not have to pay this if you are a non-U.S. resident and do not work in the U.S.

5. Franchise Tax

Some states like Wyoming or New Mexico have no franchise tax. If your LLC is set up there, you don’t owe this tax.

6. Withholding Tax

As long as you are not paid by a U.S. company, and your income is not ECI, you don’t need to worry about withholding tax.

What Is Form W‑8BEN or W‑8BEN‑E?

If you sell digital products to U.S. customers through a platform like Amazon, Shopify, Gumroad, or PayPal, they are required to withhold 30% of your earnings—unless you file a special form.

That form is called:

W‑8BEN – for individuals (sole owners)

W‑8BEN‑E – for businesses and LLCs

These forms confirm your foreign status and let you claim a tax treaty benefit that usually reduces the withholding from 30% to 0%. The form expires every three years, or sooner if your business details change.

How the W‑8BEN Form Helps You

By filing this form:

• You prove you’re not a U.S. resident
• You claim 0% withholding if your country has a tax treaty with the U.S.
• You avoid unnecessary taxes being taken out of your digital product income

What Happens If You Don’t File W‑8BEN?

If you don’t file this form:

• Platforms will withhold 30% of all U.S.-sourced payments
• Even if you don’t owe that tax, the money will be held unless you fix it

That’s why filing the W‑8BEN or W‑8BEN‑E is so important for anyone selling digital products to U.S. customers.

Does Selling to Another Foreign-Owned LLC Change Anything?

Let’s say your U.S. LLC sells an online course to another U.S. LLC, but both LLCs are owned by people outside the U.S. Does that mean you now owe taxes?

Still no—as long as both companies meet these conditions:

• The owners are non-U.S. residents
• No work is done inside the U.S.
• There are no U.S. employees or offices
• The product is delivered digitally

Even though both LLCs are registered in the U.S., there is still no U.S.-connected income. This is called foreign-sourced income and it’s not taxed under U.S. law.

 What about a U.S. Bank Account?

Some people think that having a U.S. bank account or Stripe account means they will owe taxes. But this is not true.

A U.S. bank account does not count  as a “U.S. trade or business.” It is just a place to hold your money. As long as you follow the rules and stay outside the U.S., you are safe.

Summary: No U.S. Taxes If You Stay Outside the States

Let’s go over the main points again:

• You can own a U.S. LLC even if you are a non-U.S. resident.
• You can sell digital products like e-books or software to other LLCs.
• If you have no U.S. office, no employees, and no work done in the U.S., then:

• You do not have a U.S. trade or business
• You do not  have effectively connected income
• You do not owe federal or state U.S. taxes

If you are setting up an online business and plan to use a U.S. LLC to sell digital products, knowing the tax rules is key. The U.S. makes it simple for non-residents who stay outside the country to run a tax-free digital business. Just follow the rules, and you can keep more of your profits.

If you’re feeling overwhelmed with information on how to set up an LLC, how to fill out documents correctly and/or how to avoid paying taxes legally, tap on the link below to set up a 15-minute consultation call with Tony Durante’s Team. We will set up your foreign owned business quickly, safely and successfully.
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