How U.S. Taxes Affect Your IT Business: SaaS, LLC, IP, and the New 2025 Rules

The U.S. is the largest IT market in the world. But along with revenue comes tax risk. In 2025, the IRS officially adopted new rules for taxing digital activities. It’s a game-changer for everyone — from SaaS founders to freelance developers.

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1. Tax Nature of Income: Not Everything That Looks Like a Service Is a Service
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The tax qualification of your income is key. The IRS now clearly distinguishes:

Transfer of IP (full or partial) — often does not create a U.S. tax liability if rights are permanently transferred.
SaaS — is not a sale, it’s a service. If servers or clients are in the U.S., it’s U.S. source income — and subject to tax.
Custom development — is a service; income is sourced based on the location of the developer.
Licensing, know-how, royalties — taxed based on the place of use of the product.
Selling a copyrighted article (e.g. downloadable software) — tax depends on the billing address of the buyer.

2. SaaS on AWS U.S. Servers = Tax Risk

Even if you're a Ukrainian team with a product hosted on U.S. servers — the IRS considers this doing business in the U.S. This creates:

Reporting obligations;
Double taxation risks;
The need to file W-8 or W-8ECI forms;
Potential payment holds by U.S. payment platforms.

Solution: Move servers to Europe (e.g. AWS Frankfurt) and avoid physical U.S. presence.

3. LLC or C-Corp: Which to Choose?

LLC — a pass-through entity where the owner pays the taxes:
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- Good for early stages or smaller volumes without nexus;
- Easy to manage;
- Not VC-friendly (VCs don’t invest in pass-through structures).
C-Corp — a legal entity that pays taxes separately:
- Ideal for investment;
- Preferred by U.S. funds;
- Allows employee equity programs;
- But: double taxation and complex reporting.

4. State Taxes: The Hidden Risk

Beyond federal taxes, you face state-level taxation:

Sales tax (5%–9.75%) — on transactions;
Gross receipts tax — on revenue (Ohio, Washington, Texas);
Nexus — tax connection can arise from:
- Server or agent in a state;
- Sales volume ($100k–$500k);
- Even client IP addresses.

5. How to Protect IP and Stay Tax-Efficient?

A smart model: keep IP in a favorable jurisdiction (Cyprus, Ireland) and have your U.S. C-Corp license it. This structure helps you:

Minimize corporate income taxes;
Avoid U.S. estate tax (up to 40%);
Stay flexible and investor-friendly.

Conclusion

The U.S. is an attractive but complex market. You can’t “enter” it without a solid tax strategy. Your SaaS, IP, servers — everything matters. Tax optimization isn’t about avoidance — it’s about smart structuring.

Want to go deeper? Watch our webinar “How to Pay Taxes in the USA Correctly” and start building the right business setup now.

How to Pay Taxes in the USA Correctly? AVITAR & iFindTaxPro

How to Pay Taxes in the USA Correctly? AVITAR & iFindTaxPro (Part II)

How to Pay Taxes in the USA Correctly? AVITAR & iFindTaxPro (Part III)

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