San Diego International Law Journal

Document Type



This Article will begin by discussing the circumstances under which a foreign person will be deemed to be engaged in a trade or business in the United States and by examining a proposal that would introduce a great level of certainty for tax planners and the IRS. The principal focus of the Article, however, will be on the circumstances under which the United States should impose U.S. income tax on the income of a foreign person from a business conducted, not directly in the United States, but through an agent acting on behalf of the foreign person. The treatment of agents as permanent establishments under international double taxation treaties has attracted considerable attention from commentators in recent years. This Article had a broader focus. It will first examine the standards to be applied under the Code when determining whether a foreign person is engaged in a trade or business within the United States as a result of the U.S. activities or facilities of an agent. Second, this Article will consider the distinction between an independent agent acting in the ordinary course of its business and other agents under both the Code and U.S. tax treaties, and the application of this distinction to business activities conducted in the United States by an agent on behalf of a foreign principal. Finally, it will suggest how the Code or regulations could be revised to reduce the uncertainties that currently inhere in these issues.