What taxes does an import or export business owe?

An import or export business pays federal income tax on profit like any other company. Customs duty is a separate charge collected by US Customs and Border Protection, not the IRS. Duty and freight generally become part of the cost of the goods rather than an immediate deduction, and a foreign-owned US entity has additional information filings.

Key points

Customs duty is collected by US Customs and Border Protection on goods entering the country and is a separate system from federal income tax, which the IRS administers.
Duty, inbound freight, broker fees, and transit insurance generally become part of inventory cost under section 471 and reach the return through cost of goods sold when the goods are sold.
A large purchase of imported stock at the year end generally does not reduce that year's profit, because the cost stays in inventory until the goods are sold.
A US corporation that is at least 25 percent foreign-owned, including a foreign-owned US LLC treated as a corporation for this purpose, files Form 5472 to report information required under sections 6038A and 6038C when it has reportable transactions with a related party.
Formation documents, ownership agreements, and immigration questions for an international business are legal work handled by an attorney, not by a CPA.

Is customs duty an IRS tax?

No. Customs duty is charged on goods entering the country and is administered by US Customs and Border Protection, which classifies the merchandise, determines its value and country of origin, and collects the duty at entry. Federal income tax is a separate system, charged on profit and administered by the IRS. A dispute over tariff classification or customs valuation is resolved inside the customs system and has nothing to do with a tax return.

The two systems do not offset each other. Duty paid is not a credit against income tax, and paying income tax does not reduce duty. What duty does affect is the cost of the goods, which is where it enters the tax computation. A US business exporting goods generally meets duty in the destination country's system rather than its own, which makes it a pricing and contract question for the exporter rather than a US filing question.

Why does paying duty not reduce this year's profit?

Duty, inbound freight, customs broker fees, and insurance in transit are costs of acquiring goods and getting them into saleable condition. They therefore generally attach to the goods themselves rather than being deducted when the invoice is paid. Section 471 governs how inventories are computed, and Publication 538 covers the accounting periods and methods that carry the computation forward. The cost comes out through cost of goods sold in the year the goods are sold.

The consequence catches importers regularly. Buying a large shipment in December, paying the duty and the freight, and expecting a deduction produces the opposite result: the cash has left, the goods are still in inventory or on the water, and profit for the year is unchanged. A business can therefore owe tax on income that is entirely tied up in stock. The way to manage that is a forecast that treats inventory purchases as a cash-flow decision, not a year-end tax move.

When does an importer file Form 5472?

Corporations file Form 5472 to provide the information required under sections 6038A and 6038C when reportable transactions occur with a related party. For an import or export business the relevance is immediate: purchases from a supplier under common ownership, sales to a related distributor abroad, loans between the US entity and its owner, and payments for services between them are the kinds of transactions the form exists to capture.

Two points matter in practice. First, the trigger is foreign ownership of the US entity, not size or how international the supply chain is: a small family company is squarely inside the rule when a foreign person holds at least a quarter of it and it transacts with a related party, and outside the rule entirely when it has no such foreign shareholder, however much it imports. Second, it is an information return rather than a tax computation, which is exactly why it gets overlooked: nothing on it produces a payment, so it does not announce itself the way a balance due does. Owners of foreign-owned US entities should confirm the filing with a CPA in the first year rather than discovering it later.

What else does an import or export business have to plan for?

State tax does not disappear because the goods came from abroad. Sales and use tax can apply to imported items the business uses rather than resells, and holding inventory in a state, including at a third-party warehouse, can create a state filing obligation that has nothing to do with where the company was formed.

The structure questions run alongside. How the entity is organised decides whether profit is taxed on a personal return or a corporate one, and a foreign owner may have US filing obligations in their own name. Treaty and residency questions turn on specific facts and are worked through case by case rather than from a general rule. The documents that create the structure — formation papers, ownership and shareholder agreements, supply contracts, and anything bearing on immigration status — are legal work that an attorney handles. The returns, elections, and information filings that follow from the structure are the accounting side, and the two need to be planned together rather than in sequence.