All domestic vendors are required to provide a valid Form W-9 in order to do business with us. The W-9 is required regardless of whether or not the payment to the vendor is considered reportable on a Form 1099. The W-9 states the vendor's organization type, primary business address, U.S. taxpayer ID number and the full correct name that corresponds to the taxpayer identification number. The submitted Form W-9 must be signed by the vendor or a duly authorized representative of the vendor.
A: Foreign Vendors, (non-U.S. individuals, non-U.S. businesses or non-U.S. organizations):
The U.S. Internal Revenue Code and Treasury regulations provide that a payment of U.S. source income to foreign vendors may be subject to 30% non-resident alien (NRA) tax withholding. In certain circumstances, a reduced rate, or exemption from the withholding tax may be allowed (for example, when an amount is exempt under a provision of tax treaty between the foreign vendor's country of residence and the U.S.).
All foreign vendors are required to provide a valid withholding tax certificate (one of the Forms W-8) in order to do business with us. A W-8 is required regardless of whether or not the payment to the vendor is U.S. source income, subject to the withholding tax, or reportable on a Form 1042-S. the withholding tax certificate form is used to document the foreign status of the vendor, as well as, in certain circumstances, the exemption from, or allowance of a reduced rate of tax to be withheld from a payment.
Q: What payments will be subject to non-resident withholding taxes?
A: In general, in order for a payment to be subject to non-resident alien tax withholding, it must be considered a payment U.S. sourced income. Some of the more common expenses paid by U.S. withholding agents which would result in the payment of U.S. source income to vendors and other service providers are interest, royalties, compensation for personal services, rents, pensions or annuities and gains from the sale or exchange of the patents, copyrights and similar intangibles. Payments for the purchase of goods (raw materials or inventory items) generally will not be subject to the withholding tax, however, a valid withholding tax certificate (one of the Forms W-8) must still be submitted to document the foreign status of the vendor.
Q: What is U.S. sourced income?
A: For income paid to a foreign person to be subject to non-resident tax reporting and withholding, the payment must be U.S. sourced. Following are some basic rules for sourcing of certain types of payments by withholding agents and multi-nationals:
1- Interest - If the debtor is a U.S. resident, the interest is generally US sourced.
2- Royalties - If the subject property is used in the U.S., the royalty payment is US sourced. Payments made in connection with the sale of a certain intangible assets, including copyrights and patents, are generally sourced similar to royalties when the payments are contingent on the productivity, use or a disposition of the intangible.
3-Rents - If the rental property is located in the U.S., the rental payment is U.S. sourced.
4- Personal Services - If the services are performed in the U.S., the payment for those services is generally U.S. sourced.
The Internal Revenue Code sourcing rules are contained in Sections 861 through 865. Income tax treaties can sometimes modify these rules.
Q: What happens to the withholding certificate once I submit it? Does is get sent to the IRS?
Submitted certificates are stored in our internal files and provide us with the ability to apply the correct U.S. taxes due. Further, the collection of the certificates provides a record that we met the requirements of U.S. tax law by verifying the foreign status of the vendor. Copies of the withholding certificates are not routinely sent to the IRS, but may be provided during an audit as evidence of our compliance with U.S. tax law.
Q: Do I need to provide a U.S. Taxpayer Identification Number (TIN)?
A U.S. Taxpayer Identification Number (TIN) is an identification number used by the Internal Revenue Service (IRS) in the administration of tax laws. A TIN can be either be a Social Security Number (SSN), an Individual Taxpayer Identification Number (ITIN), or an Employer Identification Number (EIN) and is issued either by the Social Security Administration (SSA) or by the IRS.
A TIN must be included on a withholding certificate if you will be receiving payments subject to the non-resident withholding tax and you claim either of the following to reduce or eliminate the amount of tax withheld from payment:
•Tax treaty benefits (exemption from tax or reduction in tax amount)
•Exemption for effectively connected income
You do not need to provide a TIN if you are solely submitting a certificate to confirm you are either a non-U.S. individual, a non-US business or a non-U.S. organization and:
•The goods, materials or services you supply to Hallmark or one of its companies are produced and delivered entirely from counties outside of the U.S. and U.S. territories
•You are not entitled to claim treaty benefits as your permanent country of residence does not have a treaty agreement with the U.S., or
•When a payment to an individual is considered unexpected
Non-U.S. individuals required to provide an ITIN to claim tax treaty benefits (on Form W-8BEN) or an exemption from tax withholding for effectively connected income, should apply for the ITIN by submitting a Form W-7, Application for IRS Individual Taxpayer Identification Number, to the IRS directly.
Non-U.S. entities and business organizations that are required to have an EIN in order to claim treaty benefits (on Form W-8BEN) or an exemption from tax withholding for effectively connected income should submit Form SS-4, Application for Employer Identification Number, to the IRS directly.
If necessary, please see the IRS website at www.irs.gov for the applicable TIN application forms and instructions.
Q: My company provides services, what must I do?
If it is not known where services are to be performed or the location is not otherwise specified (contractually or described on an invoice requesting payment) the presumption per IRS regulations will be that services are performed in the U.S.
1. Foreign Vendors - Payment for Services Performed in the US: All foreign vendors receiving payments for services performed in the U.S. are required to submit a withholding certificate, Form W-8 (the types include W-8BEN, W-8ECI, W-8EXP, W-8IMY). If the U.S. does not have a current tax treaty with the foreign vendor's country of residence that exempts or reduces the rate of US federal income tax withholding on such payments, or if Form W-8 does not contain a valid US taxpayer identification number and has therefore not been correctly completed before payment is processed, 30% of the total payment to the foreign vendor will be automatically withheld by us. This liability is then sent to the IRS on the vendor's behalf.
A list of existing tax treaties between the U.S. and other countries can be found in IRS Publications which are available online at
www.irs.gov. In order for the withholding certificate to be valid and allow for a reduced rate, or exemption from, tax under a tax treaty, the certificate must contain a US taxpayer identification number - an individual taxpayer identification number (ITIN) or employer identification number (EIN). Instructions and links for obtaining a U.S. taxpayer identification number are available through the submission process or on the IRS website.
2. Foreign Vendors - Payment for Services Performed Outside the U.S.: All foreign vendors receiving payments for services performed outside the U.S. must still complete a withholding certificate. A payment for services performed outside the U.S. does not constitute U.S. sourced income, thus will not be subject to the 30% NRA withholding, no treaty benefits need to be claimed and there is no need for a U.S. taxpayer identification number. However, we request that every foreign vendor fill out valid certificate to confirm that they are a foreign vendor and not subject to U.S. tax reporting and/or backup withholding.
In addition to providing a valid withholding certificate, we request that all invoices requesting payment specify the location outside the U.S. that services were performed. Without the location information on the invoice, payments may be subject to the 30% non-resident tax withholding under the presumption that the services were performed in the U.S..
Q: My company sells Tangible Personal Property (Goods and Materials), what must I do?
All foreign vendors receiving payments for tangible personal property (goods and materials) must still complete a valid withholding certificate (one of the Forms W-8). A payment for goods and materials will not be subject to the 30% non-resident withholding tax, no treaty benefits need to be claimed and there is no need for a US taxpayer identification number. However, we request that every foreign vendor fill out a valid certificate to confirm that they are a foreign vendor and not subject to U.S. tax reporting and/or backup withholding.
Please note, if services are provided in conjunction with tangible personal property, the services should be separately valued and described in any invoice requesting payment. If the services are performed in the US, please see the explanation of the payments for services performed in the U.S. (above) regarding the applicability of the withholding tax and the claiming of tax treaty benefits.
An example of an applicable service associated with the sale of tangible personal property might include a situation whereby you sell us equipment for use in the U.S. and provide your personnel to assist with installation of the equipment at one of our U.S. locations.
Q: I am an artist licensing images or artwork for use on product sold in the U.S., what must I do?
Generally payments, either lump sum or quarterly payments, for the use of intangibles, such as images and/or artwork, on products sold in the US, constitute payments of U.S. source royalties subject to the 30% non-resident withholding tax. All foreign vendors receiving U.S. source royalty payments are required to submit a withholding certificate (one of the Forms W-8). The foreign vendors may be able to claim exemption from the tax or an allowance of a reduced rate of withholding tax if treaty benefits are claimed on the withholding certificate. If the U.S. does not have a current tax treaty with the foreign vendor's country of residence that exempts or reduces the rate of federal income tax withholding on such payments, or if Form W-8 does not contain a valid U.S. taxpayer identification number and has therefore not been correctly completed before payment is processed, 30% of the total payment to the foreign vendor will be automatically withheld by us. The liability is then sent to the IRS on the vendor's behalf.
A list of existing tax treaties between the U.S. and other countries can be found in IRS Publications which are available online at
www.irs.gov. In order for the withholding certificate to be valid and allow for a reduced rate, or exemption from tax under a tax treaty, the certificate must contain a US taxpayer identification - an individual taxpayer identification number (ITIN) or employer identification number (EIN). Instructions and links for obtaining a U.S. taxpayer identification number are available through the submission process or on the IRS website.
Q: Which form should I submit?
A: We appreciate that the process for selecting the correct form for submission is complex, and to try and help guide you through we have created this application. The online e-forms application helps you determine the correct form to submit by comparing the answers you provide to the questions raised, against the type of submission you make. We are not permitted under the IRS regulations to offer tax advice on this choice. BUT, generally:
Form W-9 is used by all U.S. Persons (individuals, business or organizations) to provide the correct taxpayer identification number to the payer and if applicable to certify that you are not subject to U.S. back-up withholding.
Form W-8BEN is normally used by non-U.S. Persons (non-U.S. individuals, non-U.S. businesses and non-U.S. organizations) who are the beneficial owners of any income that is received or becomes payable. The form is used to identify you as a non-US person and may be used to claim treaty benefits if they apply, reducing or eliminating U.S. tax withholding requirements. A Form W-8BEN is not normally used by individuals claiming treaty benefits for Personal Services, for this you would normally submit a Form 8233 available from the IRS web site directly.
Form W-8ECI is normally used by non-U.S. persons (non-U.S. individuals, non-U.S. businesses and non-U.S. organizations) claiming that the income being received is (or is deemed to be) Effectively Connected with the conduct of a trade or business in the U.S. You would normally have a business address in the U.S., which must be entered on the Form, and would normally already file tax returns in the U.S. to report income earned in the U.S..
If you expect to receive both income that IS effectively connected and income that is NOT effectively connected you may need to submit both Forms W-8ECI and either the W-8BEN or potentially Forms W-8IMY or W-8EXP.
Form W-8IMY is normally used by non-U.S. partnerships, intermediaries or other flow-through entities. Payments made to these entities, are treated as made to the underlying owners of the entity. For example if payment is to be made to a partnership that has three partners (each a non-U.S. individual), the partnership must provide a Form W-8IMY indicating it is a partnership AND attached to the W-8IMY must be the appropriate W-8 forms from each of the three partners.
Form W-8EXP is normally used by non-U.S. governments, international organizations and non-U.S. tax exempt organizations (amongst others) and should be submitted whether or not you are claiming a reduced rate of, or exemption from U.S. tax withholding.
Q: I have been waiting for the e-mail confirmation to electronically sign in the website, How long does it take?
A: The signatory verification email is sent out immediately and it should be in your email account very soon. Delay can be caused by a few factors such as your internet connection, email service delay or possibly your spam filter. If you have not received your email token within a few minutes you should first check your spam or junk email folder as it may been automatically captured there. For security reasons the submission token is time dependent and you may need to complete a new submission if you exceed the time limit.
Q: I just filled out a W-8 on paper and I sent it in, do I need to submit it again? Must I do it on your website?
A: If you have recently sent in a paper form you can still use this service and send an electronic form. We provide guidance and help through the submission process and where a paper form could not be validated, the new e-form could supersede the paper form, potentially reducing the need for a follow up call or preventing delay in our vendor set-up and payment process.
Q: We received the email request for a certificate, who should fill it out and sign?
A: The certificate must be signed and dated by the beneficial owner, or if the beneficial owner is not an individual, by an authorized representative or officer of the beneficial owner. If the certificate is completed by an agent acting under a duly authorized power of attorney, the certificate must be accompanied by the power of attorney statement, which can be attached through the process. Please note the submission, whether paper or electronic, is made under penalties of perjury. The agent, as well as the beneficial owner may incur liability for the penalties provided for an erroneous, false or fraudulent form.
Q: Why is this process so complex?
A: The process we have adopted is taken from the IRS guidelines on obtaining Forms W-8 and W-9 electronically; unfortunately determining tax status under U.S. tax laws is very complex. We have tried to design this application to simplify the process, putting the required information in one place. The objective is to provide as much guidance as allowed and take you through the process as swiftly as possible completing the correct certification accurately first time. We are restricted by the regulations and limited to how much advice and guidance we can provide to you. Completing your certification submission through this process, we believe, is the most efficient way to confirm your US tax status, enabling us to apply the correct tax treaty benefits. Please note that this application is not meant as an alternative to obtaining your own tax advice.
Q: Can I send in my certificate by fax or email?
A: Unfortunately we cannot accept faxed or e-mail copies of the IRS Forms W-8BEN, W-8ECI, W-8EXP or W-8IMY. IRS regulations stipulate we must have either the signed original or an electronically signed form for our records.