Effectively connected income is income connected with the conduct of a US trade or business, which the US can tax at graduated rates for a non-resident. Whether income is effectively connected depends on facts such as having a US office, US employees, a dependent agent acting for you, or inventory located in the United States.
Why does Effectively connected income matter for founders?
ECI is the difference between owing US income tax and owing none. A non-resident performing services entirely from abroad frequently has no ECI. Placing inventory in a US warehouse - including through fulfilment programmes - can change that analysis, which is why ecommerce sellers cannot rely on remote-services reasoning.
Where can I read more about Effectively connected income?
Note: A plain-English definition for orientation, not legal or tax advice. Rules change - last checked 2026-07-21.