If the US source income has tax withheld at the correct amount (default is 30%) then no tax return is required.
The magic is in understanding the metaphysics of the definition of US source. Just because the money comes from a US customer doesn't mean that you have US source income.
If I hire a web developer in Canada and he designs my site whilst sitting in a chair in Vancouver, the income he ears from me is not US source. Weird I know. For services, income is sourced where the human body who did the work is physically located. God what an awful sentence.
Ah, that makes sense, actually. What about someone in Canada, selling a product on a website hosted in the US, with a customer billing address in the US?
My intuition says "not us source" because the production and administration of the product was in Canada.
There are also categories of income which are exempt from witholding, such as royalties. For instance, Canadian authors receive royalty cheques from Amazon with no witholding if they submit a W-8BEN. Is their income "non-US source" because the owner is not resident in the US?
The income tax treaty can reduce US tax on income paid to Canadians down to zero, depending on the type of income. That's what you are seeing with the W-8BEN.
For selling stuff across borders, source of income is where ownership changes hands from seller to buyer. If the buyer owns the item as soon as it goes into a DHL pouch in Canada, then it is Canadian-source income and the US can't tax it.
I guess my question was: is a return required on US source income that has been reduced to zero? e.g. royalty payments, where the receiver is in Canada, and sales of products were made in USA.
Assume the income is from licensing, and the license was granted from a Canadian source.
Thanks for answering all these, I should have been more precise with my earlier questions.
The magic is in understanding the metaphysics of the definition of US source. Just because the money comes from a US customer doesn't mean that you have US source income.
If I hire a web developer in Canada and he designs my site whilst sitting in a chair in Vancouver, the income he ears from me is not US source. Weird I know. For services, income is sourced where the human body who did the work is physically located. God what an awful sentence.