I work as an independent contractor developing software for various organizations in the USA. I usually bill a client an agreed upon amount and provide some specific service in return. For what it's worth, the software I create could be considered a "product", if that is relevant to my question.
I operate my business as an S-Corporation of which I am the sole member. (I hope to take on big enough projects to hire employees in the future!) Payment for services rendered by me is paid directly to my corporation, which in turn, pays a salary to me.
For those of you not familiar with S-Corporations, they are a legal construct in the USA where a person or small group owns a company; the company's profits flow directly to the shareholders; avoiding the "double taxation" that some businesses are subject to.
I would like to know how my company and I will be affected tax-wise in the event that I provide services to and receive payment from a client in a foreign country.
Suppose that at ACME pays me USD 20,000 in return for development of software to monitor a road-runner trap. In the course of providing this service, I travel to ACME HQ at a cost of $1000 and rent an automobile and an apartment for a month at a cost of $2000. Therefore, my total business expenses for this engagement are USD $3000.
If ACME were in California, I would pay taxes on USD 17,000 because I had revenue of 20,000 and expenses of 3,000.
Suppose that ACME is in Britain (or anywhere else for that matter). My revenue and expenses are the same, but now my money has been earned and my expenses incurred in a foreign country.
How will my company and I be taxed? What do I need to bear in mind when I set up the business contract? Does it even make sense to use my S-Corporation to do business in a foreign country?