U.S. Tax Complexities Affecting Foreign Sellers Using Amazon.com FBA
There are two important factors to consider if you are a foreign seller looking to use Amazon.com via FBA.
- U.S. Federal Tax Responsibilities
- U.S. Sales Tax Responsibilities
There is a lot of confusion around both subjects. Many sellers are from a country where the U.S. has a tax treaty with their country (see https://www.irs.gov/businesses/international-businesses/united-states-income-tax-treaties-a-to-z). Many sellers who sell on Amazon.com FBA, where your products are physically in the U.S. vs. selling on Amazon.com and shipping products from outside the U.S., believe that since there is a tax treaty with their home country, there are NO U.S. federal tax reporting requirements and therefore NO U.S. sales tax due. Both are incorrect, especially the sales tax part. Unlike VAT, sales tax is handled at the state level, which is handled at the federal or country level. There is NO tax treaty with the states, and therefore selling via Amazon FBA requires the collection and remitting of sales tax. This is where SalesTaxSystem.com comes into play to help you with the entire process to obtain sales tax permits and remit sales tax with our partners (with a lot of critical steps in between).
There seems to be a lot of confusion on both subjects due to tax treaties between the US and various countries. Many sellers who use Amazon FBA to ship products directly from a US location to their clients believe they are exempt from tax requirements due to existing treaties between their home country and the U.S. This is incorrect. Each seller’s situation needs to be analyzed to determine whether the activities are taxable at the federal and/or state level. Even if not taxable, it may be advisable to make certain disclosures. Foreign sellers are still held to U.S. federal tax reporting requirements and state sales tax requirements. It is important to note that sales tax is handled at a state level, not a federal level, and tax treaties are made at a federal, nation to nation level. This means state sales tax laws are not part of the treaties. Therefore sellers using Amazon FBA are still required to collect and remit sales tax where their business has nexus.
Sounds complicated, right?! Luckily, this is where SalesTaxSystem.com comes into play. We can help you understand the process and assist with permit applications and direct you to a partner remitting service.
As a foreign seller, you are completing either a W-8BEN (foreign individual) or W-8BEN-E (foreign company) when you register for your Amazon Seller Central Account. This protects Amazon as the agent who is sending you money earned as a seller in the U.S. market. These forms are not provided to the IRS but are available if Amazon is audited.
Above and beyond US domestic tax law, several factors must be reviewed to determine if you qualify for treaty benefits as a foreign seller engaged in a U.S. trade or business (even if your country is listed on the IRS web site for treaty benefits).
Sales Tax System is hosting a critical webinar (which will be recorded for Sales Tax System Members) to cover these important issues.
It would be a nightmare to find out in 3-4 years that the IRS expected to receive a 1120F and 8833, and you are now involved in an audit.
Below are the subjects that will be covered on our webinar on March 16th by special guest, U.S. tax attorney Marc Schwartz:
Internal Revenue Code Factors
- What is engaged in a U.S. trade or business? Hint: it is NOT what you have been reading online
- What is E.C.I (Effectively Connected Income), and why should you care?
Tax Treaty Factors
- Do you qualify for tax treaty benefits?
- Permanent Establishment (PE). What is it, and how is it different from engaging in a trade or business- this will clear up a lot of confusion).
- What is a Protective Tax Return?
- What is a Treaty-Based Position?
- IRS’s Aggressiveness Towards Non-U.S. Persons: learn about the consequences if you are Audited and have not Filed (Tax on Gross Income).
- Foreign Sellers with a U.S. Entity
- LIVE Q & A on your most important questions
Our Guest Presenter
Marc Schwartz– U.S. Tax Attorney & Founding Partner with SCHWARTZ INTERNATIONAL
As a founding partner at Schwartz International, Marc teams with various U.S. and foreign business clients, providing strategic tax and financial solutions to help his clients achieve their goals.
Marc has lived and worked in the U.S. and abroad in both governmental and private sector roles. His diversified experience enables him to bring a practical global perspective to the individuals and businesses he serves. He began his career at a Big 6 accounting firm in Atlanta, Georgia, where he built a strong foundation in federal, state/local, and international tax. He then transferred to one of the firm’s non-U.S. offices in Latin America, where he continued to serve European, Asian, Latin American, and U.S. clients.
Marc earned his B.A. from Colgate University, a Master of International Affairs from Columbia University, and a Law Degree from Emory University. He is fluent in Spanish.
*When you join Sales Tax System, you will have unlimited access to the recording of this powerful webinar for our international Amazon.com FBA sellers!