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Taxes For Foreign Sellers On Amazon

If you’re selling on Amazon and are based in the United States, chances are you’ve heard of tax laws. What most sellers don’t know, though, is that there’s tax information for foreign sellers too.

In this blog, we’ll cover everything you need to know about taxes for foreign sellers on Amazon – from how to register as a seller and what an Individual Taxpayer Identification Number (ITIN) is, to the tax implications of international sales.

Taxes For Foreign Sellers On Amazon

If you’re a foreign seller on amazon.com, you may need to pay income tax, sales tax, and payroll tax. These taxes are charged by the governments of the states in which you operate your business.

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Income tax is charged by the federal government on income earned by individuals and corporations in the U.S. This tax is called the income tax. The tax rate for this income varies from 0% to 34%, depending on income level.

Sales tax is a tax levied by states on retail sales of goods and services. It is usually collected at the point of sale as part of the cost of the goods or services being purchased.

Payroll tax is a tax that employers levy on employees for each salary or wage an employee receives for work done in their establishment.

Non-resident foreign sellers will need to provide Form W-8BEN to amazon to be exempt from U.S. tax reporting requirements. US-based Amazon sellers will need to file taxes, even if they fall below the threshold required for an amazon 1099-K form. This form is used by sellers who have $10,000 or more in sales annually with amazon.

If you’re a foreign amazon seller, it’s important to familiarize yourself with all applicable tax laws and regulations in order to avoid any potential issues with amazon or any other federal, state, or local government agencies.

Federal Tax Treaties

U.S. tax treaties are agreements between the U.S. and other countries to ensure fair tax practices.

A tax treaty can provide a tax credit in the U.S. or home country for income taxes paid to the foreign country.

Non-U.S. citizens must check the stipulations of their tax treaty with their particular country of residence before assuming that U.S. income taxes will be reduced on sales made through Amazon.

Non-U.S. citizens must consider the tax treaties and other international tax laws of their countries when making sales through Amazon on foreign soil, as they may affect their tax liability on Amazon sales abroad.

Steps To Pay Amazon Taxes In the US For Foreign Sellers

All foreign sellers on Amazon must pay taxes in the US.

Depending on the business entity, foreign sellers may need to pay

  • State and federal income taxes.
  • State sales and use taxes.
  • State and federal payroll taxes.

1.

Registration Requirements For Amazon Seller Tax ID

2.

Amazon Seller Tax Information Interview

3.

Federal Income Taxes

4.

State Income Taxes

5.

State Sales Tax For Foreign Sellers On Amazon

6.

Paying State Use Tax On International Purchases

1. Registration Requirements For Amazon Seller Tax ID

As a seller on Amazon, you must obtain an EIN or SSN if you wish to register your business with the IRS. An EIN is a tax identification number issued by the IRS for tax purposes. It is similar to a social security number and is used to track income tax liabilities for businesses.

To get an EIN, you need an SSN, ITIN, or a registered agent representing a foreign business. You must register your business to a U.S. address even if you are not a resident.

During the Amazon seller tax information interview, you need the tax rate of your home country’s tax treaty with the IRS. As a seller on Amazon, you must comply with all applicable tax laws and regulations.

What is an Individual Taxpayer Identification Number (ITIN)?

ITINs are tax identification numbers issued to non-US citizens who must file a US tax return but are ineligible for an SSN. ITINs are obtained by completing Form W-7 and usually takes approximately 7 weeks to finalize the paperwork.

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ITINs are usually valid for one tax year, which means it is important to apply before the current tax filing season ends. However, applying for an ITIN before getting an EIN can be challenging, so it’s best to apply for both at the same time. 

EINs are similar to social security numbers for individuals but are used for businesses instead. They allow companies to open bank accounts, register with government agencies, and so on. So it is always recommended to have both an EIN and ITIN in case you or your company needs them.

What Is An Employer Identification Number (EIN)?

An EIN is a unique nine-digit number issued by the IRS to businesses for identification and tax purposes. EINs are similar to Social Security Numbers for individuals, and non-US citizens must fill out Form SS-4 to obtain one. 

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To start using EINs, businesses must first apply for an ITIN (Individual Taxpayer Identification Number) from the IRS. It is important to get an ITIN before getting an EIN, as it allows businesses to register for tax services and pay taxes without having to submit an application for an EIN. 

Once a business has its ITIN, it can apply for an EIN from the IRS. This number will be required for many business activities, including importing and selling products through customs, hiring workers, applying for sales tax permits, and opening bank accounts.

2. Amazon Seller Tax Information Interview

Foreign sellers on Amazon must complete a tax interview to open an account.

Foreign sellers must submit an IRS Form W-8BEN to be approved. This form is used to provide tax information for tax purposes and should be completed by any foreign seller who opens an account with Amazon.

US sellers must complete an IRS Form 1099-K to report sales income from sales of goods on Amazon.

For tax purposes, it is vital that foreign sellers file tax returns and provide accurate and consistent financial and tax information.

US sellers may also be required to submit an IRS form 1099-MISC to report other income such as commissions or other income received for sales made on Amazon.

Tax IDs such as an Employer Identification Number (EIN) or Social Security Number (SSN) may be required for US-based sellers. They must submit these documents when first opening the account and every time they make sales on Amazon.

What is a W-8BEN?

Amazon sellers may request a W-8BEN form to claim treaty benefits, which can exempt them from 30% tax withholding.

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The W-8BEN form is used for foreign individual sellers to simplify the U.S. 

federal income tax perspective. Foreign entity sellers may use the W-8BEN form to simplify the U.S. federal tax perspective. 

By completing the W8-BEN form and successfully passing the tax onboarding questionnaire, foreign sellers can avoid receiving a 1099-K form in their account statements. This can save time and effort while ensuring they remain compliant with tax regulations.

What is a W-9?

A W-9 form is a tax form for US citizens to certify that they are liable for income tax reporting when selling on Amazon.

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It is required to fill out a W-9, which is required to set up an account and successfully complete sales on the site. 

An EIN (Employer Identification Number) is also required to fill out a W-9 when setting up an account and successfully completing sales on the site. 

Foreign sellers who complete the W8 tax form series do not receive 1099-K at year-end detailing their income from sales on Amazon. Instead, this information is reported directly to the Internal Revenue Service (IRS). This can save time and energy in accounting for one’s income.

3. Federal Income Taxes

Foreign sellers on Amazon are liable for U.S. income tax, including federal income taxes. Non-U.S. taxpayers must provide Form W-8BEN to Amazon in order to be exempt from U.S. tax reporting requirements.

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Tax treaties may affect the need to pay federal income taxes on earnings from an Amazon business. Before filing your tax return, it’s important to review the tax treaties you’ve signed with foreign countries and consider any additional tax benefits that may apply.

To determine if you qualify for treaty benefits as a foreign seller, it is important to review several factors, such as whether or not you’re Selling through a foreign corporation or other entity and the amount of sales income you earn from your business on amazon.com

4. State Income Taxes

US-based Amazon sellers will need to file taxes, even if below the threshold for an instant 1099-K.

Depending on the business entity you’ve chosen, you may need to pay state and federal income taxes, sales and use taxes, and state and federal payroll taxes.

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Tax treaties may also affect if you will need to pay income tax on earnings from Amazon. Non-US taxpayers will need to provide Form W-8BEN to Amazon in order to be exempt from US tax reporting requirements.

If you are a non-US taxpayer with a taxable income of over $350,000, you should consult a tax advisor for more information about your tax obligations.

If you earn income from Amazon sales and have any questions regarding tax reporting requirements, it’s important to speak with a tax professional.

5. State Sales Tax For Foreign Sellers On Amazon

Foreign sellers on Amazon may need to pay state and federal income taxes, state sales and use taxes, and state payroll taxes.

Sellers are responsible for collecting Japanese consumption tax in their country of origin, which can add 8% to the sale price. Sellers may also need to apply for a foreign qualification in every state where its conducting business and where their products are being sold in order to collect and remit state sales tax.

To learn more about sales tax for foreign sellers on Amazon, read our blog Taxing foreign sales on e-commerce sites: State tax issues for sellers here.

6. Paying State Use Tax On International Purchases

In general, use tax applies to the sale of tangible personal property made outside of the United States and brought into, or shipped into California for storage, use, or other consumption.

It is a tax paid by the purchaser and is calculated based on sales tax rates.

Use tax is a transactional tax that requires a sales tax permit.

If a seller does not have a physical presence in the U.S. nor makes sales into the U.S., then they are not required to collect sales tax.

However, if a seller has an established physical presence in the U.S., they should consider collecting sales tax on their international purchases regardless of whether they have a formalized business relationship with the state where the purchase was made.

Conclusion

It is essential to pay state sales tax on Amazon sales. In addition, if you are selling on other e-commerce platforms, it is vital to understand how state use tax laws apply to your sales.

Additionally, you must collect the appropriate sales tax for foreign sellers. To avoid unnecessary tax headaches, it’s important that you register with the appropriate tax authorities and comply with the laws of each state where you do business. This way, you can avoid tax complications and stay within the law.

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