Expanding to Walmart is a popular trend for non-resident sellers who have shown success on Amazon.com.
There are many steps involved in correctly forming a U.S. LLC for your e-commerce business (when required), and one of the key areas is to avoid issues with both the marketplace and the IRS.
We have seen sellers reach out to us and share what others have told them to do when forming a U.S. single-member LLC and this will (when caught) create a major issue for either your account or with the IRS.
Here are the Walmart W-9 Mistakes and what sellers need to know.
If you are a non-resident looking to form a U.S. LLC to sell on Walmart, you will need to fill out the W-9, which will create a U.S. taxpayer. A U.S. taxpayer is an entity such as an LLC taxed as a corporation or a partnership that will file a separate U.S. tax return and pay U.S. taxes. A tax treaty will, in most cases, offset the partnership taxes (distributions) to some level with your country.
Of course, creating a U.S. taxpayer gets more complex, so what is being taught by “agencies” and on Youtube is form a single-member LLC disregarded and fill out the W-9.
This next part is incorrect, but what is being recommended:
On line 3, check the box Individual/sole proprietor or single-member LLC (this part is technically correct), BUT…
Part II, under Certification, has a few statements, and one says 3. I am a U.S. citizen or other U.S. person (defined below);
As a non-resident, you are NOT a U.S. citizen. What are the definitions of a U.S. taxpayer?
Definition of a U.S. person.
For federal tax purposes, you are considered a U.S. person if you are:
- An individual who is a U.S. citizen or U.S. resident alien;
- A partnership, corporation, company, or association created or organized in the United States or under the laws of the United States;
- An estate (other than a foreign estate); or
- A domestic trust (as defined in Regulations section 301.7701-7)
- The most common option is a U.S. corporation or partnership. That can be an LLC taxed as a corporation or partnership.
A single-member LLC disregarded owned by a foreign entity, or a non-resident individual is NOT a U.S. taxpayer.
In conclusion, you committed perjury if you completed the W-9 as a non-resident in this manor for either Walmart or Amazon. And they both are aware of it. The W-8BEN or W-8BEN-E was the proper form with a U.S. single-member LLC disregarded owned by a foreign individual or foreign entity.
This is one of the top Walmart W-9 mistakes to avoid for non-resident sellers. You need to connect the dots when you sell on a U.S. marketplace, even as a non-resident seller, whether you need U.S. insurance for Amazon, sales tax registrations for Shopify, or you are attempted to get approved by Walmart, make sure you work with someone that understands all the key points.