- Amazon is the largest e-commerce platform in the world. There are over 2.5-million third-party sellers on Amazon.com, which surged during the pandemic and is going strong. Amazon.com also has over 150-million Prime subscribers, who love their two-day shipping (or faster) and other benefits.
- Every day, sellers from around the world are setting up a new Amazon.com Seller Central account with the hope of expanding their U.S. business. Even with supply chain issues growing competition, with millions of new U.S. consumers since the pandemic has continued to shop on Amazon, it is the marketplace for serious sellers looking to expand quickly.
- Amazon is now enforcing its terms of service (TOS) regarding product liability insurance for sellers by September 30, 2021. Most non-resident sellers will be able to obtain insurance in their home country. If you sell a high-risk product and live outside the U.S., you might not have any options to obtain insurance in your country for selling in the U.S. In that situation, U.S. insurance providers will work with a U.S. LLC, address, and EIN to obtain better U.S. product liability insurance coverage and rates. Amazon sellers have been receiving several 30 days notices for compliance. In total, 90 days was the maximum for compliance, but sellers have been giving longer, likely due to issues with providing non-resident insurance options. The best action plan is not to risk your account and get protected immediately. Likely, you will have better options overtime.
Amazon.com Seller Central Account Requirements:
Let’s first look at what Amazon.com requires before you create your Amazon account, and then we can look at some of the strategic factors to consider when you start a U.S. company for selling on Amazon.
Go to https://sell.amazon.com/ to set up your account. Most sellers will become professional sellers. Professional sellers have a monthly fee of $39.99 per month. If you plan to sell more than 40 units a month, a professional plan makes sense since an individual account charges $0.99/per item fee for each unit that sells (this is not the case with the professional seller account).
You will need the following information to complete your Amazon seller registration:
- Your legal business name, address, and contact information.
- An email address
- Already selling online and need to determine their past sales tax liabilities
- An internationally chargeable credit card with a valid billing address (type carefully and make sure your card is activated; because if the card is not valid, Amazon will cancel your registration.
- A U.S.-based phone number where you may be reached during the registration process. Skype is a great option.
- Complete the tax interview. This is where most mistakes occur. A U.S. taxpayer will complete the W-9 form, and a foreign taxpayer will complete either the W-8BEN (foreign individual) or W-8BEN-E for a foreign entity. Learn more here
- An EIN is NOT required for a non-resident seller; they will complete one of the W-8BEN forms. If a non-resident or U.S. resident seller and you form an entity taxed as a U.S. taxpayer (an LLC taxed as a corporation, for example), Amazon may take up to 60 days to verify your EIN and your account.
Amazon Tax Interview Changes Late 2021
Essential Tips when Activating your Amazon.com account to avoid inactivation or delays.
Everything must match up when you set up your account. An essential item is that the business address on your account matches the address on your bank account. This could be a U.S. or foreign address. They need to match up. Amazon will at random times require additional verification, including for your address.
One of the challenges when doing business in another country is to anticipate three moves ahead to avoid future changes that may create your Amazon account issues. The address is a crucial component to doing business in the U.S.
Although we live in a world where most statements are online and easily accessible, the IRS, banks, trademark offices, and states are old-school, and important notices are still sent by mail.
U.S. Virtual Address Service Strategy
Unleash the power of a U.S. virtual address service that will revolutionize your Amazon business. Our expert team is here to scan every important piece of mail that comes your way, so you never miss a beat. Say goodbye to the fear of missing Amazon address verification notices, trademark applications, or IRS notifications.
Our company is like no other, we know the exact steps to take with each notice, providing you with peace of mind that is priceless to your business. Just imagine being selected for a California sales tax audit, but never even knowing about it. This nightmare scenario is all too real for sellers who use one address in the early stages of their business, only to later change their address and forget to update the necessary agencies.
But with our virtual address service, you’ll never have to worry about that again. Whether you’re selling on Shopify or crossing economic nexus thresholds in multiple states, our service will provide you with a huge benefit. This includes sales tax registrations, and so much more important mail that you simply can’t afford to miss. Trust us to keep your business running smoothly and ahead of the game.
What are Your Goals for Expanding to the Amazon
Whether you are based in the U.S. or outside the U.S., it is important to take a step back and evaluate your U.S. expansion strategy with your business and brand. Your goal may be to expand your brand for acquisition, global brand development, or increase your overall profits.
Your strategy will impact whether you expand to the U.S. by selling through your foreign entity or forming a U.S. entity. There are many steps, components, and, of course, expansion costs involved. Most don’t understand the full picture, but we do.
Which entity may be the best?
Maximize Your U.S. E-Commerce Business and Minimize Surprises with the Right Structure
The world of e-commerce is rapidly evolving, and it’s crucial to stay ahead of the game. Your goal should not be simply forming an LLC and obtaining an EIN. It’s about finding the proper structure to maximize your U.S. e-commerce business and minimize potential tax surprises, including sales tax (when required).
Selling on Amazon, Walmart, Shopify, or any other platform is a complex process, and each platform has unique rules and regulations. It’s important to understand your options before making any decisions.
You may sell on Amazon through a foreign entity, but remember that it’s not always the preferred option. In some cases, forming a U.S. entity is necessary, such as when you need to obtain U.S. liability insurance or use Shopify payments. However, in most cases, a U.S. entity is not required.
Note: A single-member LLC disregarded for U.S. tax purposes will NOT be the legal entity on Amazon. The beneficial owner completes the withholding certificate and is the name on the storefront. Not the LLC.
Before forming an LLC, it’s crucial to understand the different tax implications, especially for non-U.S. residents. The LLC could be taxed as a C-corporation or a partnership, bringing into play the 30% dividend withholding tax or a price transfer study with expenses to a foreign entity.
It’s also important to be aware of the impact of opening a U.S. bank account with a foreign individual as the owner rather than an entity. If you make a mistake on the SS4 application, you may not know about it until you’re audited years later.
Low-cost providers may not be equipped to handle the constantly changing landscape of e-commerce and sales tax, which is where we can help. Our CEO is available for paid strategy calls to help you navigate these complexities and find the best solutions for your unique situation.
Don’t leave your U.S. e-commerce business to chance – take control and make informed decisions that will lead to success and long-term growth.
Here are two areas to gain clarity on with your U.S. expansion and entity formation:
Ready to cash in on your Amazon brand’s success? It’s time to join the trend and expand your brand to reach its maximum value in just 2-4 years. With the help of specialized aggregators, you can sell your Amazon brand for the big payday you’ve been working towards.
Large firms in the acquisition space are eager to evaluate your business and profits, determining the best multiple for a successful sale. But be warned, due diligence is crucial when selling your e-commerce brand, and one key area that will be scrutinized is your sales tax compliance.
Don’t let sales tax compliance hold you back from realizing the full potential of your e-commerce brand. While Amazon handles sales tax for you, selling through your website or Shopify store adds an extra layer of complexity with the ever-changing economic nexus thresholds. Navigating the nuances of how some states combine marketplace and non-marketplace sales to determine these thresholds can be a daunting task.
That’s where we come in. We’re here to help you navigate the complex world of sales tax compliance and registrations. Don’t let the confusion and stress of this critical aspect hold you back from maximizing the value of your brand. With our expert support, you can rest assured that your business will be fully compliant, freeing you up to focus on what really matters – growing your brand and securing your financial future.
- Did you create a U.S. taxpayer?
- Did you create a permanent establishment?
- Is there a U.S. tax treaty with your home country?
- Do you want to retain profits in the U.S.?
- Which U.S. tax returns are required on the ownership of your U.S. entity?
- What state tax requirements will come into play?
- Which states require sales tax compliance even with marketplace nexus?
- What is the start date on your SS4 application with the IRS if you have already been selling in the U.S.?
- What are the taxation of dividends in your country?
- Do you need an EIN for the ownership entity?
- Will form 8832 also need to be filed?
- Will you violate tranfer-pricing rules?
- U.S. residents is an LLC taxed as an S corporation the best option?
Our team works with several CPAs and tax attorneys to help ensure you comply as you expand to the U.S. If you decide to create a U.S. taxpayer, we recommend that your accountant from your country is on the same page with the flow of profits and taxation responsibilities. U.S. residents will find that operating as a sole proprietorship will impact your personal credit and brand and is not the best way to operate, even if you are not profitable your first year.
Entity Options
LLC formation. A limited liability company became available in the U.S. in 1977, in Wyoming. In 1997, the IRS established default rules for how LLCs would be taxed. Two members would be, by default, taxed as a partnership. By default, a single-member is disregarded, and the profits or loss will flow to the owners, but Amazon won’t allow you to change the legal entity with this entity. You must create a U.S. taxpayer.
The operating agreement must match the LLC members and taxation type when you form an LLC. For example, if you have an LLC taxed as a C corporation, an LLC taxed as a partnership is disregarded; those are two separate operating agreements.
U.S. Banking
Expanding to the U.S. has never been easier with Amazon’s flexible payment options. But why settle for high fees when you can keep more of your profits? We recommend setting up a Payoneer or Wise account to effortlessly transfer your earnings from Amazon to your home country. You’ll save big on Amazon’s fees.
But wait, there’s more. If you’re selling on your website or Shopify in addition to Amazon, sales tax compliance becomes a crucial factor to consider. A fully functioning U.S. bank account with ACH capabilities is recommended for seamless integration with sales tax software companies. But what if you’re a non-resident company without a U.S. presence? No problem. We work with a trusted provider that offers wire transfer options for sales tax compliance without the need for a U.S. company.
Importing Goods to an Amazon Fulfillment Center
Many Amazon sellers manufacture their goods abroad. China is the most popular. Once your products are manufactured and everything is approved for shipping, you will want to work with an experienced freight forwarder and customs broker to get your products to the U.S. and cleared through U.S. Customs, then arrange transport to an Amazon fulfillment center.
Amazon Brand Registry
When you set up your Amazon account, you will have your brand name and sold-by name. Your seller name is easy to change on your Amazon account. The brand name leads to the brand store page and is linked to registered and trademarked brands. The brand name does not match your entity name. We do recommend your entity file a DBA with your registered brand name. You will want to go through a comprehensive trademark registration process. Most trademark services only check the federal trademark database but do not conduct a nationwide search.
After your brand name is trademarked, you will be able to use your pending mark to get a full brand registry in about seven business days. Amazon brand register unlocks a suite of tools designed to help you build and protect your brand, creating a better customer experience. Any listing that includes your company’s brand can get immediate updates for your team.
Many trademark services will only check to see if your name is available by checking your name at the USPTO. Here is the challenge with that process.
The USPTO examining attorneys ONLY search their database of Federal trademarks. That’s about 2 million marks. That is just 12% of reality, which MAY affect legal use. They do NOT research State trademarks (1 million marks) or common law marks (13 million) with 1st use rights under common law. Additionally, the USPTO rejects 39% of all filings because of other mistakes, not just the likelihood of confusion refusals. So, yes, the USPTO does A search, but not ALL the research needed to determine if your given name, slogan, or logo is, in fact, legally exact. This is why the USPTO publishes marks for the opposition, and why they allow people/companies a chance to cancel a mark up to 6 years later. This is why they recommend a true I.P. comprehensive search BEFORE filing, before use anywhere – because others MAY have prior rights in SOUND, APPEARANCE, or MEANING. In the end, there is more to a trademark registration than only filing with the USPTO; similarly, there is more to filing an LLC than filing the articles with the secretary of state.
Exemption Certificates
Most online sellers on Amazon needs a resale certificate until he entirely manufactures their items by themselves. Such a certificate is also called a seller’s permit and gives you a chance to buy products without paying any taxes. This is most common with dropshipping. There are situations where the supplier will request an exemption certificate from the seller. Typically, this is when the supplier has nexus in your customer’s state.
In most states, you can use your certificate to make tax-free purchases for further reselling, while you have a valid certificate from any state.
But in California, Florida, Alabama, Illinois, Maryland, Hawaii, Louisiana, Massachusetts, and Washington (including Washington D.C.), you won’t be able to use an out-of-state resale certificate.
