Listing on Amazon.com - Tax Questions


#1

Hey guys,

Just registered on Amazon.com’s seller program to expand my sales over there.

During the registration process there quite a lot of fairly complicated tax related questions.

I think I answered it all correctly but I just want to check with you guys.

If I’m a UK resident, UK passport and with no affiliation to the USA and am keeping all my stock in the UK and sending it all out myself (no FBA) to buyers in the USA shopping on amazon.com then am i right in thinking I will not have to deal with USA taxes at all?

In other words, do I need to do anything extra or can I just keep sending out my stuff to the potential new American buyers and paying tax to HMRC like usual?

Thanks!


#2

Hey, thanks for your reply.

The reason I asked was mostly to get reassurance from others that I’ve understood the general rules correctly. Because quite a lot of questions were asked (much more than when registering at the UK site) and I don’t know the US system as well I wanted to make sure that I roughly understand it correctly.

If I’m selling online through Amazon to the USA on amazon.com BUT my stock is in the UK at all times and I have no personal connection to the US (USA passport etc) then I’m not expected to be personally paying tax to IRS?

This was just my understanding reading Amazon’s stuff before I registered and during the actual process. I don’t remember any mention of $20,000 or 200 items though? Is there a difference between registering with IRS and actually paying the IRS money.

I’m not trying to avoid them btw, just want to understand my obligations as a UK seller selling to USA customers through amazon.co.uk

Same the other way around really… do USA sellers selling on amazon.co.uk pay tax to HMRC?

I remember reading somewhere that they don’t. Am I wrong?

I have an accountant so I can talk to him (and will) but I figured I might get more accurate (and quick) input from sellers here who have already investigated this.


#3

That might be best to be a question for an accountant.

If your shipping your items from the UK, you will not normally need to register your business with the IRS, but if your business is substantial enough, you should plan for it, as it will be communicated to the IRS by Amazon (1099) if you have more than 200 orders or more than $20K in sales.

There are tax treaties between the UK and the US so that you do not have to pay tax on the same income. Your US income would be added to your UK income and your US taxes paid would be deductible.

You will also need to register your VAT number on Amazon.com to avoid having VAT added to your Amazon.com fees.

It is generally not a good idea to try to avoid the IRS because penalties can be substantial.

If you plan on a successful business (rather than just the occasional sale), it is better to get ahead of it.

Dave


#4

If you are not keeping any stock in the US, there is less risk.

Take a look at this link from your US account:

https://sellercentral.amazon.com/gp/help/help-page.html/ref=au_200663290_cont_scsearch?ie=UTF8&itemID=200663290&language=en_US

You will find more details about the requirements and actions to take.

Regarding paying UK taxes, some do pay UK taxes.

I do pay both income taxes and VAT, but my UK business may be larger than your US business and I use FBA in the UK. However, my UK taxes are used as a deduction due to the tax treaty to avoid double taxation. There can be ways to reduce or avoid taxes. You might have heard of Starbucks with their franchise fees that almost entirely eliminated their UK taxes, which instead are paid in the US. I am not sure how that works.

Dave


#5

Hi,

Thanks for the reply and the link. Very useful.

So it seems that I will likely have to fill in the 1099-K FORM as I expect to easily make 200 sales over the year based on current trajectory.

But with all that information I still don’t get what filling in the form will require me to do.

Is the form simply a form that lets the Inland Revenue know my figures or is it a form that is used to calculate something I OWE them?

Or am I exempt from paying USA taxes as a UK seller keeping stock in the UK and just selling via amazon.com ?

I believe I filled in Form W-8BEN during my registration process… in the the page you linked it says:

"I am a foreign seller and not a U.S. taxpayer. Do I need to provide any information to Amazon?

If you are a non-U.S. taxpayer, the responses you provide to the tax interview wizard questions will create the appropriate tax form on your behalf.

IRS regulations require non-U.S. taxpayers to provide Form W-8BEN to Amazon in order to be exempt from U.S. tax reporting requirements."

And at the beginning of the page it seems to be saying that the $20,000 or 200 sales threshold is for US citizens and that Amazon submits this W-8BEN form at registeration sot hat we don’t have to worry about that as non US sellers. Quote:

"Due to Internal Revenue Service (IRS) regulations, U.S. third-party settlement organizations and payment processors, including Amazon, are required to file Form 1099-K for U.S. taxpayer sellers who meet the following thresholds in a calendar year:

More than $20,000 in unadjusted gross sales, and
More than 200 transactions.
IRS regulations require non-U.S. taxpayers to provide Form W-8BEN to Amazon in order to be exempt from U.S. tax reporting requirements."

Can I get a confirmation from anybody? I understand that if you are storing stock in the country in question it’s a different matter. I’m only asking about the situation where you are keeping all stock and business in the UK but listing on amazon.com


#6

I think you will have to provide details to the US tax authorities on a yearly basis showing what your US sales were and how you accounted for them with HMRC. On your UK tax return the figure you state for US sales will need to be the same as the figure you supply to the US tax authorities and you will need to show what tax you have paid in the UK on your US sales. Hope that helps. HMRC helpline might be the place to ask more complicated questions.


#7

The 1099 is sent to you (and to the IRS) by Amazon. You do not fill it in. It simply has your monthly sales on Amazon.com and the total for the year.

I think getting an official answer will be a challenge.

US tax accountants do not usually understand the obligations of non-US businesses.
UK tax accountants do not usually understand the obligations of non-UK businesses.

Amazon does not want to state any position because they may be among the worst of offenders.

US businesses are supposed to without taxes for income paid to non-US people or businesses:

http://www.irs.gov/Businesses/U.S.-Tax-Withholding-on-Payments-to-Foreign-Persons

http://www.thebusinesscoalition.org/u-s-tax-obligations-u-s-company-open-virtual-office-u-s/

It is my position (not an expert opinion) that selling to customers who place an order on a US website is conducting business in the US. If a US customer comes to Amazon.co.uk, that is business in the UK.

My interpretation is that if you have a meaningful business activity in a country, you should be filing a tax return in that country. I file tax returns in US, UK and Canada.

The proceeds of the foreign business are declared in your home tax return along with the taxes paid in those countries according to the tax treaties.

Dave

Edited by: Boardgames4UsUK on Apr 23, 2015 8:31 PM


#8

Hey, thanks for the reply.

So Boardgames4UsUK you pay taxes in Canada and USA? How much do you pay? Are you paying sales tax in every individual USA state? It sounds so complicated and undoable.

On eBay where I also sell they actively encourage you to expand to their .com site, advertising services that will do it for you automatically without any mention of taxes or registering with IRS etc. Weird.

Etsy.com only has one site that you sign up for. UK customers see prices in GDP but it’s the same admin for all sellers. What would the situation be there you think?

Thanks :slight_smile:


#9

Yes, I do. I pay quite a bit in USA (as I have been selling there for years), not much in UK (as I have only been selling there for far less and have only recently grown to a level with there are taxes to pay - startups operate at a loss for the first couple years) and more in Canada (much less than the US) as I have been selling there for as long as the US). Since Canada is my home country, I rely on the tax treaties to avoid double taxation. Worldwide sales are substantial, so there is no avoiding taxes at this stage.

For UK, I pay VAT for all sales in UK and EU (less than 5% of UK sales).
For Canada, I pay GST/HST (like VAT) and PST in 5 provinces that require it.
For USA, I only pay sales tax in 2 states.

Amazon, eBay and others will not publicly state a position on taxes because they also may not be fully compliant with their tax obligations. My principle is that you pay income taxes for the countries you sell in, but pay close attention to all costs required to earn that income.

The US legislation still has a moratorium on Internet sales tax, so collecting/paying sales tax for each state that has an Amazon warehouse is asking for trouble. Anyone I have heard of registering for sales tax has also been obligated to get a business license (which you do not need if you do not have a “physical presence”), filing use tax (which you would not need to do if you do not maintain an office there), paying state income tax (which you would not need to do if you do not maintain an office there).

I have made the decision to follow the federal legislation as it takes precedent and pay attention to this until it is resolved. It is a bit of a risk, but I have found that being removed from paying state sales tax is much more difficult. Once the legislation has an outcome that will result in more tax coverage, I will check into the electronic tax filing services. I can deal with 10 tax agencies, but when it becomes much more than that, I will need additional technology and services to assist.

Dave


#10

Hi again,

Thanks for your reply.

So you store stock within the USA and UK? My understanding is that in that situation it is unambiguous and you are required to pay sales tax. Would you still be trying to pay Sales Tax in USA if you were sending all your stock out from Canada yourself?

Also, if you’re only registered for sales tax in two states then isn’t that very close to not paying at all as it’s only 4% of the total states available. How have you chosen which states to pay sales tax to? If it’s based on your keeping stock in those warehouses then again isn’t that different than if you’re sending from your country of origin directly?

Of course like you say the paper burden of trying to pay different sales tax all over the place would certainly be prohibitively annoying and costly. I would 100% simply not sell to the USA if that was required as it would be a total nightmare…

This article from 2013 suggests that at least at that time it was NOT required that people do this as they mention ASOS potentially being affected by the proposed legislation and they are a huuuuuge company in the UK turning over tens of millions a year minimum. Even in the article it suggests it would only be for companies turning over a million a year and my guess is that it didn’t pass.

It’s a shame more people aren’t chiming in with their knowledge. As you say it’s pretty hard to even get an accountant to take a position. Having trouble getting anyone to say anything for sure. So I really appreciate that you’ve taken the time :slight_smile:


#11

> So you store stock within the USA and UK? My understanding is that in that situation it is unambiguous and you are required to pay sales tax. Would you still be trying to pay Sales Tax in USA if you were sending all your stock out from Canada yourself?
>

I store stock Canada, USA, and UK. For shipping from Canada to USA, the rules are more murky (similar problem for UK to US). The customer expectation is that they would not need to pay anything extra to receive their order. If there were any customs, duties, or taxes added, they could choose to refuse the delivery. Technically, there is no nexus, so there should not be any such requirement. The decision would be to avoid the sales tax and take chances on avoiding registering for sales tax. Fortunately, with using FBA, I have avoided this problem.

> Also, if you’re only registered for sales tax in two states then isn’t that very close to not paying at a.ll as it’s only 4% of the total states available. How have you chosen which states to pay sales tax to? If it’s based on your keeping stock in those warehouses then again isn’t that different than if you’re sending from your country of origin directly?
>

I have a couple nexuses in the US. Those are the states that I have registered my business. The current US internet sales tax moratorium prevents other states from requiring that the internet retailer collect and remit sales taxes. It could be undertaken voluntarily, but many states will also require a business license and state income tax as well. Similarly requirements could be extended to city and county, resulting in hundreds of jurisdictions to register, collect, and remit. The decision made by most internet retailers is to follow the federal law and await federally mandated changes.

> Of course like you say the paper burden of trying to pay different sales tax all over the place would certainly be prohibitively annoying and costly. I would 100% simply not sell to the USA if that was required as it would be a total nightmare…
>

Agreed. That is the position by most. Part of the current confusion is the ambiguity of a nexus in any state where there is an Amazon FBA warehouse. Often those are staging areas and are totally outside of the control of the retailer.

> It’s a shame more people aren’t chiming in with their knowledge. As you say it’s pretty hard to even get an accountant to take a position. Having trouble getting anyone to say anything for sure. So I really appreciate that you’ve taken the time :slight_smile:
>

On the US forums, there is continuous debate on this topic. There is no consensus. There are some sellers who register for every state where there is an FBA warehouse, just in case. Several of those who have done so have regretted it due to the business license and expectation of income tax requirements that follow. Most are waiting on the sidelines for a decision by either restricting their use of FBA (to avoid potential nexuses) or taking no action outside of the state they reside in.

Dave


#12

Hi
I think that all your questions can be answered here

http://www.brighton-accountants.com/blog/vat-uk-usa/

and also confirmed here

And from the Inland Revenue here

Hope this helps

Edited by: Authentic Vitamins on Jul 4, 2015 10:02 AM


closed #13