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Intro to Amazon Sales Tax for Non-U.S. Sellers

Intro to Amazon Sales Tax for Non-U.S. Sellers

Nearly half of all sellers on Amazon’s U.S. marketplace are non-domestic. It makes sense that sellers from other countries desire entrance into Amazon’s U.S. market, given that the U.S. itself is one of the largest consumer markets in the world, and Amazon is the largest online marketplace within the U.S. In many ways, Amazon can serve as a gateway to the U.S. market for non-U.S. brands.

Expanding into the U.S. from another country comes with a whole host of complexities, not least of which is taxes. If you want to sell on Amazon’s U.S. marketplace, but you’re based out of another country, what are the tax implications?

First, let’s be very clear: Kaspien is not a tax expert. Don’t take any statements in this post as tax advice. If you’re serious about expanding your brand into Amazon.com from another country (or even from within the U.S.), you should absolutely speak to a tax professional.

That said, we can share details about Kaspien’s experience working with international brands for the U.S. marketplace, including important context on recent legislation and preliminary considerations.

Does Amazon Charge Sales Tax?

For many years, Amazon and other online retailers were able to avoid collecting sales taxes in many states. Why? Because prior to 2018, most states’ sales tax laws did not explicitly address ecommerce and how it differs from physical store sales.

That all changed with the landmark U.S. Supreme Court case, South Dakota v. Wayfair, Inc.

Amazon Sales Tax After South Dakota v. Wayfair, Inc.

In June 2018, the U.S. Supreme Court ruled that sellers must pay sales tax in U.S. states if they exceed a certain sales or number of orders threshold, even if they lack a physical presence in the given state.

This decision meant that sellers would have to track sales and orders at a state-level, and register in the appropriate tax jurisdictions when the time comes. Naturally, this placed quite a burden on online sellers, which, thankfully, nearly every state has recognized and attempted to ease.

Amazon Sales Tax Collection

As of August 2021, 46 states have enacted Marketplace Facilitator laws, which transfer the responsibility of collecting and remitting sales tax from individual sellers to marketplaces (Amazon, Walmart, eBay, Etsy, etc.).

Brands that sell on Amazon or other U.S. online marketplaces do not have to track, collect, or remit sales tax for sales that occur on these platforms; the marketplaces automatically do it for you. This applies to any brand selling in the U.S., even those coming from other countries.

You can read about each state’s policies in this helpful state by state guide.

Marketplace Facilitator Laws Do Not Cover Direct Websites

It’s crucial to note that Marketplace Facilitator laws apply, like the name says, only to marketplaces. If a seller sells product through their own website, they must still track those sales and orders as well, and file as required in all relevant taxing jurisdictions.

For non-U.S. brands who wish to sell in the U.S., this distinction means that selling on a marketplace will likely be easier than selling directly to consumers, at least as far as taxes are concerned. The marketplaces will automatically calculate and collect taxes, and where applicable, remit them to sellers through their settlement reports. Sellers can then use these reports to file their tax returns.

A Registered Agent in Every State

Sellers who exceed the sales or transaction threshold for a given state AND sell outside of marketplaces must have a physical presence in that state so that taxing authorities can communicate with them. This applies to non-U.S. brands selling in the U.S. as well.

Instead of opening up 50 offices, most sellers use registered agents. Registered agents are contracted specialists who serve as your company’s legal contact for tax purposes. In our experience, they charge around $50/year/state.

Sales Tax, Income Tax, Property Tax, Oh My

So far, what we’ve discussed applies only to sales tax. Some states have income tax laws, which could affect the requirements you must meet. We’ve seen this requirement appear when sellers use a third-party logistics (3PL) provider or storage facility in an applicable state. Likewise, some states have property taxes that could come into play.

This is a conversation with a tax professional, as the requirements can vary depending on your business. The best advice is always to consult a tax professional because the implications to your business could be substantial. We only know our experience, and your business may be subject to different laws and regulations.

Amazon Payment Options for Brands

Sales tax, of course, means there was a sale, and that means someone is getting paid. So, we’ll close this post out with a quick review of Amazon payment options for brands. If you sell on Amazon.com, you’re likely to do so in one of several ways:

  • Sell your products wholesale to a retailer
  • Either to Amazon Retail (first-party or 1P) or a third-party seller (3P), like Kaspien
  • Sell your products on Amazon through your own seller account
  • You can do this yourself, or hire an Amazon agency to manage your seller account for you

If you sell your products to a retailer, you’ll get paid via a purchase order. As the recipient of the payment, you do not incur any taxes. As the buyer, the retailer would pay any applicable taxes.

If you sell your products through your own seller account, you’ll get paid through Seller Central. Marketplace Facilitator laws would apply here.

To learn more about the pros and cons of each approach, check out our post, “Amazon Retailer vs Amazon Agency.”

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