By Michael Gorman

Amazon’s business model has been an excellent way to start a business without much capital and make some good money out of it. You can start selling your own personal branded products or you can resell items manufactured by established brands. 

Although the online eCommerce platform handles most of the logistical aspects of business, what are the tax implications effective when expanding Amazon business globally? Businesses need to understand if they should really worry about international sales tax and here is an explanation on the matter:

International sellers that aren’t U.S based

International sellers that aren’t based in the U.S have complex taxing systems if they have business in-country. However, if they don’t sell or have a physical presence in the U.S they don’t have to pay taxes. 

For example, if a Chinese business sells to India, they don’t have to pay sales tax to the U.S even though Amazon is based in the country. That doesn’t mean that they are exempt from paying tax in their own countries, and because of that, they need to visit their tax professionals to find out. 

Some countries may require that you charge sales tax or require you to register to charge Value Added Tax (VAT). There also case-by-case exceptions on the tax implications that you will be exposed to when trading with the U.S. 

When international sellers use U.S warehouses or have other sales tax nexus, they will face different regulations. What are they? Here are the tax implications that international sellers will incur in these unique circumstances:

If you warehouse stock in the U.S

Amazon handles the logistical aspects of the business, which doesn’t only involve the shipping but also warehousing. The eCommerce platform has different warehouses spread out across the U.S and that’s where sellers keep their stock until it is time for it to be shipped. Even though the warehouse isn’t owned by you, it will count as a significant presence in the state the facility is in. 

Living outside of the border doesn’t exempt you from sales tax because it counts as if there is your entity based in the U.S. Wherever the warehouse is based, you need to pay taxes in that state, that’s if it is required. 

These five states that don’t require sales tax, so it is important to try and find out from the local tax authorities if it is necessary. Above paying the tax from that state, you might be required to file the sales tax return in Pennsylvania and Washington. 

The cause of that is Amazon handles their tax collection in those states, but you need to find out more about that from the company. Amazon also handles the sales tax of sellers in the state of Oklahoma and you also need to find out more about that from the company directly.

All of this might overwhelm you a bit if you are a part-timer or a student who’s trying to create a good income source as an Amazon seller. Take help from tax experts if required and outsource your essay, thesis or dissertation work to expert writers at Essay Bot. Go through the EduBirdie review to find out more about the writing services. 

Sales Tax Nexus

International sellers that aren’t U.S based also have another hurdle to jump concerning their sales tax. It’s determining how to pay taxes when they have a sales tax nexus in any state in the U.S. A sales tax nexus refers to any business interests in a certain state. 

For example, even if you have only an office, that is a sales tax nexus and you need to consult professionals to figure out where you need to file it. Even things as trivial as having an employee in that state makes you have sales tax nexus which will make you responsible for filing in that area. 

Even if there is no physical presence such as a building, warehousing or employee in the U.S, you still need to file sales tax if you sell products in-country. 

Different states have varying requirements; you may need to fulfill a certain number of sales or make a specified amount of revenue be required to file the sales tax. In whatever state you have made significant transactions, you need to determine if you aren’t liable to file for sales tax.

International seller compliance

To avoid being in the bad book of Uncle Sam, you need to be tax compliant in all states you are trading in. To do so, you need to choose the perfect accounting firm to get sound advice and take actionable steps. 

You will be required to determine the states where you have nexus and that is where you warehouse the stock, have an employee or own a building. Also, don’t forget that sales may also count as nexus once you have reached a certain number of transactions or revenue. 

You can check where your products have been warehoused in the Inventory Event detail report on the Amazon portal. To register for sales tax, international sellers may hit a roadblock because online systems may not allow their application. 

As a result, those international sellers may be required to register using paper systems or call the state directly to log their application. You may need to register for a U.S bank account to file sales tax. In that case, you or a business representative may need to be present at a banking institution to do so.

U.S international seller compliance

Even U.S based international sellers still need to comply with the sales tax that is required in their state. They need to register for a sales tax permit with the relevant tax authority, usually called the Department of Revenue. 

The permit will enable you to collect sales tax from each transaction that is taxable and along with that permit, you will get dates of filing. Filing the sales tax collected either happens monthly, quarterly or annually depending on the size of transactions and the revenue generated. 

Because of that, you need to have a great bookkeeping system that will allow you to know the exact size of transactions and where they took place. That will be very helpful when it is time to file all the sales tax derived from those transactions. 

You can opt for sales tax automation tools available online, which connect to the carts that will autonomously collect the data needed. U.S companies trading in other countries should also determine if they require them to file sales tax if they have a sales tax nexus in their states or cities.

The bottom line

Sales tax can be a very confusing concept for international sellers, especially those that aren’t based in the U.S. Because of that, they need to consult tax professionals that specialize in these kinds of matters. However, international sellers do have a sales tax nexus obligation when they have an office, employee or warehouse their stock in the U.S.

Author Bio:

Michael Gorman holds rich experience in freelance writing and proofreading. He is from the UK and currently works as an essay writer at Essay writing service UK. While working for the essay writing service, he updates his knowledge through latest books, various blogs and magazines. You can reach him via Facebook or Twitter.