The Seller Abroad

Using FBA to sell on Amazon from abroad… can't be that hard!

Category: Tax

Questions – Part 1

Questions & Answers – Part 1

In this post, I will share some questions and answers that have eventuated from the “Question?..Contact Me” form on this blog. There are some great questions that have come through and I believe the answers to these will be useful to the whole community. So here goes the first of hopefully many Questions & Answers posts.  Questions

Question 1

This question is all the way from Macedonia:

I am not sure how I can import my goods in the USA without having a company there. My accountant told me that I need to have some entity (Company, etc.) in the USA that will be importer of the goods and I need to make invoice for the goods that will be paid by that entity. Are you doing something similar or you solved this issue on some other way?

Answer 1

You do not need to have a company in the USA to import. The Amazon recommended freight forwarders know how to set up the import details such that you can do it from abroad. I recommend having a look at the Shipping Cheat Sheet post for a detailed walk through on how to handling shipping from abroad.

Question 2

Another question from Macedonia:

Do I need to have EIN or ITIN number in the USA for tax collection in order to sell on Amazon?

Answer 2

Yes, you need an EIN for Sales tax collection when selling using FBA on Amazon. I recommend reading the Tax ID Cheat Sheet for a detailed walk through on how to obtain an EIN. 

Question 3

Third time lucky from Macedonia:

Do I need to create Invoice for each product bought by the end customer?

Answer 3

You do not need to create an invoice for each product bought. Amazon produces reports of the number of sales, amounts, discounts, etc. There are a number of reports you can get the Amazon system to generate for you to keep track of sales and cash flow.

Question 4

This one is from my local, Australia:

Is it worth it? Have read a few of your posts. Can one still make the $10,000 plus profit per month some sellers claim?

Answer 4

Good question! I’ve seen a lot of big claims out there as well. I guess it comes down to what you define as “worth it”. I can see hitting the $10,000 in revenue a month being realistic with about 3 or 4 products or 2 killer products. That said, $10,000 profit will probably require a much large business built over a couple of years with a good amount of invested capital. For me, this does not replace my primary income but serves as a good supplementary income stream that lets me live my lifestyle stress free. For example, 1 product with roughly $4,000 in revenue a month may generate $2,000 in profits a month, which is a nice little leg-up. The more products you add the better it gets. That said, you are obviously risking your investment with each new product. I am sure like any high risk investment, it pays of huge for some people (like in those claims you mentioned).

 

 

 

Tax ID Cheat Sheet

Getting a Tax ID

Following on from my Tax ID clarified post, I have constructed a Tax ID Cheat Sheet to walk you through the steps to obtain a federal tax ID in the USA. This should simplify the process significantly as I had to do a lot of research to get mine done. So here goes…

Tax ID – Cheat Sheet

 

  1. First check if your country of residence has a tax treaty with the US. Find out if you need to pay income tax in the US, in your country of residence or both by checking with your country’s government tax website;

 

  1. If you are not based in the US and are not going to file an income tax return in the US, then you will need to apply for an EIN in order to file for Sales Tax in the relevant US states/territories;

 

  1. If you will be filing an income tax return in the US, then you will need to apply for an ITIN (not covered in this cheat sheet);

 

  1. Live abroad and need further advice/confirmation on which tax ID you need to apply for? Call this number, +1 267 941 1000 and follow the prompts (press 1 for English, then option 4 and option 4 again)2. You will be able to describe your business activity and the IRS representative will confirm which ID you need to apply for;

 

  1. Applying for an EIN:
  • You will need to fill and submit an SS4 form;
  • You can do this online if you already have a Social Security Number or an ITIN. I am going to assume you do not;
  • Applications can no longer be filed over the phone and will need to be submitted in writing;
  • You can access the SS-4 form here1 and the official “Instructions for Form SS-4” here1;
  • Your application can be mailed or faxed – if faxing, ensure you send your fax to the number for international applications as shown on the “Instructions for Form SS-4” document on page 2 (+1 267 941 1040);
    • The IRS aim to respond to mailed applications within 6 weeks;
    • The IRS aim to respond to faxed applications within 5 working days;
  • If you haven’t heard back within this time frame or wish to follow up your application, call +1 267 941 1000 and follow the prompts (press 1 for English, then option 1)2;

 

  1. Now that you have your EIN, you can go ahead and register for your sales tax ID with states in which you hold a nexus.

 

Disclosure: I am not a tax advisor and the information provided is only a reflection of what I’ve learnt from my personal experience. Please do your own research and fully understand your obligations before making any decisions.

1Link worked on 26th Jan 2016. Use this link if you are having trouble accessing the site, go to www.irs.gov and search for the SS4 From.

2Promt sequence was accurate as of 26th Jan 2016. Please listen to options to ensure you are entering the correct prompts.

Tax ID… Clarified

Since publishing my post on “Dealing with Tax and Bank Settings,” I’ve received a large number of responses with further questions on both tax and banking. Let’s address tax first. Let me start by answering a couple of common questions:

Q: Do I need a tax ID?

A: If you are selling on Amazon in the US, you will need to pay sales tax. In order to register with states/territories to collect sales tax from your customer, you will require a tax ID. In order to file your sales tax return, you will require a tax ID. So in short, I’d say yes, you need one.

Q: What states/territories do I need to pay sales tax in?

A: You will need to pay sales tax for any sales made to customers within states in which you hold a Nexus. What’s a nexus, I hear you ask…. Well, a nexus is a presence in any state/territory. For our typical case of an entity set up outside the US with stock sitting in a FBA warehouse, you are considered to have a nexus in any state in which your product sits in a FBA warehouse.  Given this situation, you will need to register for and pay sales tax to any state in which a FBA warehouse holds your product.

Getting a Tax ID

So first step is to get a tax ID. I know from experience that the process of identifying and applying for the required tax ID can be painful due to the lack of clear information available. I have simplified the process by putting together a “Tax ID – Cheat Sheet”. The Cheat Sheet is a detailed walk-through to obtain a tax ID.

This Tax ID – Cheat Sheet is available as a premium post. You can check it out here 

 

Disclosure: I am not a tax advisor and the information provided is only a reflection of what I’ve learnt from my personal experience. Please do your own research and fully understand your obligations before making any decisions.

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