The Seller Abroad

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

Tag: EIN Registration

Questions – Part 2

Questions & Answers – Part 2

Welcome to the second post where 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 let’s get into the Questions & Answers.Questions

Question 1

A question from the USA:

So I received a quote from the supplier in China, not realizing it was an FOB quote. With the customs fees and transportation costs how does one possibly turn a profit while doing this? Any advice or information would be greatly appreciated, it all seems next to impossible with the doubling of the COG’s just in transportation. Thanks for your blog, and all your information.

Answer 1:

I think this is something we can all relate to. I went through this exercise for a few products before I found one that would be profitable. I think it is important to realise that the freight portion of the cost is going to be much higher on your first ‘test’ batch of product due to the small ‘test’ quantity ordered. The freight ratio will get better on larger orders as freight per unit cost will reduce. That said, the key is to find a product where the numbers work. There are two general paths that seem to work. Number 1, you can try looking for a very small/light product to reduce transport cost; or number 2, look for a premium product that can be sold at over 3 times the cost of manufacture (FOB cost). A third option that I am yet to try myself is to source the product locally to avoid shipping and customs charges.  My first two lines of product fit into the number 2 and 1 category (in that order) and are turning a healthy profit.

I myself found this the biggest challenge in starting to sell a product. This is also why not every story is a success story. There is a fair element of risk. That said, nothing ventured nothing gained. I recommend taking the leap if you can afford the risk.

Question 2

This question is from the neighbour, Canada:

I read your cheat sheet for both shipping and tax id and have a question. When is it necessary to get an EIN? Would I be able to get away with not having one for shipping by courier such as UPS/FedEx? From what I’ve heard, they don’t really require EIN if shipment value is less than $2500, is this correct? Have you shipped smaller amount before using courier companies? What is the process with that? Do they basically take care of customs/duties and just charge you for that service?

Answer 2

To answer the question, you don’t need an EIN before importing product using UPS/FedEx. In my experience, the only time I required the EIN was when I had to collect sales tax for the items that were being sold on Amazon. My first shipment value was more than double the $2500 value and I did not require an EIN to get the product through customs.

I’d love to hear from anyone that might have had a different experience to mine. Please feel free to leave a comment with your thoughts.

Question 3:

Here is one from the UK:

I have a question regarding getting approval (un-gating) in certain categories in the US. I am based in the UK, and am looking to sell in the health and personal care category (although my product won’t actually be sold in that category, Amazon has told me I still need approval in this category). It seems Amazon will only accept invoices from wholesalers on their approved list and it turns out my China-based supplier is probably not on this list and so my applications keep getting disapproved. I was wondering if you’d come across anything similar.

For people based in the US it seems like all they have to do is buy a few random products from US based wholesalers and send in these invoices, and once they are un-gated, they can go on to sell anything in that category. But being based in the UK, I don’t think that will work as US wholesalers aren’t likely to send products to the UK, and UK documentation may not be valid for them.
Another difficulty of selling in the US from abroad!

Answer 3:

This is an interesting one. In my initial research into potential products I found that products in the health and personal care category were trending and ticked all the boxes in terms of being small, light and easy to ship as well as having the ability to sustain a healthy mark-up. That said, the complications highlighted in your question are the very reason I did not go down this path.

I’m afraid I cannot answer this question directly. The one idea that did come to mind is to have a US manufacturer package and send product to Amazon directly (not via the UK) in order to get approval. Once you have gotten approval, you can bring in product from abroad that meet all the required approval specifications.   

If anyone has experienced this issue and has a way of making it work please share your experience on the comments for this page. It would really help out a fellow seller abroad from the UK.

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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