Tax and Bank Settings
In this post I’ll explore dealing with Tax and Bank Settings on your Amazon seller account when you sell from abroad. But first, I’d like to start this post with a big shout out to Scott Voelker (The Amazing Seller) for featuring me in his podcast number 130. Thank you for directing people selling from abroad to my blog. Hopefully everyone finds the blog super helpful.
I thought I should use a post to touch on a couple of administrative hurdles when setting up an Amazon seller account from outside the USA. I know Scott touched on the difficulty of attaching a bank account to your Amazon account from abroad, so I’ll try shed a little light on this and a couple of other road bumps; in particular tax and bank settings.
Attaching a bank account to receive deposits from Amazon.com is actually the easy part. Amazon has made it quite easy in that they support banks from several foreign locations, Australia being one of these. So all you have to do is log into your seller central account, go to Settings, Account Info and click on Deposit Methods. Here you can add your foreign bank account. Amazon will deposit your funds from sales (minus their fees of course) every two weeks. Amazon automatically convert the USD to the destination bank’s currency. This is pretty convenient right…. Not always! It is all good except I’ve noticed that Amazon’s conversion rates are terrible. They actually seem to take quite a large chunk in commission for the conversion. This may be Amazon or the broker they use for the conversion, I’m not too sure, but either way you lose a fair bit. Unfortunately there is no option to transfer the money to a foreign account without converting to the destination’s currency. I even set up a USD account in Australia and it still didn’t work. Turns out the only way to avoid losing out on the conversion is to set up a bank account based in the US and then use your own currency conversion broker to convert and send the money to Australia.
This gets a little tricky. There is a bit of advice out there about how to set up a bank account in the US from abroad, however it is not very clear. Easiest way seems to be to just visit the US and go to a bank in person to set it up. This however is quite an expensive way to do things when you live so far away. You may also need to apply for an EIN (Employer Identification Number), which you will need for tax purposes as well.
I’m going to go ahead and guess that you’re thinking, what is an EIN?! Let me explain to the best of my knowledge. My understanding is that this is an identification number used for tax and reporting purposes. Sort of like your tax ID in your own country. There are a couple of different types of these in the US. There is an ITIN which you can use if you live in the US, have a physical presence in the US or intend on filing Income Tax Returns in the US. If you do not, the EIN can be used for purpose of conducting business or opening a bank account. You have to fill in a SS-4 form from the IRS website and submit it through mail or fax. Jump on their website to check out the details. This EIN number then lets you set up a bank account and register to collect sales tax. Sales Tax… now that’s a whole other can of worms!
Here is my understanding on how Tax works when you sell from abroad. Australia has a treaty with the US to avoid paying Income Tax twice, which means I can pay Income Tax in Australia only rather than in both countries. Worth checking if the country you reside in has the same sort of treaty set up with the USA. Sales Tax however is a different story. In the US, Sales Tax is charged by the state rather than federal government. This means each state has its own tax rates and so forth. It’s all kind of confusing. The good part is that Amazon will work out the Sales Tax portion for you. What you have to do is register for a tax ID with any state in which you hold a Nexus. From an FBA point of view, keeping stock in a FBA warehouse is considered a Nexus. So for example, if you have stock in a Californian FBA warehouse, you need to register to collect Sales Tax with the state of California. Once you’ve registered and obtained your tax ID number for the state, you can put this information into your Amazon account. Once this is done, Amazon will charge the customer the appropriate amount of Sales Tax. To enter your tax ID in your seller account, go to Settings, Tax Settings and Edit Your Tax Collection Obligations. Now you will automatically collect tax for all sales made in that state. Amazon even generates a tax report for when you do your filing.
A quick 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.
Now go conquer the universe!
Post Highlights for dealing with tax and bank settings
- Set up a bank account and Amazon will deposit your money in your local currency
- To save on conversion fees, set up a bank account in the US, this can be tricky though
- Research your tax obligations. Check if your country has a treaty to avoid paying Income Tax twice
- Register for Sales Tax with the state in which your product is warehoused in a FBA warehouse
- Set up your tax settings on Amazon to automatically charge Sales Tax
- Conquer Universe!