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July 3, 2019

336 Q & A Tuesday: Sales Tax for Foreign Amazon Sellers

Guys, Tax question from a foreigner

I’ve got LLC registered in Dеlaware and I’ve talked to CPA, EA, and one consultant.
CPA told me I shouldn’t file 5472, EA told me I should.
CPA and consultant told me file 1040NR, EA told me I shouldn’t.
I’ve paid 250$ commission to the consultant but I started to doubt his knowledge.
Who should I listen to?
Should I fill 5472?
Should I fill 1040NR?
How do you deal with your taxes?
Thank you

This is an excellent question.
I’ve JUST interviewed Paul Rafelson, an expert tax lawyer., We’ve got an episode coming out soon on the new podcast (10K Collective Podcast). The episode is due to go live in about late July. But if you’d like early access, email me and we may be able to sort it out.

Obviously to answer a Q like that properly implies knowing multiple things, most important being: Are you selling only on Amazon? (What level of revenue? is also important but a broader Q)

Have you already registered for sales tax? It’s hard to give advice without specifics but the simple summary of Paul’s advice around sales tax was: DON’T REGISTER FOR ANYTHING if you’re only selling on Amazon.

I’m not a tax lawyer or any kind of lawyer and there are many who would disagree. I’m just passing on what I understood from the interview.

Get in touch and I can put you in touch with Paul if you want to explore further.
I have no affiliate deal and no strong opinion either way as I’m not claiming sales tax expertise.

Handling the Big Three threats to Amazon sellers: Trump Tariffs, Sales Taxes and Brexit

It is tempting to lump together the three big threats that e-commerce sellers are aware of, at least the ones that I speak to in the UK.

However, it’s interesting that whilst they have similarly far-reaching and scary consequences, the nature of each one of them is I believe entirely different. I think they are worth comparing and contrasting.

Trump Tariffs

Having been speculative for a long time, and with a lot of uncertainty around them, now at the time of recording that is on the 23rd of June 2019, it seems that Trump import tariffs of 25% are present on many many products being imported from China. So in a sense, this is a very simple thing to deal with: you just need to check whether your products are liable, and if they are, unfortunately, for now, you simply pay the tariff.

Of course speculating about whether or not the tariffs are here to stay, and if so for how long is very difficult. Also, it is difficult to judge whether the further $300 billion worth of products will be taxed as Trump has threatened, and again if that does happen, how long that will last or whether it will be repealed quickly.

However, the current situation is at least know.


Brexit it is a strange opposite in that it has been quasi decided at least by referendum – I am aware that in British politics this is not simple, but I’m simplifying –but no action has happened. Again trying to predict the future and see when Britain might leave, whether it won’t be hard bricks it, some kind of agreed X it or indeed whether Britain and staying in the EU, is a very speculative thing again.

However, the risks to Amazon importers from China are much clearer and I believe that the mitigation strategy is pretty straightforward. If you sell intercontinental Europe and the import from China into the UK, the obvious risk is that you will not easily get good out of the UK into Europe. And I believe the solution is pretty simple: create a subsidiary company which under EU law you currently can do in the relevant country in Europe where you get the majority of your sales, probably best to do it in Germany, but to be honest you should be up to import into anywhere in the European Union without a big problem at the moment. And then simply have that supply chain ready to go to Europe if it proves necessary.

Of course, if you had to implement this it would cost a lot of money and be a very big disruption to your supply chain. However, I am not suggesting you implement everything, but that you plan and lay groundwork. This will only apply to sell as you’re making significant money so I guess several hundred thousand dollars upwards a year in the European Union. As a judgment call, everybody has to make themselves anyway, I merely making the obvious suggestion.

Seller action vs. Inaction

Sales tax is the opposite. Because in government, in the form of the states of the USA, is extremely active and aggressive in pursuing Amazon sellers, people are taking action frequently.
In fact, a lot of the top legal advice is to do nothing and let the states introduce and implement their legislation making Amazon responsible for collecting sales tax.

Brexit is a strange opposite to sales tax. Because the government is not forcing anybody to do anything, sellers are largely extremely passive in around Brexit, despite the very clear potential danger to their future supply chains.

Be proactive – not reactive

In the end, this comes back down to mindset stuff I’ve been talking about recently with Stephen Covey’s Seven Habits Of Highly Effective People.

It may seem that something as fluffy sounding as that has nothing to do with the hard realities of tax. I disagree.

I believe if you are reactive in your approach, you allow yourself to be bullied. Whereas, in fact, the correct action might be to calmly assess the situation and decided to do nothing.

Where is in the case of Brexit, just because nobody is forcing sellers to do anything, that means very few sellers are taking action. Whereas, in fact, a proactive business person will work to mitigate possible future threats, not just react to what is happening in the present.

I’m taking plans proportional to the size of the problem that you might get and the probability of it happening.

In that regard, this reminds me very very much of Amazon Sellers’ relationship with the possibility of Amazon account suspension. I don’t think anyone should be driven by fear in business, but nor should they close their eyes and hope. As the marines say, hope is not a strategy.

Instead, regarding seller suspensions, I think everyone should take to simple actions on the strategic level, which of course need to be executed on the tactical and everyday level.

Make A Plan

The first is simply to have a strategy in place to minimise the risk of the risk – in this case, suspension, which is under your influence as an Amazon seller(unlike Brexit!)

The second is to have a plan in place to deal with suspension should it happen. This is much more similar to the Brexit situation, I feel.

In the end, I just would like to see more often is making very careful for full decisions when they have far-reaching consequences.

If I have influenced any teasing listeners to make more thoughtful decisions, I’m very happy that I have performed a useful service to the Amazon seller community.

Watch my Q & A Tuesday: Sales Tax for Foreign Amazon Sellers

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Michael Veazey

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