Introduction
Amazon USA presents lucrative options for entrepreneurs in other countries to sell their products on its platform, but starting a business outside of the United States can leave one wondering whether certain actions and steps can be taken. Can you open an Amazon seller account without being based in the US? Should you have a bank account, Employer Identification Number (EIN), and address in the US?
Fortunately, it is possible for a foreign-owned US LLC to sell through Amazon, given that it and its owner fulfill all Amazon’s conditions for seller verification and do not violate any tax and other regulations. Nevertheless, registration of an LLC alone does not imply the right to open an account or tax exemption.
In this article, you will learn about Seller Verification process for a foreign-owned US LLC, the necessary paperwork, Amazon FBA for non-residents of the US, and taxes associated with running a business.
Can a Foreign-Owned US LLC Sell on Amazon?
Yes, foreigners are eligible to create an LLC in the US and register to become a seller in Amazon’s US platform. While Amazon does not require residency for all sellers in the US, it is dependent on one’s eligibility, identity and account requirements.
An LLC owned by a foreigner may be considered a good choice for entrepreneurs wishing to sell tangible items in Amazon, especially using the service called FBA.
Before applying, understand these key points:
- Formation of your business: The business needs to be formed in accordance with the regulations of the registering state.
- Verification of identity: Amazon reserves the right to verify the business owner’s identity.
- Details of your business: The name and other details of your business should be correct.
- Arrangement of payouts: You need a bank account that is eligible for receiving payments from Amazon.
- Tax obligations: Your business should provide appropriate tax information.
A US LLC can provide a formal business structure, but Amazon evaluates seller applications separately from state business registration.
How Amazon Seller Registration Works for a Foreign-Owned US LLC
The registration process comprises the preparation of your business details and then verifying it through Amazon’s verification process.
Step 1: Form Your US LLC
Select an appropriate state and register the LLC in that state. The selection of the state might be based on factors like formation cost, annual fees, operation of the business, and location of the business.
After registration, get your approved documents from your state and organize your company information.
Step 2: Obtain an EIN if Required
Employer Identification Number (EIN)
This is a federal tax identification number issued by the Internal Revenue Service (IRS).
The LLC owned by a foreign national might need an EIN for tax purposes and other activities related to the company. The foreign individual who cannot apply for an EIN online will need to apply through some other IRS-recognized procedure.
The EIN is different from SSN or ITIN, and the fact that a person has an EIN doesn’t mean he/she is a tax resident of the US.
Step 3: Prepare Your Seller Account Documents
Before starting Amazon Seller Registration, prepare the information that Amazon currently requests for your business and account representative.
Depending on your circumstances, this may include:
- Government-issued ID of the account representative or beneficial owner.
- LLC formation papers.
- Business address and contact information.
- Information about the bank account to which the proceeds will be paid.
- Credit card that is valid for paying seller fees.
- Tax information and tax interview information.
- Proof of address/ownership if needed.
Requirements can vary by seller, country, and verification process. Check Amazon’s current instructions rather than assuming that every applicant needs the same documents.
Step 4: Create Your Amazon Seller Account
Go to Amazon Seller Central and choose US marketplace registration. Give accurate information about the kind of business, legal information about the business, and seller’s information.
In case the selling party is an LLC, ensure that the information you provide matches the real legal information about the business. Avoid entering a personal name where a business name should go.
Step 5: Complete Identity and Business Verification
There could be occasions where Amazon would require you to submit some documents or ask you to verify your phone number, carry out a video verification or get additional information regarding your company and its proprietors.
It is necessary that the details match in your LLC documentation, identification document, address proof, and your selling account on Amazon.
Step 6: Complete the Tax Interview and Set Up Payouts
Tax information is normally gathered by Amazon via its tax interview process. Base your answers on the real ownership and tax status of the business.
Additionally, verify that the bank you have chosen to use for disbursements is approved. An approval for a US LLC does not automatically translate to the approval of all banks or payment accounts.
Can You Use Amazon FBA as a Non-US Resident?
Yes. Amazon FBA for Non-US Residents will work if the seller complies with Amazon’s guidelines and policies for importing, storing, and selling goods in the United States.
Through FBA, you will ship eligible inventory to Amazon facilities where Amazon will take care of activities like storage, order processing, customer service, and returns for eligible orders.
FBA can assist international founders in running their business without taking care of every single US order themselves.
However, using FBA doesn’t exempt you from your duties as a seller. You should think about:
- Product compliance: Your products need to comply with relevant US safety standards and regulations.
- Import arrangements: Custom procedures require the appropriate documentation and importer of record to be identified.
- Inventory management: Storage and fulfillment fees may influence your bottom line.
- Sales tax: Storing inventory in fulfillment centers may give rise to sales taxes in some states.
- Returns: You will continue to be accountable for running your business.
Before shipping inventory, calculate product costs, international freight, customs duties, Amazon fees, storage charges, advertising costs, and expected returns.
Tax Obligations for a Foreign-Owned US LLC
It is very important to know about US LLC Tax Compliance because your LLC will not be tax-exempt just because you own it and live outside the country. There are several issues that determine your responsibilities like tax status of LLC, ownership, operations, incomes, employees, and more.
Federal Income Tax and Information Returns
If there is only one foreign individual that owns a US LLC, then, in general, it will be considered a disregarded entity for federal income tax purposes, unless it has chosen otherwise. A domestic disregarded entity which is fully owned by a foreign individual may have other reporting requirements such as Form 5472 to be included in Form 1120, where required.
If an LLC has multiple members, it will be treated as a partnership, unless it chooses to be taxed as a corporation.
Important considerations include:
- Form 5472: May be needed for reportable transactions for a US disregarded entity owned by a foreign person, or some foreign-owned corporations.
- Pro Forma Form 1120: Typically accompanies Form 5472 when required for a foreign-owned US disregarded entity.
- Form 1065 and Schedule K-1: May be relevant for LLCs that elect partnership treatment.
- Income Tax Returns: Income tax returns may be needed if the business earns income effectively connected with a US trade or business.
- Withholding obligations: Can arise in certain circumstances involving foreign owners or payments.
Not every foreign-owned LLC has the same filing obligations. Missing a required information return can result in significant penalties, so seek qualified tax advice before the filing deadline.
Does an Amazon Seller Need to Collect Sales Tax?
Maybe. Each state has its own laws for sales tax, and Amazon will collect and pay sales tax for the marketplace transactions whenever required by law in those states.
That being said, marketplace collection does not automatically discharge all obligations for sellers. Based on the state and type of the business, registration and filing of reports might still be required.
A seller should assess their physical location, the presence of any employees in any state, and economic nexus based on sales. Don’t presume that Amazon takes care of all state requirements for you.
Other Compliance Requirements to Consider
Apart from registration and taxation, foreign founders must consider the following matters prior to growing their Amazon enterprise.
Maintain Your LLC
Keep yourself updated regarding annual reports of the state, franchise taxes, registered agent service, and record keeping. These will differ from one state to another.
Follow Amazon’s Seller Policies
Ensure that you have an accurate listing of your products, provide real information about your business, and follow any limitations concerning product categorization and intellectual property.
Do not open multiple accounts or submit inconsistent documents without checking Amazon guidelines first.
Check Product and Import Regulations
There could also be issues of safety certification, labeling, testing, permits, or other documents needed depending upon the product in question. Some products have additional requirements before they can even be listed.
When importing products, make sure to know who is going to be the importer of record.
Review State and Local Requirements
Based on your activity level, you might require state registration, sales tax permits, licenses to conduct business, and other state registrations. Just because your business is registered in one state does not mean that you are free from other state regulations.
Common Mistakes Foreign Amazon Sellers Should Avoid
International founders can reduce delays and compliance risks by avoiding these common mistakes:
- The belief that LLC incorporation will automatically lead to Amazon’s seller account authorization.
- Using conflicting names and addresses of the business on different paperwork.
- The assumption that EIN certification means meeting all American tax obligations.
- The neglecting of filing Form 5472 and other required information forms.
- The idea that Amazon’s marketplace sales tax collection system handles all your duties.
- Fulfilling orders while ignoring the rules about shipping products into the country.
- Overlooking all the expenses that come with satisfaction, advertising, and compliance.
Having a good seller account and compliance strategy in place can help make starting and running a business on Amazon easy.
Conclusion
An LLC owned by someone from another country can also be sold via Amazon USA, thus acting as one of the possible options for entrepreneurs outside of the country who wish to access the US market. However, for you to register, you must do more than forming an LLC; you have to verify, choose a payment method, understand tax reporting, and comply with regulations regarding products, imports, and the state.
Before you start, sort out your LLC documentation, find out your tax status, determine the tax you need to pay, and add up all your costs.
Planning to establish a US LLC for your Amazon business? E-Startup can help you understand the company formation process and the documentation involved. Explore our US LLC Formation services to take the next step toward building your US business.
Frequently Asked Questions
1. Is it possible for a non-US citizen to create an Amazon US selling account via an LLC?
Yes. Non-residents of the USA can use a USA LLC in their application process provided that the business fulfills the conditions of Amazon regarding eligibility, identity, payments, and tax.
2. Does a foreign-owned US LLC need an EIN to sell on Amazon?
An EIN may be needed for tax reporting, banking, and business administration. The exact requirements depend on the seller’s circumstances and Amazon’s current registration process. An EIN alone does not guarantee account approval.
3. Is a foreign-owned US LLC subject to taxation if it sells on Amazon?
This may be subject to federal, state, and other taxes and filings. This depends on the classification of the LLC, its income, the nature of the business, and where inventory is held. Sales taxes are different from federal income taxes.
4. Is it possible to use FBA from Amazon outside of America?
Certainly, qualified residents of other countries can avail themselves of the Amazon FBA service. They need to satisfy all Amazon’s criteria and take care of their inventory importing, compliance, taxation, and any necessary state registration.
