Handling a USA LLC as a foreigner can be different so learning how tax works for you is the best way to start. Continue reading this blog to know more.
How Tax Works for Amazon Business: How Tax Works for a Foreign Director Owning a USA LLC for Amazon Business
The United States (US) does not currently have a national sales-tax system for foreign directors. However, indirect taxes are imposed on a state level, with authorities having the ability to impose their own sales and use tax. These taxes differ from one state to another. As such, some traders may be asking how Amazon’s business tax works for foreign directors in the U.S.
A U.S.-based Limited Liability Company is a business structure that is designed to protect the entrepreneur or director from liability stemming from debts and liability.
An LLC can be described as a pass-through tax entity that is not traced directly. Rather, profits or losses are passed on to the owner, who then reports them on their personal tax return, even as their goods or services may be subject to VAT or other state tax.
How Tax Works for Non-U.S. Citizens
As a U.S.-based business or entity, you must comply with specific state legislation on taxes and import duties. Admittedly, foreigners are subject to U.S. tax if they trade or engage in other businesses in the U.S. If your business is not engaged in a trade or business in the U.S (ETOB), you are not liable to income tax.
In this article, we look at the different forms of taxes and income tax that are imposed on non-U.S. directors. You can leverage the resources at Sterlinx Global to better understand how to approach taxation in the U.S and ensure you abide by state regulations.
What Charges do you pay as a non-U.S. Foreign Director?
A company does NOT need to pay Income Tax in the USA if you are not a resident of the USA. If you are a non-resident in the U.S., you are not required to pay income taxes.
However, for Amazon business owners, you must pay a 3% import duty charge through a local shipping agent that acts as your representative.
Standard rates applied across the U.S.
However, there is no standard rate or national sales tax in the U.S. Sales tax varies by state and could range from 2.9% to 7.25% in various states. In addition to the standard rate imposed by the state, an additional tax could equally range from 1 – 5%.
Sales Tax for Amazon Businesses
Regarding sales tax, if you use the Amazon FBA in any state, you are required to register and have an accountant declare your sales taxes in each state and pay these separately. However, this only qualifies as sales tax.
Suppose you opt to sell your products via a fulfilment centre in a particular state that does not require the payment of certain taxes. However, whenever the fulfilment centre ships the products, they will be subject to state sales tax. As such, you will need to pay and declare sales tax.
For example, you may use a fulfilment centre from Delaware, which has no sales tax attached. However, if you ship this product from Delaware to California, the product will be subject to sales tax in California.
Paying VAT in the U.S.
VAT is zero-rated for sellers that are not located in the U.S. However, Amazon will reduce the selling price to the customer to deduct VAT.
U.S. Business Owned by Non-U.S. Business Owner
Income Tax and Import Duties
As a non-U.S. director who sells in the U.S., you are required to pay income tax based on your earnings in the U.S. However, you are subject to import duty rates based on the location of your business.
For example, there is a 4% tax on all imported items for personal or business use in U.S. territories such as Puerto Rico. As such, import duties may vary based on the territories where goods are traded across the U.S.
Sales Tax and VAT
The Sales Tax & VAT will be charged and paid like any US-owners if a business is established in the U.S. However, this may differ from one state to another, so you should rely on expert advice from Sterlinx Global to keep your tax affairs in order.
Here is a list of recently asked questions about How Tax Works for a Foreign Director Owning a USA LLC for Amazon Business
Who is required to register for sales and use taxes?
Every person or entity engaged in the sale of tangible items at retail or furnishing services must register with the state to obtain a sales tax licence, permit, or certificate. However, what counts as engaging in business may vary from one state to another.
What documents are you required to submit for sales and tax registrations?
Sellers, vendors, and retailers must register in various states by registering with the relevant state tax authority website or filling out the relevant form with the state tax authority. Each state has unique registration requirements and requires different documents for registration.
How often should you submit your tax returns?
Tax returns must be filed annually, semi-annually, quarterly, or monthly depending on the state requirements. Filing frequency is contingent on the sales volume and the amount of tax collected during the period. However, monthly filing is required by most states.
Taxation for non-U.S. directors differs from one state to another
As a non-U.S. foreign director, you are required to pay income tax in the U.S. and the sale of goods and services is liable to a sales tax. However, the requirements may differ from one state to another. Amazon business tax can seem daunting, but Sterlinx Global can help you navigate the complex U.S. tax environment as a seller. For more information on how to prepare for your Amazon Business in the U.S. contact one of our expert advisors at Sterlinx Global.