Selling on Amazon FBA when you live outside the United States can be a challenge but it’s not impossible. Even still sellers online want to sell their products on the Amazon platform and rightly so. The company started from humble beginnings in 1994 and has steadily grown to almost $30 billion in annual sales today. There is no sign of e-commerce sales slowing down so it’s no surprise that people around the globe want to get a piece of the action.
You can too! First, however, there are a few hurdles you will have to jump over in order to get your Amazon FBA account set up. For starters Amazon only allows sellers to register if they reside in certain accepted countries.
Amazon will require that you have a U.S. bank account, valid phone number and an internationally chargeable credit card. It is possible for someone who is not a U.S. citizen to obtain a bank account at an American bank. However, doing so is not an easy process and will typically require that you provide proof of identity to a bank representative in person.
There are also several fees that are assessed to Amazon FBA during the normal selling process. These include referral fees, fulfillment fees, storage fees, administrative fees and so on. As foreign seller the money you earn is received in U.S. dollars and converted to your home currency. A fee is charged for this conversion. If you are buying your inventory in U.S. dollars you will have to pay a conversion fee as well. Of course keeping your costs low and avoiding these extra fees will help keep profits up.
There is a solution to these problems though. Money transfer services, like TransferWise and Payoneer, allow you to set up a bank account that accepts money in U.S. dollars and also coverts the funds to your local currency. Their fees are also lower than what Amazon typically charges you.
What Business Entity Should I Set Up?
Although it is not required to form a separate legal entity to sell on Amazon, sellers form a Corporation or Limited Liability Company (LLC) because of their unique benefits. Both can offer liability protection potentially saving your personal assets from lawsuits related from your business operations. However, most sellers choose the LLC because of its ease of administration, low cost and flexibility. There are dozens of websites that will walk you through the process of forming your own LLC. We help many online sellers set up business entities so if you need help you doing this just contact us.
An LLC is set up at the state level and the requirements and benefits may vary from state to state. Some states offer better liability protections and others offer more privacy and anonymity for the LLC members.
Nevertheless, if you decide to set up an LLC in the U.S. you will need to obtain an Employer Identification Number (EIN). Applying for an EIN is a little longer if you are not a U.S. citizen because the application has to be faxed or mailed in and the turnaround time is approximately 2 months.
In addition to the wait to get an EIN for your LLC you should expect certain compliance requirements. Most states require that LLCs pay an annual fee and have a registered agent in the state. The registered agent is someone who can receive notices from the state on your behalf. There are many companies whose main business it is to act as your registered agent and it is highly recommended that you use one.
What About Sales Tax?
When you sell items tax is typically collected and paid to states and local governments. What makes this tricky is that some states also taxes transactions at the city or district level. A handful of states have no sales tax at all. On top of that the states are independent and make their own rules when it comes to sales tax.
To determine if sales tax should be collected states look to see if you have a physical presence or hired someone within the state. For years customers would order products online and, because many of the sellers did not have physical presence or any workers there, the state would not be able to collect sales tax on those transactions. As you can imagine, the local retailers weren’t too happy about this and states did not like missing out on that revenue, especially as online sales continue to increase.
So the states took the matter to court and won. The court decided that the states could collect sales tax on these online transactions if the seller had economic nexus. Economic nexus is just a fancy way of saying if you sell more than a certain amount, or number of transactions, you will be treated as if you have a presence in the state.
Thankfully, because Amazon is considered a marketplace facilitator, they track this so the right amount of tax can be collected and paid if you meet a state’s economic nexus level. Amazon has a helpful U.S. sales tax cheat sheet that shows which states it collects sales tax on behalf of the seller. If you cross the economic nexus threshold of a state that is not in the list you will be responsible for collecting and paying the sales tax. TaxJar and Avalara are two well-known companies that will automatically file the sales tax returns for you.
It doesn’t end there. States require that you file a tax return to report the collected sales tax. Amazon does not do that for you. If a sales tax return is required you will need to register with the state to obtain a sales tax id number and determine the frequency of the sales tax return filing.
Hopefully you’ve learned enough now o make your Amazon FBA selling a success.