Amy’s cross-border chat Risk warning! What hidden risks does the US Consumer Notification Act bring to cross-border sellers?

Risk warning for cross-border sellers Hidden risks of the US Consumer Notification Act in Amy's chat

Hello, I’m Amy, and I’m here to assist you on your cross-border journey to strike gold.

What hidden risks will the US “Consumer Notification Act” bring to cross-border e-commerce sellers? And how can they avoid them?

The US Consumer Notification Act will take effect on June 27, 2023. This law stipulates that cross-border e-commerce sellers who have sold new products (or unused products) at a sales volume of 200 or more within the last 24 months, with a transaction total exceeding $5,000, are obligated to provide their business information, and Amazon is obligated to collect, verify and disclose this information.

So, what hidden risks ⚠ will the implementation of the “Consumer Notification Act” bring to cross-border e-commerce sellers? I have roughly divided it into three aspects:

🅾 Deduction of withholding tax

After the new law takes effect, Amazon will review the tax identification number of the seller’s company’s country, and overseas companies may be subject to a 10% withholding tax.

In fact, when we register for an Amazon seller account and apply for filing, we need to fill out a W8 form, which is a declaration for non-US individuals and companies to confirm that they are not US taxpayers.

For example: sellers who apply for an Amazon US seller account using a Chinese or Hong Kong company need to fill out this form. Although the same form is filled out by the seller, Amazon treats these seller accounts differently:

Seller accounts registered with Hong Kong companies will be directly subject to a 10% withholding tax by Amazon, but this tax will not be deducted from seller accounts registered with Chinese companies. The reason is that China and the US have a bilateral tax treaty, but Hong Kong does not.

🅾 Sales Data Synchronization

According to CRS rules, sales data from sellers’ US sites will be disclosed to the Chinese government.

According to US tax regulations, sales generated in the US must be taxed in the US. If the seller has uploaded a Chinese company’s tax number on Amazon, but has not filed for income tax in the US (some companies are even non-compliant in filing for income tax in China), under-reporting or not reporting, this situation poses a very large tax risk.

Now that China is about to start the fourth phase of the Golden Tax, it will be difficult to explain the return of overseas funds for sellers. And according to CRS rules, financial account information is automatically exchanged between countries every six months. If the seller’s sales on the Amazon platform are not reported for income tax in the US, this information will also be disclosed to the Chinese government.

So I suggest that sellers who register their Amazon account in the name of a Chinese company should quickly register a US federal tax ID and file for income tax annually. Even if you are not profitable in the US and do not need to pay much tax, filing is a must-do.

🅾 Sales Tax Filing

Sellers need to apply for and file for sales tax in the state where their warehouse is located.

According to US tax regulations, sellers need to apply for a sales permit in the location of the warehouse where the goods are stored. This includes Amazon’s FBA warehouse. Although as an e-commerce platform, Amazon has an obligation to withhold and pay sales tax for buyers, as platform sellers, although your sales tax is withheld and paid by Amazon and you have not actually paid any sales tax, you are obligated to register and file for sales tax in the state where the FBA warehouse is located.

💡Amy’s Tips:

🔅 The US “Consumer Notice Act” is strictly enforced, and accounts registered with simple information will not be able to continue selling on Amazon. Only compliant and legal accounts can operate on the platform for a long time.

🔅 For more information about the Consumer Notice Act, you can click on the US government link: zllp.myyxxx_okscw?.._ckby/=ddy117lzaokscw?..yzki.?a/=ddy5502h.t1&rgpwt60

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