US Tax Implications for Canadians Selling on Amazon.com
Expanding your business to Amazon.com is an exciting opportunity for Canadian sellers. However, navigating the tax implications of selling across the border can be complex. This article provides a clear overview of the key tax considerations when selling on Amazon.com.
Read on to learn more.
Understanding Your Tax Obligations
As a Canadian business, generally, you won’t be liable for US federal and state income tax unless you have a physical presence in the US, such as a warehouse or office.
Sales tax in the US is imposed by individual states, not the federal government. Should you reach a certain sales threshold in a specific state (a nexus or a significant presence), you may be required to collect and remit sales tax on your sales to customers in those states.
US Sales Thresholds per State
Each state has its own rules regarding sales tax nexus, so it’s important to understand the requirements of each state where you conduct business. On Amazon, reaching a specific state threshold is unlikely as sales are spread across the USA. However, larger businesses or sellers can reach these thresholds.
Many states have adopted a sales threshold of $100,000 in sales as a trigger for economic nexus. If a seller’s sales to customers in the state exceed this threshold within a certain period (typically either the current or previous calendar year), they’re required to collect and remit sales tax in that state.
Some states use a threshold based on the number of transactions rather than the dollar amount of sales. For example, if a seller has 200 or more separate transactions with customers in the state within a specified period, they may be required to collect and remit sales tax in that state.
Marketplace Facilitator Laws
Many states have enacted laws that require marketplace facilitators (e.g., Amazon, eBay) to collect and remit sales tax on behalf of third-party sellers using their platforms. In such cases, individual sellers may not have to worry about sales tax nexus if they exclusively sell through these marketplaces.
Seeking Professional Help
US tax laws can be intricate, especially when dealing with cross-border e-commerce. ProMerit can guide you on your obligations, including referring you to a US tax professional who can advise you on your specific situation. This ensures you comply with all tax regulations and optimize your tax strategy.
