Navigating U.S. tax for non-resident Amazon sellers
Navigating U.S. tax as a non-resident Amazon seller turns on two domestic tests first, then a treaty filter. The correct order is simple. Decide whether you are engaged in a U.S. trade or business. If yes, decide whether your profit is effectively connected income under the business-activities or asset-use tests. Only then apply any treaty permanent establishment relief and disclose it properly. Conflicting advice usually arises when treaty concepts are mixed into the domestic USTB test or when ECI look-throughs are skipped.
The three-level framework
Level 1: No USTB and no ECI
Your U.S. activity is not considerable, continuous, and regular, so you are not USTB, and there is no ECI. Example: you do not use Amazon FBA or a U.S. warehouse or 3PL, all orders are fulfilled from outside the United States, and you have no U.S. office, staff, or dependent agent. A foreign-owned disregarded LLC files Form 5472 with a pro-forma 1120 only in years with reportable related-party transactions such as funding, reimbursements, intercompany payables, or loans. Some sellers file a protective 1040-NR or 1120-F to start the statute and preserve deductions in case the IRS later asserts USTB; that is optional risk management, not a requirement.
Level 2: USTB and ECI, but no PE under a treaty
Under domestic rules, you are USTB, and profits are ECI. Under the treaty you may still have no permanent establishment if you have no fixed place at your disposal and no dependent agent that habitually concludes contracts. A typical pattern is year-round Amazon FBA with U.S. inventory cycles and fulfillment, which meets domestic asset-use and often business-activities tests. If the taxpayer is an individual, file Form 1040-NR and attach Form 8833 to claim no PE. If the taxpayer is a foreign corporation, file Form 1120-F and attach Form 8833. Timely filing preserves deductions and starts the statute. If you operate through a U.S. partnership, file Form 1065 and handle section 1446 withholding with Forms 8813, 8804, and 8805; each foreign partner files a 1040-NR or 1120-F and attaches Form 8833 if claiming a treaty. Form 5472 applies only to a foreign-owned disregarded LLC with reportable related-party transactions.
Level 3: USTB, ECI, and a PE
You are USTB and ECI domestically, and you also have a permanent establishment because you carry on business through a U.S. place, such as returns, prep, or management space, or a dependent agent habitually concludes contracts. Individuals file Form 1040-NR. Foreign corporations file Form 1120-F and may owe branch profits tax on the dividend-equivalent amount. Partnerships file Form 1065 and withhold under section 1446. States likely require income, franchise, and sales or use filings.
USTB in plain English
You are USTB when you actually do business in the United States in a way that is regular, continuous, and meaningful. Courts describe the overall threshold as considerable, continuous, and regular. A U.S. office or a dependent agent can be evidence of USTB but they are not required. Frequent FBA restock and fulfillment cycles often satisfy the domestic threshold even when Amazon is an independent platform.
ECI in plain English
Once USTB exists, profit is ECI if one of the two look-throughs is met. Under the business-activities test, your U.S. activities were a material factor in the income you earned. Under the asset-use test, your income came from assets used or held for use in the U.S. business, such as your inventory in a U.S. warehouse. Purchased inventory is generally sourced by place of sale or title passage, and produced inventory by place of production. Foreign-source income can still be ECI if it is attributable to a U.S. office that materially participates.
Why Amazon FBA usually meets USTB and ECI
Most FBA sellers sell to U.S. customers throughout the year, place their own inventory in U.S. warehouses, and run pricing, content, ads, and restocking in repeat cycles. Together, those facts typically satisfy USTB and make profits ECI under domestic law. The independent-agent concept belongs to the treaty filter and can support a no-PE claim when conditions are met, but it does not defeat the domestic analysis.
When FBA might not be USTB
There is no bright-line dollar threshold; the pattern controls. Short pilot with no restock, inventory present but no listings or filled orders, or ultra-sporadic seasonal trickles with long gaps are common edge cases. States can still require returns based on inventory or economic nexus even when federal tax is zero.
Why professionals disagree
Layer mixing by importing dependent-agent treaty logic into domestic USTB, underweighting asset use, filing protective returns to control risk because facts drift, overlooking state rules because treaties do not bind the states, and repeating the myth that no dependent agent means no U.S. tax are the usual causes.
Practical steps that match this framework
Decide USTB first, then determine ECI under business activities or asset use.
If a treaty resident and no PE attach Form 8833 to a timely 1040-NR or 1120-F to claim business-profits relief. Match filings to the taxpayer type.
Foreign individual files 1040-NR. /
Foreign corporation files 1120-F and models branch profits tax if taxable. U.S. partnership files 1065 and handles section 1446 withholding.
A foreign-owned disregarded LLC files Form 5472 with a pro-forma 1120 only when there are reportable related-party transactions. Treat states separately because inventory location and sales thresholds can create income or franchise and sales or use obligations even when federal tax is eliminated by a treaty. For marketplace KYC, Amazon onboarding is cleaner with a foreign entity and home-country address; a U.S. virtual address and utility bill often fails verification (must be a real operating office).
Call to action
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