Expanding your successful global Amazon brand to the U.S. market is filled with opportunity, competition, and risk. This endeavor requires careful overall e-commerce expansion and tax planning to navigate the complexities of this lucrative yet challenging market.
Seven-figure e-commerce sellers must ask different questions to plan their expansion and protect their established global brand. They must understand the importance of making informed decisions and aligning themselves with the right professionals.
Here are key questions to ask before taking the plunge into the U.S. market:
1. Is Your Business Ready for U.S. Expansion?
Before diving into the specifics, assess whether your business is ready for U.S. expansion. You may see an opportunity for your products to thrive in the U.S. marketplaces, and that analysis is a must.
Once you determine a fit to grow your brand, it is time to shift your focus to how to expand into the U.S. through your foreign entity, form a new U.S. LLC, and ask very detailed questions on the pros and cons of each decision. Some additional questions that come into play are whether you are working with a U.S. supplier that, for legal, tax, payment terms, logistics, and most importantly, trust, would prefer to work through a U.S. LLC. If so, does that U.S. LLC become the legal and business name on your Amazon account, or does your foreign entity stay on your newly formed Amazon account? Are there advantages to a U.S. company if you are looking for an exit after 2-5 years?
Consider your current market saturation, financial health, and operational capacity. Expanding too quickly or without adequate resources can strain your business and dilute your focus.
2. How Will You Handle Amazon Account Verification?
One of the first hurdles you’ll encounter is Amazon account verification. Amazon requires detailed documentation to verify your identity and business legitimacy. Common issues include account verification, taking the tax interview, and completing the proper U.S. tax forms. The goal is to avoid extra verification caused by needing a utility bill.
Many international sellers struggle with this because they rent apartments or share utilities with family members in their home country.
Partnering with an Amazon Agency Partner, such as NCP, can help navigate these requirements by guiding alternative documentation and verification processes. Our consulting services start with a review of your overall plan to expand and include options for a direct referral to an Amazon-designed account manager, support with fulfillment, account health, conversation growth, merchandising, and global expansion, all tailored strategies for your business. Plus, you will gain access to the latest offers, from beta and pilot programs to opportunities to grow your Amazon business.
3. What Are the U.S. Taxation Requirements?
Understanding U.S. tax obligations is crucial. Determine whether you need to file a W-9 or W-8BEN form. The W-9 is for U.S. persons and entities, while the W-8BEN is for foreign individuals and entities. Misfiling these forms can lead to serious IRS consequences. There is much more involved in U.S. taxation than determining if you have dependent agents.
Determining if your U.S. LLC, whether it is disregarded or taxed as a partnership to create a U.S. person, is engaged in a U.S. trade or business, and has effectively connected income requires an analysis.
Consulting with a knowledgeable tax advisor specializing in e-commerce can ensure you meet all tax requirements and avoid penalties.
4. How Will You Manage U.S. Banking?
Setting up a U.S. bank account is essential for smooth financial operations. Technology companies linked to regional banks, such as Relay or Mercury, are popular among e-commerce sellers. Payment transfer gateways such as Wise and Airwallex are also popular, and often, these work in conjunction with each other.
Now, you need to understand the fine print to determine whether the payment gateway or technology company requires the account holder to be a U.S. personal and what business and personal verification is required, which is a much higher standard than 12 months ago.
However, some non-residents believe they need a U.S. utility bill linked to a U.S. address to open these accounts. This is not always the case. Professional guidance can clarify the requirements and streamline the process.
5. Should You Form a U.S. Company?
Not all e-commerce sellers need to form a U.S. company. In some cases, using your existing foreign company might be more advantageous. Factors to consider include tax implications, legal liability, and operational logistics. Additionally, you need to remember the marketplace requirements; Walmart is different from TikTok Shop, which is different from qualifying for Shopify payments; some are looking to work with a U.S. person, not a disregarded entity. Simple does not always work and, in most cases, will lead to roadblocks.
Even after gaining clarity on your expansion strategy, formation station from the management, operating agreement type, formations of a U.S. LLC, capitalization, and flow of funds are all critical components of your planning process.
It is essential to consult with a seasoned U.S. entity formation specialist who understands Amazon and Shopify’s requirements. That team must also be connected with top CPAs and tax attorneys who understand non-resident taxation issues.
6. What Are the Sales Tax Compliance Requirements?
Sales tax compliance is complex and varies by state. You must understand which states you have nexus in and how to collect and remit sales tax accordingly. Failure to comply can result in hefty fines and back taxes.
Selling on Amazon, where Amazon the marketplace collects sales tax, is very different from selling on your Shopify store. In the latter case, you need to track and combine your economic nexus thresholds, which increases the complexity.
A company with sales tax experience is recommended as a part of your overall expansion plan. What happens if you get behind on sales tax? Are your products taxable? Do you register through a foreign or U.S. company? All these questions are important within this evaluation. Sales tax specialists can help you navigate these requirements and implement efficient compliance strategies.
7. How Will You Utilize Shopify Payments?
Understanding Shopify Payments as a non-U.S. resident is crucial if you’re using Shopify. This involves navigating their verification process and ensuring you meet all regulatory requirements. Most do not understand all the costs of saving on the 2% conversion fees.
Detailed guides and professional support can make this process smoother, ensuring you can leverage Shopify Payments effectively. NCP is a Shopify partner and consults with global clients weekly on this all-important expansion decision.
8. Do You Need U.S. Insurance?
Insurance is another critical consideration. You should know that once you cross $10K in sales on Amazon in the month, you must obtain liability insurance. This may be difficult to obtain as a foreign entity, or at best, the insurance costs may be 2X to 5X higher than U.S. insurance.
This changes your strategy overall for compliance. Depending on your business model, you may need various types of insurance, such as general liability, product liability, or professional liability. A U.S.-based insurance broker familiar with e-commerce can help you identify and secure the right coverage.
9. How Do You Choose the Right U.S. CPA or Tax Attorney?
Selecting the right U.S. CPA or tax attorney is vital for your expansion success. Look for professionals with experience in e-commerce and international business. They should offer comprehensive services, including tax planning, compliance, and advisory. A strong network of experts can also provide additional support in areas like legal structuring and financial planning.
Many tax professionals will point out that if you do not have U.S. dependent agents, there is no need to worry about U.S. taxes unless they are from FDAP income. The first part is not true. There is more involved in the analysis.
10. When Should You Consult a Professional?
Before making any moves, it’s essential to consult with professionals who can address all your concerns. A holistic approach that includes tax advisors, legal experts, and e-commerce consultants ensures you cover all bases and make informed decisions. These professionals should be well-connected and able to seamlessly facilitate your U.S. expansion plans.
Conclusion
Expanding your e-commerce business to the U.S. market offers tremendous potential for growth, but it requires careful planning and expert guidance.
By asking the right questions and aligning yourself with the right professionals, you can confidently navigate the complexities of U.S. market entry. Professional support is invaluable, whether managing Amazon account verification, understanding U.S. taxation, setting up banking, or ensuring sales tax compliance.
At NCP, we specialize in helping seven-figure e-commerce sellers as they expand into the U.S. market. Our team of experts, including Amazon Agency Partners, tax advisors, and legal consultants, are here to guide you every step of the way.
Contact us today to schedule a consultation and take the first step toward a successful U.S. expansion.
