Understanding Amazon’s Tax Interview: Key Mistakes Non-Residents Should Avoid with LLCs

Navigating Amazon’s tax interview for non-residents with U.S. LLC can be complicated, particularly regarding tax compliance. Many non-residents choose to operate as individuals or as entities from their home country and will complete the W-8BEN or W-8BEN-E form during the Amazon tax interview.

However, forming a U.S. single-member LLC often becomes necessary, especially in dropshipping scenarios where U.S. suppliers require dealing with U.S. companies (tip: don’t form your LLC in Wyoming when dropshipping). It might also be essential for securing U.S. insurance coverage when options are scarce in the non-resident’s country. The necessity for insurance compliance increased after September 2021, particularly for sellers recording over $10,000 a month in sales.

It’s crucial to understand that U.S. suppliers may be indifferent about your Amazon sales, the proper completion of your Amazon tax interview, or even whether you’ve mistakenly committed tax fraud. However, insurance underwriters need to be more indifferent regarding claim filing.

Imagine this: Your insurance adjuster denies your claim because your U.S. LLC wasn’t genuinely managing your Amazon business or due to an ‘inadvertent trick’ played on the Amazon tax interview. The repercussions can range from mildly inconvenient to severe, depending on the size of your claim. A $5K claim on a $1M policy might not raise eyebrows, but a claim worth $800K is likely to trigger intensive scrutiny from insurance company attorneys.

Suppose you’re an Amazon seller ticking the insurance box to get verified and are not concerned about coverage because you’re selling low-risk items like rubber kitchen spatulas. In that case, the above doesn’t apply. However, the looming risk of an Amazon suspension should pique your interest, so please keep reading.

Establishing a compliant U.S. LLC and meticulously navigating the Amazon tax interview are not just administrative formalities. They are protective measures crucial to the value and longevity of your Amazon business and brand. Make no mistake – skirting these requirements could lead to a pain you didn’t anticipate, undermining the success you’ve worked so hard for.

Amazon Tax Interview Questions

 

Here are two pivotal questions you need to answer: Are you classified as an individual or a business for tax purposes? I think your response to this will change the question you have.

Upon selecting ‘individual,’ a critical note is displayed: if you choose this category, it will lead to the following question: Are you a U.S. citizen, a U.S. permanent resident (green card holder), or another type of U.S. resident alien? It’s worth noting that this question underwent revision in the Fall of 2022 to enhance clarity in the tax interview process.

The clarification under the initial question specifies that ‘individual’ encompasses sole proprietors or single-member LLCs where the owner is an individual.

For non-residents possessing a single-member LLC disregarded for tax reasons, the default choice is ‘individual.

Your Amazon “Sold By” Name


Consider this perspective on the Amazon storefront process: if your goal is to open an Amazon store using a disregarded LLC that you own, your LLC name can be the “store name,” but most often, your brand name will be your “store name” which will show as “sold by.”

The displayed ‘sold by’ name on your storefront does not want to be your personal name, which may not project the most enticing marketing image. This is because operating under an individual name might suggest that you need to generate more profit to form a tax-saving entity.

This message may resonate poorly with U.S. consumers. True, not all Amazon shoppers pay attention to the ‘sold by’ name. However, an increasing number of consumers are becoming aware that not all products are sold directly by Amazon, and they’re likely to take note of your brand name.

 

So, could you think carefully about the image you want to project to your potential customers? Because when it comes to branding, every detail counts.

Which ‘Sold by’ Brand Impresses More?

Detailed Seller Information
Business Name: Best Products, LLC
Business Address:
10785 W. Twain Ave. Ste. 229
Las Vegas, NV 89135

Or is this brand with all Chinese details?

Detailed Seller Information
Business Name: HEFEI RUJU WANGLUOKEJI YOUXIANGONGSI
Business Address:
蒙城北路2003号
骏杰嘉和大厦1001室
合肥市
庐阳区
安徽省
230041
CN

A U.S. consumer prefers a store brand that presents itself as U.S.-based, even while shopping on Amazon. While this factor might not directly reflect in your conversion tracking, it can undeniably influence sales outcomes. How can the ‘sold by’ name include an LLC?

There are two potential explanations: you completed the Amazon account setup correctly, separate from the tax interview, or the seller has manipulated the Amazon tax interview. This act carries its own set of troubles. You can read on for more on this crucial topic.