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Why the issue matters: If the IRS later decides your Amazon activity is ECI, you can lose deductions and face tax on gross sales unless you filed a protective return.
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Common CPA splits:
• “No U.S. tax due? Then skip the return.” — true only when ECI is 100 % off the table.
• “Protective filings are just for big corporations.” — wrong; single-member-LLC owners need them too.
• “No U.S. office means I’m safe.” — ignores inventory in Amazon FCs, U.S. agents, or other PE triggers. -
Protective return mechanics:
• Foreign corporation: file Form 1120-F protectively + pro-forma 1120 with Form 5472.
• Foreign individual (owns SMLLC): file Form 1040-NR protectively + pro-forma 1120/5472. - Treaty overlay: If you’re claiming “no Permanent Establishment,” attach Form 8833 or face a $1,000 (§ 6712) penalty—protective return or not.
- Non-treaty sellers: Your only escape is proving no ECI at all (cross-border dropship, offshore POD, digital-only, etc.); the grey-area nature of that test is why many CPAs still recommend a protective filing.
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Bottom line: When there’s any doubt, a protective 1040-NR or 1120-F (with 8833 where required) locks in deductions, starts the statute of limitations, and limits penalty exposure.
U.S. Tax for Non-Resident E-Commerce Sellers—Are You Structured Correctly?
Most sellers assume they’re compliant—until the IRS says otherwise. Let’s ensure your business is set up the right way.