Walmart is a fast-growing marketplace, with e-commerce revenues skyrocketing during the pandemic. There are many benefits as a non-resident to get your e-commerce in the best option to sell on Walmart, including:
- Walmart marketplace is a newer competitor to eBay and Amazon marketplaces. Walmart’s marketplace offers sellers the opportunity to reach 100 million shoppers on Walmart’s website and app.
- Amazon has 40% of the e-commerce market, compared to Walmart’s 6%, but they are growing quickly.
- These countries are now approved to sell on Walmart: China, India, Hong Kong, the United Kingdom, Canada, Japan, and Mexico. Other countries must establish a U.S. taxpayer to register.
- Walmart marketplace gives you control to manage inventory, set your pricing, fulfill your own orders, and offer online customer care.
- Walmart allows you to reach millions of new customers that may not be shopping on Amazon.
- Walmart requires that you are approved to sell, which means you must offer high-quality products priced competitively. This means less competition because not everyone gets accepted.
- Walmart passed 150,000 sellers in July of 2022.
- Walmart sellers get 13 times more visitors than Amazon.
- Ranking your product on Walmart takes less time, effort, and money.
- There is less competition for the buy box. You can only reprice your listings once per day, which helps reduce competition.
- Walmart offers “no SKU minimums or maximums, so you can list your entire catalog.
- Walmart has no setup or monthly fees.
- Walmart offers Walmart Fulfillment Services (WFS), similar to Amazon’s FBA.
*https://www.marketplacepulse.com/walmart/number-of-sellers
The major downside is getting approved to sell on Walmart takes a lot of work. New sellers need to submit an application where new sellers have to share their experience and seller feedback. This process can take weeks before approval or rejection is delivered.
Here are the Steps to Sell on Walmart Marketplace:
- Apply to be a Marketplace Seller
- Complete Your Registration
- Complete Partner Profile
- Complete Item Setup
- Test Items and Orders
- Launch Your Account
Let’s focus on the most important part of the process, what are the possible requirements (since they are not made public), and the steps to apply and get approved to sell on Walmart.
Walmart Marketplace Seller Requirements
Before applying to be a seller on Walmart marketplace, please review and gather the following. Although Walmart does not provide you with an exact checklist for success, especially with who may be accepted and who is not accepted, our guidelines will give you the best opportunity for approval.
Walmart Overview Before You Apply:
- History of marketplace or eCommerce success. We recommend at least two years of e-commerce experience selling on another marketplace such as Amazon or eBay and your website or a Shopify store.
- Ensure that none of your products appear on Walmart Marketplace’s Prohibited Products Policy*
- All your products have UPC barcodes**
- DUNS Number (Business Credit)***
- Shipping Account Established (USPS, UPS, FedEx)****
*Walmart Marketplace’s Prohibited Products Policy. These include hazardous materials, alcohol, certain types of food, offensive products, and more. Please thoroughly review the list—if you have even just one of these items in your catalog, your Walmart Marketplace application will be denied.
**If you are planning to sell private label products. You will need to get a UPC barcode for your product. You can get barcodes from https://www.gs1us.org/. There are also plenty of resellers of barcodes on the internet that offer a lower price.
***https://www.dnb.com/ – get it within two weeks. It does like your business credit. It tells Walmart how your business will stand in the eyes of the whole credit community in the U.S.
Note: You might do DUNS first before you start your application process because once you start applying, you need to finish the whole application within the same session. Your progress will not be saved if you close your browser or tab.
The application process should take about 10-15 minutes if you have all your information available. Walmart marketplace recommends using Google Chrome on either your laptop or tablet. Make sure you have everything that is mentioned above.
**** You can sign up directly with each shipping company (if you have high volume). Or go with a paid subscription service like endicia, shipstation, or stamp.com. There is a free service called pirateship.com that offers USPS and UPS labels at a discount rate.
NOTE: Providing as much information about your business upfront will save you time later. If you have back-and-forth correspondence with Walmart Marketplace to fill any gaps in your application, it’s a good idea to act fast to avoid any delays in the review process.
What you’ll need to Apply to Walmart:
- U. S. Business Tax ID (SSN not accepted) – U.S. taxpayers.
- Fill out W9 (https://www.irs.gov/pub/irs-pdf/fw9.pdf). This form must be completed properly and most non-residents make costly mistakes on this form.
- EIN verification letter from the Department of Treasury that verifies your U.S. business address or place of physical operations (not required anymore for non-residents).
- Address or place of physical operations
- U. S. business address (for U.S. taxpayers).
- U.S. phone number
- Planned integration method for your product catalog (bulk upload, API, solution provider)
- Primary product categories, catalog size, and related information (e.g., total SKUs you will be selling on Walmart.com initially with verified UPC information, used vs. refurbished, etc.)
Which U.S. Company is Best to Sell on Walmart?
Several factors are involved in making this critical decision, especially for non-residents.
A U.S. resident may form an LLC taxed as an S corporation to keep your profits off schedule C, which is more likely to be audited, or an LLC taxed as a C corporation, which may help manage your personal tax bracket. However, you will want to be aware of the potential double taxation of profits. In either case, the LLC operating agreement must match the number of members and taxation type of the LLC.
A non-resident has the option now to sell as a foreign company and show the channel partner that referred you. A non-resident may choose to create a U.S. taxpayer; an LLC taxed as a corporation or partnership to separate U.S. sales and liability from foreign sales and liability. Of course, tax planning is essential when creating a U.S. taxpayer regarding U.S. taxes, tax treaties, and the overall tax impact on your business. Don’t be surprised if you receive different answers as we have after interviewing several CPAs and U.S. tax attorneys on this complex subject. The key is to complete the W-9 correctly, which most online videos and so-called “experts” are not advising non-residents correctly.
The goal when you apply to Walmart as a non-resident is to fill out the correct tax form, which will either be the W-9 or W-8ECI. ECI stands for “effectively connected income.” If you have “effectively connective income” in the U.S., that will impact your U.S. tax responsibilities.
If you create a U.S. taxpayer and fill out a W-9, you are creating a permanent establishment in the U.S., which will require U.S. tax returns and taxes to be paid on any profits.
The key is working with our team that works closely with CPA firms that are specialists with non-residents to help minimize your U.S. tax responsibilities which come with working with the tax treaty in your country (assuming one comes into play if not, there is another level of complexity).
An LLC is the most popular U.S. entity and the most understood with the most errors that create issues down the road. The key factors with an LLC formation to keep in mind include the following:
- The management of the LLC
- The taxation type, there are four options, partnership, corporation, S corporation, and disregarded
- The operating agreement must match the number of members and taxation type
- The LLC formalities to protect the entity veil
- Capitalization of the foreign owner (whether an individual or foreign company)
- The proper U.S tax returns to be filed for the LLC and the ownership structure.
- Avoiding commingling of funds
- Proper accounting and record-keeping to protect you from the IRS
- The properly completion of the SS4 application to the IRS
The U.S. tax strategy in relation to your country of residency is a critical factor in your overall planning. It makes no sense to save a few hundred dollars in your LLC formation, only to end up paying thousands more in taxes because the overall tax strategy was not the best for your situation.
We work with top CPAs and tax attorneys that understand U.S. taxation and the key questions for your tax professionals. If, as a non-resident, you create a U.S. taxpayer to sell on Walmart, some of the key questions to address are listed below.
- Are you engaged in a U.S. trade or business?
- Did you create a U.S. taxpayer?
- Did you create a permanent establishment?
- Did you have a hybrid entity in terms of how your countries view the U.S. taxation of your LLC formation?
- Do you qualify for treaty benefits with your country?
- Should you retain profits in the U.S? Issue dividends?
- Which U.S. tax returns are recommended?
- Which state tax returns are also due?
- When is a sales tax registration required? Especially important for Shopify sellers.
- What is the start date on your SS4 application?
- What mistakes do you want to avoid on your SS4 application?
- Do branch profits tax come into play in your structure?
- Does your entity formation need to pay U.S. taxes?
Here is an important example of the branch profits tax vs. dividends withholdings tax.
A foreign-owned U.S. corporation is not subject to the branch profits tax. A foreign corporation that does not have a permanent establishment in the U.S. is not subject to the branch profits tax. If a foreign corporation has a permanent establishment in the U.S., it will be subject to the 30% branch profits tax, which may be reduced by the tax treaty with your home country.
If a U.S. corporation distributes profits to a foreign corporation, that falls under dividends withholding tax at a 30% U.S. tax rate. The 30% tax rate can also be reduced by the tax treaty between your home country and the U.S. This is only a small sample of what is involved when you expand your e-commerce business to the U.S. and form a U.S. company to sell on Walmart.
In the end, to complete the W-9 on Walmart’s application, you are creating a U.S. taxpayer, and treaty analysis is important. Likely, you may need a new tax professional in your home country in addition to our resources in the U.S.
Another important component is which state is best to form your U.S. company to sell on Walmart. As a U.S. resident, the most common is to form an entity in your home state. However, Nevada does offer another layer of protection and complexity, even though foreign qualification into your home state will be required based upon the multi-state taxation rules. Most CPAs will advise you to “keep things simple” and form an entity in your home state, which is not always best.
Non-residents, on the other hand, have more options because they are not personally domiciled in the U.S. The most common choices are Delaware, Nevada, and Wyoming. There are several factors involved in which state is best, and one factor that most do not consider is that Walmart requires business liability insurance. One of these three states will generally trigger higher insurance premiums for your business.
Other factors include liability protection to the owner and officers or manager, ability to obtain additional verification is required in the form of a state business license or utility bill.
Costly W-9 Mistake to Avoid:
A non-resident will complete a W-9 as part of the application process. To complete a W-9, you will need to create a U.S. taxpayer. A U.S. single-member LLC owned by a foreign individual or foreign entity does NOT create a U.S. taxpayer. A U.S. taxpayer can be a U.S. LLC taxed as a corporation or a partnership. Both have U.S. tax responsibilities. If you are told or advised to fill out the W-9 form, you will NOT be checking the box that says individual/sole proprietor or single-member LLC.
This is NOT correct because, as defined below, the part 2 certification (on the W-9), number 3 says you are a U.S. citizen or other U.S. person. Which include: Definition of a U.S. person. For federal tax purposes, you are considered a U.S. person if you are:
• A domestic trust (as defined in Regulations section 301.7701-7)
Once you are clear on these major components, our U.S. entity packages include training on both subjects, which state and entity are best. Our popular strategy sessions will help you clarify what is best for you before you form a complete U.S formation with our team. Learn more about our strategy options at this link.
U.S. Virtual Address Service Strategy
We do recommend our U.S. virtual address service with the ability to scan important mail for your immediate attention. Mail sent overseas may encounter extended delays before delivery, or worse, not be received, especially if the address is not correct it does not have the proper postage.
Walmart may send address verification notices or other requirements in the future. Making sure your address matches up on all your accounts is important in your verification process. If you sell on Amazon with your foreign address, updating that to your new U.S. address would make sense (Amazon may send out a 6-digit verification code) before you complete your Walmart application.
You will receive the IRS letter to your U.S. mailing address, and you will need a copy of that letter to upload to Walmart during your application process. This EIN confirmation letter is called CP 575, and the IRS only mails the letter to the mailing address listed on line 4 of the SS-4 application. You will want that to come to our U.S. virtual address service, and we will scan the letter into the cloud and notify you when we have that important letter.
Need support? Go to “Book a Call” at the top of our website page to schedule a Zoom call with our team.
Take the next step and learn more about how NCP will help you with your U.S. company formation and our support to launch your business on Walmart.com.