Conflicting Infos between CPAs on my US LLC and US Taxes as a Non-Resident Alien (Self-Publishing on Amazon) Should I pay US taxes or not?

[alexx999]

I Own a Wyoming US LLC, I self-publish books on Amazon thru KDP, therefore they are the distributors, I spoke with different CPAs to understand who's better and why and I've got 3 different opinions from three different people...
Two of them said I owe Taxes to the US since I make business in the US, one of them said I'm not doing any business in the US since Amazon is selling, I am just using Amazon as a marketing platform...

I am confused now, I'll copy the different replies I've got, I'd like some clarifications on the topic, my idea is that I don't OWE taxes to the US, since i am a non-resident alien, without any office, Physical presence or employees in the US Soil... As far as I know, i just need to pay taxes on my country of residency (Mexico).

CPA 1:
"U.S. Tax Implications for your Wyoming LLC

As a non-resident alien with a U.S. LLC, you likely have to pay U.S. taxes on any income earned by the LLC. This applies specifically if the LLC is engaged in a U.S. trade or business, which selling on Amazon KDP likely falls under."


CPA 2:
"I will do my best. The taxation of foreigners doing business on Amazon is a bit murky and the US court system has not yet made a ruling directly on the topic.



Basically you own what is called a "single member LLC" or "SMLLC." For tax purposes, the US government ignores the existence of the LLC and, therefore, calls it a "disregarded entity."

As a disregarded entity, the entity is not itself subject to US tax.

However, the foreign owner (you in this case) will be subject to US income tax if the the income generated by the LLC is "US source income" or what is often called "effectively connected income."


As I mentioned, it is unclear whether sales through Amazon are treated as effectively connected income. Many practitioners believe that Amazon is acting as the seller's agent and, therefore, the income is sourced to the US and subject to tax. Others, like the person you mentioned above, believe Amazon is the independent seller and that the foreign owner is not really conducting any business activity in the US.


My personal opinion is that sales to US residents through Amazon would be treated as US source income subject to tax. But, as you noted, not all accountants agree"




Here's the advice i got from the forum in the past:

"

You are licensing your content to Amazon and Amazon pays you royalty.

IT IS AMAZON THAT DOES THE SELLING, NOT THE LLC!

The LLC is only a means to receive payments from the company that does the selling (Amazon).

what the LLC is really doing? It's buying ads to bring eyeballs to the company that sells the product. (amazon, not the LLC)

Since the LLC is not doing the selling, the US can't claim that you are creating an establishent in the country"


I think this is the correct version, but I'm still confused, does anyone has any experience and can explain with some references if i really owe taxes to the US or not?








Message

 

[Alexmorgan]

Even here you will have the same thing

Thats why im making one of my companies just for US operations and let them tax me day and night

 

[daniels27]

Regarding ETBUS, you can see my discussion here:

W8-BEN form needed?

I have a question about whether I need to fill in the W8-BEN form in my situation. I am a perpetual traveller and I have a contract between my foreign-owned single member US LLC (listed on the contract as "supplier/an independent contractor specializing in providing contract service") and an...

www.offshorecorptalk.com

This only relates to an active regime, i.e. selling yourself. The whole matter is highly disputed among lawyers and CPAs with no clear mind and time to read the law.

You do no sell yourself. This is very important. Amazon is selling. Not you. You get royalties from Amazon, which are taxed in accordance to the relevant double taxation agreements or in the absence of it at 30%. You can check this here:

Tax Withholding

kdp.amazon.com

The long answer is here

Publication 519 (2023), U.S. Tax Guide for Aliens | Internal Revenue Service

www.irs.gov

The 30% Tax​

Tax at a 30% (or lower treaty) rate applies to certain items of income or gains from U.S. sources but only if the items are not effectively connected with your U.S. trade or business.

Fixed or Determinable Income​

The 30% (or lower treaty) rate applies to the gross amount of U.S. source fixed, determinable, annual, or periodical (FDAP) gains, profits, or income.
Income is fixed when it is paid in amounts known ahead of time. Income is determinable whenever there is a basis for figuring the amount to be paid. Income can be periodic if it is paid from time to time. It does not have to be paid annually or at regular intervals. Income can be determinable or periodic even if the length of time during which the payments are made is increased or decreased.
Items specifically included as fixed or determinable income are interest (other than OID), dividends, dividend equivalent payments (defined in chapter 2), rents, premiums, annuities, salaries, wages, and other compensation. A substitute dividend or interest payment received under a securities lending transaction or a sale-repurchase transaction is treated the same as the amounts received on the transferred security. Other items of income, such as royalties, may also be subject to the 30% tax.

If you are not ETBUS, which applies to you, you pay the 30% (or less if you have a double taxation agreement in place). If you are ETBUS, you need to pay taxes in the US and tell Amazon that you are tax resident in the US.

 

[Xshore]

The LLC is disregarded, so the question is if you personally should pay taxes in the US when selling through Amazon. You'll notice that when filling out the tax interview on amazon it relates to your personal details, not the LLC. Check if other foreigners pay tax on those sales through Amazon.

 

[JohnnyDoe]

Regarding ETBUS, you can see my discussion here:

W8-BEN form needed?

I have a question about whether I need to fill in the W8-BEN form in my situation. I am a perpetual traveller and I have a contract between my foreign-owned single member US LLC (listed on the contract as "supplier/an independent contractor specializing in providing contract service") and an...

www.offshorecorptalk.com

This only relates to an active regime, i.e. selling yourself. The whole matter is highly disputed among lawyers and CPAs with no clear mind and time to read the law.

You do no sell yourself. This is very important. Amazon is selling. Not you. You get royalties from Amazon, which are taxed in accordance to the relevant double taxation agreements or in the absence of it at 30%. You can check this here:

Tax Withholding

kdp.amazon.com

The long answer is here

Publication 519 (2023), U.S. Tax Guide for Aliens | Internal Revenue Service

www.irs.gov

If you are not ETBUS, which applies to you, you pay the 30% (or less if you have a double taxation agreement in place). If you are ETBUS, you need to pay taxes in the US and tell Amazon that you are tax resident in the US.

100% this.
As you have a foreign owned SMLLC Amazon should act as the withholding agent.

 

[daniels27]

The LLC is disregarded, so the question is if you personally should pay taxes in the US when selling through Amazon. You'll notice that when filling out the tax interview on amazon it relates to your personal details, not the LLC.

Yes, it pertains to the owner (called member) of the LLC (foreign person or foreign company). Also please note that there is a difference between physical goods on Amazon Marketplace / FBA and digital goods on Kindle. The tax interviews are similar but not the same.

Physical goods are sold by you to the customer (or Amazon if you supply them, which is rare). There is no withholding for payments.
Digital goods are sold by Amazon and you are entitled royalties. There is 30% withholding for non-resident taxpayers.
If you are ETBUS, you pay taxes in the US as individual or company and then also withholding taxes on dividends. This applies for both type of goods.

There is no way to check what other Amazon sellers pay on taxes in the US. This is also what OP is mentioning regarding the conflicting information. In any case, CPA 1 is completely wrong. If your Kindle books would make you ETBUS already, then there would be no need for a tax interview. Obviously, you can do Kindle and not be ETBUS. CPA 2 is correct, there is no final answer. You can read my discussion in the other thread about it. My personal opinion is that for ETBUS you need to have an office or dependent agent. This is in line with internal IRS publications and most likely also the reason why there is no court ruling: because IRS is not going to court as they don't see this as ETBUS.

Check if other foreigners pay tax on those sales through Amazon.

You cannot check that. You can only use google and then you have different lawyers and CPAs with different opinions. Check my discussion in the other thread.

 

[uplana]

You cannot check that. You can only use google and then you have different lawyers and CPAs with different opinions.

how would you check that on Google?

 

[daniels27]

how would you check that on Google?

fba engage in trade or business - Google Suche

ETBUS

As a UK registered company trading in US selling physical goods, do we need to pay any kind of tax in US?

Answer (1 of 3): Sure, I can address tax issues here. US Treasury taxes a foreign corporation (“FC”) on its effectively connected income from a United States Trade or Business (“USTB”) as noted in Section 882(a). While the internal revenue code and treasury regulations do not specifically define...

www.quora.com

https://www.justanswer.com/tax/by747-morning-just-wondering-foreign-seller-amazon-fba.html

U.S. Tax Responsibilities for Non-Resident Sellers

The U.S. tax responsibilities for non-resident sellers include Amazon.com, eBay, Walmart, and Shopify sellers. Let us help you.

nvinc.com

International Tax Blog

Andrew Mitchel LLC is an international tax attorney with extensive experience in international tax planning.

www.andrewmitchel.com

https://onlinetaxman.com/tax-tips-for-amazon-sellers/

NOT ETBUS

Non-US Entrepreneurs: You Can Sell Products or Services into the US Without Paying US Tax – US Tax Services

The tax treatment of non-US entrepreneurs selling into the US is probably the most misunderstood issue in all of US international tax. Let’s take a closer look, and I’ll show you why much of the conventional wisdom you’ll read here is absolutely wrong.

ustax.bz

U.S. Tax Issues for Amazon Sellers in 2021 (Proven Tips)

If you're an Amazon seller, understand how to deal with your U.S. taxes here. The one tip that stanads above them all is....

mollaeilaw.com

US LLC for Non-US Residents (Foreigners) 2024 Guide

We examine the benefits of an LLC to a non-US resident founder, and how it can be used to your advantage. The ultimate guide to start a US LLC as a non-US resident.

startfleet.io

James Baker CPA | USA Expansion

services.jamesbakercpa.com

https://www.justanswer.com/tax/mq3fk-hungary-i-d-sell-amazon-fba.html

The lists are about equally long.

In regards to any law, the only valid indications I found are

26 CFR § 1.864-4 - U.S. source income effectively connected with U.S. business.

www.law.cornell.edu

The examples indicate that the sale of goods into the United States is not considered engaged in trade or business with the United States, but the operation of a sales office in the United States.

https://www.irs.gov/pub/int_practice_units/ISI9422_01_01.pdf

The code and regulations do not define what constitutes a US trade or business. In addition, the IRS will generally not rule on whether a taxpayer is engaged in a U.S. trade or business.
Is the FC engaged in a trade or business within the U.S.?
The issue is whether sales contracts, solicited, negotiated or executed by U.S. office personal and the performance of technical services by employees or agents in the US create a U.S. trade or business. In all instances, this is a facts and circumstances test.
- Confirm that personnel in the US sales office solicit, negotiate or execute contracts with OEM
- Confirm the location where the technical service employees provide technical services to OEM customers
- Verify that the technical employees are employees of the FC and not independent contractors

 

[JustAnotherNomad]

You probably aren't selling anything, you're probably receiving royalties. I guess you have to submit W8-BEN-E and Amazon will have to withhold tax, unless you can use a treaty.
So it depends on where you live.

 

[Xshore]

You probably aren't selling anything, you're probably receiving royalties. I guess you have to submit W8-BEN-E and Amazon will have to withhold tax, unless you can use a treaty.
So it depends on where you live.

W8ben-e is for companies. He as a sole owner of the disregarded llc should file a w8ben. Anyway, amazon will handle that automatically

 

[Xshore]

People seems to overlook that a llc is disregarded for federal taxes. So if you have etbus, you'll have etbus also if you sell via a foreign company (or without any company)