This article is for you if you’re a “non-resident alien” (or “NRA”) for US tax purposes. You’re an NRA if you’re NOT any of the following:
- A US citizen,
- A US permanent resident (i.e., a “green card holder”), or
- Someone who’s lived in the US long enough to pass the “substantial presence test.”
Thanks for the Gift!
Many NRAs who sell products into the US are filing US tax returns and paying US tax even though they’re not actually required to under US law. As an American myself, I’d just like to say thanks for your generous gift! Theoretically at least, I suppose my personal tax liability is a little lower due to your contributions, and I really appreciate it.
If you’re an NRA selling on Amazon and you don’t have employees (or other service providers) in the US, you simply don’t owe any US income tax on your Amazon sales. The same thing is true if you sell on Etsy, Ebay, your own website, etc.
How It Really Works
The whole key here is that you’re subject to US tax only if you’re “engaged in a trade or business in the United States” (or “ETBUS” for short). That’s the case only when you have your own people on the ground in the US running your business.
If it’s just you operating your business and you live outside the US, or you have employees who are all outside the US as well, then you’re not ETBUS, so you’re not subject to US income tax. It really is that easy, notwithstanding the nonsense you may read otherwise on the internet.
You’re still not subject to US income tax even if any of the following are the case:
- You source products from the US;
- Your products are manufactured in the US;
- You operate through a US LLC that’s a disregarded entity or partnership for US tax purposes;
- You deposit funds into a US bank account;
- You use non-Amazon third-party fulfillment centers in the US;
- You use other third-party service providers in the US, like graphic designers etc. that you find on sites like Upwork.com;
- You use a US address associated with your business; or
- You’re registered to collect sales tax in one or more states.
The bottom line is that you should pay tax only where the actual work of your business occurs, and nothing in this world can occur without a human doing it. If all the humans who care about your business are outside the US, then that’s where your business occurs, and that’s where you should pay tax. People in the US who do things connected with your business (e.g., employees of Amazon or DHL, third-party graphic designers, etc.) aren’t doing your business, their doing their own business—you’re just a customer or client of theirs.
To see all the details on how the law works (and why so many US accountants get this issue wrong), click here for a deeper background article.
Get Your Money Back
Once you’ve realized that you don’t need to pay US income tax on your Amazon sales, the next step is to get a refund of what you’ve paid. Also, the US will actually pay you interest on your generous gift—so really you may have some amount on deposit at Uncle Sam’s bank.
You can only claim the refund going back three years. The refund is claimed by filing an amended return that explains the situation to the IRS.
I’ve helped many NRAs take back their generous gifts to the IRS. The first step is to have a call so we can discuss your specific situation and how this all works. I can then provide an exact quote for a flat fee to get your money back from the IRS.
Ready to get your money back? Book a consultation so we can discuss your specific situation and I can answer all your initial questions.