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Amazon FBA Taxes for Foreign Sellers: The Essentials
Updated: Oct 6
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Why FBA inventory in US warehouses raises nexus questions
When you store products in Amazon's US fulfillment centers through Fulfillment by Amazon (FBA), your inventory is physically in the United States, usually in several states at once, because Amazon moves stock between warehouses. Physical inventory in a state creates sales tax "nexus" there, which means the state can require tax to be collected on sales to its residents. Today Amazon collects and remits that tax on marketplace orders in every state that has a sales tax. Nexus still matters: some states expect the seller to register or file returns anyway, and any sales you make outside Amazon are your own responsibility.
Inventory in US warehouses also raises a federal income tax question, covered below. As an Enrolled Agent, I often see foreign sellers caught off guard because they assumed that selling from abroad meant no US obligations.
Entity structure options before you scale
Before diving into Amazon FBA or any other U.S.-based sales activities, it's crucial to set up your business entity properly. The most common choices are forming a single-member LLC (SMLLC) or a corporation. A SMLLC offers flexibility and simplicity for small-scale operations but provides limited liability protection similar to that of a corporation. If you're just starting out with FBA sales, an SMLLC might be sufficient.
As the business grows, some foreign sellers move to a US C corporation, which pays US corporate tax on its own profit and keeps the owner off a personal US return. An S corporation is not an option for most foreign sellers, because a nonresident alien cannot be an S corporation shareholder. Which structure fits depends on your volume, your home country's rules and whether a tax treaty applies.
Choosing the right entity structure upfront is critical because changing it later can be costly and complex. As an Enrolled Agent, I advise clients to think about their future growth plans when deciding on their initial business setup.
1099-K reporting and what Amazon sends the IRS
Amazon runs a tax interview for every seller. US taxpayers who pass the reporting threshold (more than $20,000 in gross payments and more than 200 transactions in a year, the threshold restored by 2025 legislation) receive Form 1099-K, which reports gross payments before fees and refunds. A foreign seller who certifies foreign status on Form W-8BEN or W-8BEN-E generally does not receive a 1099-K. If you sell through a US LLC, complete the interview to match how the LLC is taxed.
Either way, the 1099-K is a reporting form, not an income statement. Amazon keeps complete records of your sales whether or not a form is issued. Your taxable income, if you have a US filing obligation, is computed from actual sales less cost of goods, Amazon fees, advertising and other expenses.
For example, if you have significant marketing costs or inventory write-offs, these should be factored into your tax calculations. As an Enrolled Agent, I emphasize the importance of keeping detailed records to accurately report your income and claim legitimate deductions.
Sales tax collection Amazon handles vs. what you still owe
Every US state with a sales tax now has a marketplace facilitator law. Under those laws Amazon, not the seller, calculates, collects and remits sales tax on orders placed through Amazon. For a seller whose only US channel is Amazon, most of the sales tax work is handled by the platform.
What is left is narrower but real. Sales through your own website, or through any channel that is not a marketplace facilitator, are yours to tax once you have nexus in a state, and FBA inventory gives you physical nexus wherever it is stored. Some states also expect sellers with in-state inventory to hold a permit or file returns even when the marketplace collected all the tax.
The rules differ by state, so check each state where your inventory sits and each state where your direct sales pass the economic nexus threshold. How the thresholds work. As an Enrolled Agent, I advise clients to review this once a year, because both the thresholds and Amazon's warehouse footprint change.
Income tax exposure on US-sourced FBA profit
Sales tax is a state matter. Federal income tax is a separate question, and it turns on whether you are engaged in a US trade or business. A foreign seller with no US office, staff or inventory generally is not. Storing inventory in US fulfillment centers and selling it regularly to US customers can cross that line. If it does, the profit is "effectively connected income" taxed on a net basis: on Form 1040-NR for an individual who owns the LLC directly, or on a corporate return if you sell through a corporation. A tax treaty with your home country can change the result; Colombia, for example, has no income tax treaty with the United States.
For example, if you sell $50,000 of product through FBA and keep $20,000 after cost of goods and fees, the $20,000 is the figure that matters if the income is effectively connected. Whether it is depends on your facts, which is why this is the question to settle with a professional before volume grows. A foreign-owned single-member LLC also files Form 5472 for every year it has transactions with its owner, whatever the income tax answer.
Getting structured before volume makes fixing it expensive
One common mistake foreign sellers make is delaying the setup of a U.S. entity until after significant sales have been made through FBA. By then, restructuring can be costly and complex, often requiring additional tax filings and potential penalties for non-compliance. It’s far better to establish your business structure early on.
For instance, setting up a single-member LLC or corporation before you start selling through Amazon ensures that you’re in compliance from the outset. This proactive approach not only simplifies your financial reporting but also protects you against unexpected tax obligations down the line.
As an Enrolled Agent, I recommend foreign sellers consult with a professional to set up their U.S. entity correctly right from the beginning. Doing so can save substantial time and money as your business grows and scales in the United States.
Frequently Asked Questions
Do I need an ITIN if I’m just starting FBA sales?
Not to start. You can form a US LLC and get its EIN without an ITIN. You will need an ITIN if you have to file a personal US return, for example Form 1040-NR because your FBA profit is effectively connected income.
Is it mandatory to register my foreign business in the U.S. states where I sell through FBA?
It depends on the state and on how you sell. Amazon collects and remits sales tax on its marketplace orders in every state with a sales tax. Some states still expect sellers with inventory there to register or file, and sales through your own website are your responsibility once you have nexus.
Can Amazon FBA handle all of my state’s sales taxes automatically?
For orders placed on Amazon, yes: marketplace facilitator laws in every sales-tax state make Amazon responsible for collecting and remitting. Amazon does not cover sales you make through your own store or other channels, and it does not file any state return that a state requires from you as a seller.
Related Reading
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This article is general information, not individual tax advice. If you want to talk through your specific situation, book a free 20-minute review or call or text us directly.
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