In recent times there is an uptick in E-commerce sales, especially due to COVID-19 Pandemic. With the closures of more and more retail stores, customers are ordering online. Amazon is one of the biggest online retailers in the world. Many Canadian businesses have a presence on Amazon, both Amazon Canadian Store and US Store.
This post is for general purposes only and cannot be considered tax advice. If you are a Canadian having a US amazon store, please contact your professional income tax service provider in Canada. If you have the US Effectively connected income (ECI) or Permanent establishment (PE), you are recommended to contact professional tax services that specialize in cross-border taxation of the US and Canada.
US Taxes for Canadian businesses with US Amazon Store
This infographic explores three possible different scenarios which a typical Canadian business selling on Amazon store faces:
- A Canadian business having US Amazon Store with no offices, or no employees in the US and not using any warehousing services from Amazon. Such a business does not have US income tax reporting requirements and does not have to pay any US income taxes.
- A Canadian business has no US employee or office in the US but uses Amazon warehousing and handling services. For example, using only warehousing services by Amazon (FBA, fulfillment by Amazon). Such a business has the US effectively connected income. There are no US income taxes payable but there are US income tax reporting requirements.
- A Canadian business having a US office, employees in the US, or own warehouse in the US. This constitutes a permanent establishment in the US. There will be US taxes on the effectively connected income from the US. There is more reporting requirement involved with this.
In order to understand this infographic, readers are recommended to read the US Income taxes for Canadian businesses post.
If you are having US ECI or PE, you are subject to sales tax regulations as well. If you have a permanent establishment in the US, state income taxes are also applicable for such businesses. Canada-US treaty provides relief from double taxation at the federal level only. Certain states use economic nexus rules and tax income their state-sourced income if reporting thresholds are met, such as the State of California.
Keep in mind, the ECI of a CFC of a U.S. Citizen or Green cardholder is taxed in the United States. However, treaty can override it, if applicable. If you are a U.S. citizen or green cardholder, speak to your cross border tax accountant before making any decision.
You can take advantage of US income tax services for Amazon sellers in Canada from us. If you own an Amazon store and resident of Canada or any other country struggling to figure out your US income tax reporting requirements, we can help you with that.
Maroof HS CPA Professional Corporation is a CPA firm in Ontario, Canada providing a wide range of corporate income tax services and individual income tax services in Canada. Get in touch with us.
How to get ITIN from IRS?
Maroof HS CPA Professional Corporation is an IRS Acceptance Agent in Canada. We can help you with both US Income Tax return preparation as well as forward your application for ITIN (Individual taxpayer identification number). Get in touch with us.