Amazon has given worldwide access to reach your customers.
However, operating on a cross-border platform involves dealing with a lot of regulations and complexities. Taxation is one of them.
In addition to your home country, you need to interpret and comply with the rules of another country.
If you are a Canadian Amazon seller in the U.S., we have discussed different steps you need to understand before filing any of your taxes.
Before you file your amazon taxes in the U.S., we would recommend reading the difference between Canadian e-commerce taxes and the U.S. e-commerce taxes. By comparing both, understanding the processes may become easy for you.
3 Steps to File Taxes for Canadian Sellers in the U.S.
1 – Understanding your Level of Involvement
Taxation for out-of-country sellers has a varied effect depending upon their level of involvement in the U.S. land.
Moreover, the taxation laws in the U.S. have variability depending upon the state you are operating in.
We have mentioned the following the categories:
| Situation | Explanation | Examples | Implications |
|---|---|---|---|
| Category 1 | You just accept orders and fulfill them. | Amazon fulfilled by the merchant. | None |
| Category 2 | You actively use the logistics in the U.S. | You operate an office in the U.S. and produce revenue. | You will be labeled under ECI (Effectively connected income) or ETBUS. |
| Category 3 | You have a proper business setup in the U.S. | In addition to offices, you have employees as well. You operate for 183 days. | You will be labeled under ECI and PE (Permanent Establishment) |
2 – Determine your Tax Forms
Once you have a clear understanding of ECI and PE, the next step will be to determine which form you may need to file.
We have written a complete article explaining all the forms and deadlines for Canadian e-commerce sellers in the U.S.
Moreover, the general overview will be as follows:
- Category 1:
If you belong to category 1, you may not need to file any of your taxes. However, a consultation with a professional CPA is always recommended.
- Category 2:
If you fall under this category, you may need to file the following forms.
For individuals: 1040NR & Form 8833
For corporations: 1120-F with Form 8833
- Category 3:
You may need to file these under this category.
For individuals: 1040 NR
For Corporations: 1120-F
3 – Consult a CPA
Taxation is always complex. Moreover, cross-border taxation adds to the complexity.
You deal with different rules, geographies, and governments. The risk of losing your money for unnecessary taxes gets high.
AkifCPA makes sure that you save your money and time with us. We have a history of excellent services to our clients.
Contact us today and file your e-commerce taxes.
