How does US Tax work for a non-resident Amazon seller based in Hong Kong?

Thanks for the detailed response! I think I'm still a bit confused about the "effectively connected income" concept. If my business activities (like sourcing products, managing operations) all happen in Hong Kong, but the products are stored and shipped from Amazon warehouses in the US, does that automatically create US nexus? And would a tax treaty between Hong Kong and US affect any of this? Also, for state taxes, does Amazon handle the sales tax collection now, or would I need to register in each state where they store my inventory?

For effectively connected income, it's about where the income is generated, not where you physically conduct operations. When you sell products that are stored in US warehouses to US customers, that creates US nexus regardless of where you manage the business from. The products' physical presence in the US is what matters. Tax treaties can provide some relief, but the US-Hong Kong tax treaty has limitations for business income. If you have "permanent establishment" in the US (which Amazon warehouses holding your inventory likely creates), you'll generally still be taxable in the US on that business income. Regarding sales tax, Amazon does have Marketplace Facilitator laws in most states now where they collect and remit sales tax on your behalf. However, you may still need to register in states where you have inventory for income tax purposes. Also, some states have economic nexus thresholds based on sales volume rather than physical presence.

Did it actually help with the state tax issues too? That's what scares me the most about selling on Amazon US from overseas. I've heard horror stories about sellers getting hit with surprise tax bills from random states years later.

I'm skeptical about these online tax tools for international sellers. How does it handle the complexity of tax treaties? And does it give you actual filing instructions or just general advice? Most of these services seem to be designed for US citizens, not foreign sellers.

Yes, it absolutely helped with state tax issues. It broke down exactly which states I needed to worry about based on where Amazon was likely to store my inventory, and which states have economic nexus laws that would affect me based on my projected sales volume. It even highlighted which states have more favorable tax treatments for foreign sellers. Regarding tax treaties and international complexity, that's actually where it excelled. It has specific modules for non-US sellers and addresses exactly how tax treaties apply to marketplace sellers. It gives you filing instructions, explains which forms you need, provides timelines, and even creates documentation you can share with a tax preparer if you use one. It's specifically designed to handle cross-border situations like ours, not just for US citizens.

How does this actually work? I thought the IRS doesn't take calls from international numbers? Do they help with state tax questions too or just federal?

This sounds like BS. I've tried everything to get through to the IRS as an international seller and nothing works. They don't prioritize foreign callers and the international tax line is always busy. I'll believe it when I see it.

The service works by essentially handling the wait time for you. You submit your number, and they use their system to navigate the IRS phone tree and wait on hold. When they reach an agent, they connect the call to your phone. It works with international numbers too - I used my Hong Kong number without issues. They primarily help with getting through to the IRS for federal tax questions. For state-specific questions, you'd need to contact each state's department of revenue directly. However, once you get clarity on your federal obligations, the state requirements often become clearer too. In my case, the IRS agent was able to explain how federal filing requirements affected my state obligations as well.

That's interesting! I hadn't heard about the QBI deduction for non-residents. Would this apply if I formed the LLC in Hong Kong but elected US tax treatment? Or would I need a US-formed LLC? And are there specific requirements for qualifying as a non-resident?

The QBI deduction can apply to income that's effectively connected with a US trade or business, regardless of where your LLC is formed. However, the business must qualify as a "qualified trade or business" under Section 199A rules. For a Hong Kong LLC with US tax election, you would need to file Form 8832 to elect how you want to be taxed in the US. Most commonly, foreign single-member LLCs elect to be treated as disregarded entities, meaning the income flows to your personal tax return where the QBI deduction might be applied. The key requirement is that the income must be effectively connected with a US trade or business and reported on your US tax return. There are income limitations and other requirements, so I'd recommend getting professional advice specific to your situation before making any decisions based on potential QBI benefits.

Is FIRPTA really relevant for an Amazon business though? I thought that only applied to real estate transactions. An Amazon seller account isn't real property, is it?

You're right to question this - FIRPTA typically doesn't apply to Amazon businesses. FIRPTA is specifically for "US real property interests" which generally means actual real estate or substantial ownership in companies whose assets are primarily US real estate. An Amazon seller business, even a successful one, wouldn't usually trigger FIRPTA withholding upon sale. The business assets (inventory, customer lists, brand value, etc.) aren't considered real property interests. However, there could still be other withholding requirements under different sections of the tax code when selling a US business as a non-resident. The buyer might need to withhold taxes under other provisions, but FIRPTA specifically wouldn't be the issue here. @Natasha Volkova - Were you thinking of a different withholding provision, or did you have a specific scenario in mind where FIRPTA might apply to an Amazon business?

This is exactly the kind of comprehensive analysis I was hoping to see! The double taxation aspect is something I completely overlooked when researching this. I'm particularly concerned about the Hong Kong territorial tax system interaction. If I'm managing the business from Hong Kong but selling through US warehouses, it sounds like I could get hit with taxes in both jurisdictions on the same income. The Branch Profits Tax is also news to me - that 30% rate sounds brutal on top of regular income taxes. Would forming a US subsidiary instead of operating as a branch help avoid this? And how do you determine what constitutes "reinvestment in the US business" for purposes of avoiding the branch profits tax? @Owen Devar - Do you have experience with the foreign tax credit process between US and Hong Kong? Is it straightforward to claim, or does it require extensive documentation?

@Joshua Wood Great questions! The foreign tax credit process between US and Hong Kong can be complex but is definitely manageable with proper documentation. For the US side, you d'use Form 1116 to claim foreign tax credits for Hong Kong taxes paid on the same income. Hong Kong requires detailed documentation showing the US taxes paid, which you can get from your US tax returns and payment records. The key is maintaining clear records that trace the same income being taxed in both jurisdictions. Regarding the Branch Profits Tax - yes, forming a US subsidiary like (a US LLC or corporation instead) of operating as a branch can help avoid this tax entirely. A subsidiary is treated as a separate US entity, so there s'no branch "profits to" tax at the additional 30% rate. For reinvestment, the IRS looks at whether earnings are kept in the US business operations versus being distributed or constructively distributed to the foreign owner. Things like expanding inventory, opening new product lines, or keeping profits in US business bank accounts typically qualify as reinvestment. One strategy many Hong Kong sellers use is forming a US LLC that elects corporate tax treatment, which can provide more flexibility in timing distributions and managing the overall tax burden between jurisdictions. The upfront consultation costs with tax pros in both countries are really worth it - I learned this the hard way after initially trying to navigate it alone!

This is incredibly helpful, thank you for sharing your real experience! I have a few follow-up questions based on your journey: 1. When you formed the US LLC as a single-member disregarded entity, did you still need to file any annual state-level reports or maintain a registered agent? I'm trying to understand the ongoing compliance costs beyond just tax filing. 2. For the proactive state registrations you mentioned - did you register for income tax purposes in those states before you actually had sales there, or did you wait until Amazon confirmed they were storing inventory in those locations? I'm worried about registering too early and creating unnecessary compliance burdens. 3. On the EIN application - did you run into any issues applying as a Hong Kong resident? I've heard mixed reports about whether the online application works smoothly for foreign applicants or if you need to call/mail instead. Your point about getting the structure right before generating income really resonates. I'd rather spend a bit more upfront on proper setup than deal with messy retroactive fixes later. @Chloe Martin - Also curious if you ended up needing that tax professional consultation in both jurisdictions like others suggested, or if you were able to handle the Hong Kong side yourself?