Amazon US for wholesale with LLC

[Dz48]

Hi everyone,


I’d like to get your thoughts on how to optimize a tax situation.

I’m planning to start a wholesale business in the US through Amazon. My suppliers and customers will all be based in the US, so I need to form a US LLC, as it’s very difficult to open accounts with US distributors using a foreign company.

In this case, my income will be considered Effectively Connected Income (ECI).
My current tax residence is in a country that does not have a tax treaty with the US, so I would have to pay income taxes in the US.
Do you have any advice or solutions to optimize this setup?
My country of origin does have a tax treaty with the US, and I still have an address there. Is it risky to use that address?

Thanks,

 

[daniels27]

ETBUS or not is a difficult story. In many cases, there are people claiming ETBUS‌ but it actually is not. In case you only buy and sell, it most likely‍ is not if you handle your business properly, relying on third party shippers and warehouses⁠ only. You can seach the forum, I have many posts on that matter. But in⁤ the end, it is your call.

If you believe that you are ETBUS and have⁣ done your research, a treaty most likely won't help you to escape corporate taxation in⁢ the US either as you will have more than just a warehouse in most cases.︀ You will then be left with reduction of withholding tax on dividends.

In any case,︁ you can check the treaties that the US has with various countries. There are quite︂ some. The main focus will be on the limitation on benefits. Check them and try︃ to find a way, there are really big differences. You most likely want to resort︄ to Ireland and Georgia as they will most likely offer the best options. All CIS︅ countries have no limitations, you can get the dividends tax-free in any case (or claim︆ the US LLC to be a single-member entity of the Georgian one to further optimise).︇ Note that you will have to pay corporate taxes in Georgia once you remit money︈ into Georgia. You can then hire you in Georgia as self-emplyed and benefit from some︉ low-tax benefits below a certain threshold. Or you can keep all the money in the︊ US and invest it elsewhere without taking it back to Georgia. Ireland, you need to︋ check but it is a favourable jurisdiction in the EU for low withholding taxes with︌ the US.

 

[Cloudbanck]

If you just deal with Amazon which︂ clearly isnt a dependent agent of you, and you have no employees, offices, warehouses or︃ other stuff in the US, you are probably not ETBUS and then it doesn't matter︄ that you have Effectively Connected Income. There will be no tax to the US, tax︅ treaties are irrelevant, but the country where you reside matters a lot.

Startfleet guide is︆ pretty good on this: https://startfleet.io/guide/us-llc-for-non-residents-guide

And there is case law from the 1940s from a︇ radio station in Mexico based close to the border with the US. 95% of the︈ ad revenue of the radio station was from the US, and they had a US︉ LLC and a post box in the US. At the end the radio station was︊ deemed to not be ETBUS and not liable to US tax.

 

[Dz48]

Thanks guys for the explanations. In the end, who decides if I'm ETBUS or not‌ ? Me or the IRS?
About the tax return, I noted this:

• Non-ETBUS: Form 5472‍ / 1120
  
• ETBUS: Form 5472 / 1120 + 1040NR.
  

Other than Stewart Patton, do you⁠ know any CPAs who have the same opinion ?

 

[daniels27]

The IRS won't do any advance ruling on ETBUS. However, there also isn't a single‌ public court case for decades, I guess they don't want to risk anything while taking‍ the money of scared people. See my posts below.

Yes, there are more. See my⁠ previous posts

Trust me, it is︈ pointless to ask any lawyer or CPA. The answers you'll get are half-half an nobody︉ will have any clue other than "we always file that way for our clients and︊ IRS never contested."

IRS also is known for having a low audit rate and it︋ won't go up with the recent developments.

 

[JustAnotherNomad]

Make the Amazon business a C-corp and take the money out through a second US‌ LLC that is transparent, just in case? Just leave some money in the C-corp, which‍ you pay tax on.