Amazon's new method of harvesting sellers! The truth behind US taxation

Just last week, sellers on the US site received backend emails notifying them that Amazon will soon begin to collect taxes from sellers! In addition to the sales tax that we reported earlier, which is a tax borne by buyers (click here for details on consumption tax), how come there is suddenly a tax that sellers have to pay?

Many of my American site friends are still confused. Is this tax a compromise between Amazon and the government? Or is it a new way for Amazon to collect taxes?

Let’s first take a look at what Amazon says

▲Details of the email sent to the seller

The content of the email notification is very simple. It just informs sellers that after June 1, some state governments may impose taxes on third-party sellers’ expenses on Amazon (such as Amazon platform commissions, platform monthly fees, or FBA pre-processing, labeling, packaging, etc.)!

The scope of this tax is very strange. Whether it is the consumption tax levied by other states earlier, or the value-added tax (VAT) that has become compliant in Europe, they are all taxes related to sellers and sales activities.

The seller has sold the goods and generated sales/profits, so the seller needs to fulfill the tax obligations. This logic is easy for most people to understand. But this time, the seller is required to pay taxes on the money he spends. What is the reason for this?

Let’s look at this news together

Amazon's full-year profit in 2018 exceeded 11.2 billion U.S. dollars . What's even more shocking is that Amazon did not pay any taxes on these profits !

Although an Amazon spokesperson denied the rumor, claiming that Amazon had paid up to $2.6 billion in corporate taxes last year and there was no such thing as paying zero taxes.

However, the media still questioned that the tax refund and incentives were used to offset these taxes, and even an additional $129 million in tax refunds were added . The overall tax rate was -1.2%, which means that Amazon did not pay a penny to the government, and the government even paid money.

In addition to Amazon's strong legal team avoiding taxes through various loopholes, there is another very important factor - the government lacks a comprehensive and effective way to collect taxes from such large companies in emerging fields .

Judging from the fact that states are constantly improving the scope and definition of their sales tax collection, the government is also aware of this problem. In addition to the sales tax levied on third-party sellers, Amazon cannot be spared either. The truth behind this tax is

—— The government is taxing Amazon’s profit margins

Amazon's most profitable project at present is still the e-commerce module composed of third-party sellers.

So if Amazon wants to pay taxes on its huge profits, it must target its most profitable business. So the government has set its sights on the fees Amazon charges third-party sellers, hoping to make Amazon bleed here.

Since taxes are to be levied, it is obviously impossible to directly introduce a new tax type targeting only Amazon. We can also see from the example of consumption tax that the best solution for levying taxes on such unprecedented behaviors is to modify the scope of taxation . For example, consumption tax has included e-commerce sales in the taxable scope through the new change of "establishing relationships".

This time, the government's new policy also regards the commissions, monthly fees, and FBA-related fees charged by Amazon to third-party sellers as electronic services provided by Amazon to sellers, so that electronic service tax can be levied on Amazon .

Obviously, Amazon would not give in so easily, and sent this email to the seller.

This is why the scope of this tax is so strange, because this tax was originally intended for Amazon. It’s just that Amazon has passed the tax burden directly onto the sellers!

After paying the 15% commission (for certain categories), you still have to pay taxes on the money you paid! Isn’t this just charging more!

On Amazon's official forum, foreign friends also voiced condemnation.

Will Amazon allow us to raise prices to offset the cost of this tax, or will they treat us sellers like disposable items?

Isn't this double taxation?! I paid tax once when I sold the product, and again when I paid the commission after selling the product?

And the sellers voted with their feet in the background to express their protest for Amazon's move.

Amazon is so unscrupulously harvesting sellers because it has taken advantage of the fact that sellers cannot do without it. However, this is obviously not the situation the government wants to see.

The tax is still under discussion in the state governments, so Amazon has no way to provide the scope of taxable sellers, specific tax rates and a list of taxable states in the notice. (I found a list of taxable states on the official forum. Scan the code at the end of the article to get it.)

Therefore, during the period until the implementation on June 1 , the government may still introduce or amend more targeted policies to combat the power that Amazon has over third-party sellers.

There is no definite statement about the specific tax policy at present, and we still need to wait for the news from the US state government. However, for such an Amazon environment with increasing taxes and fees, using high-profit strategies to offset these costs is still a universal solution.

I have also prepared a high-profit operation rule for everyone, which can maintain high sales with a profit margin of more than 30%, and even reach about 40% with later optimization . Scan the QR code below to find me~

PS. If you want to join the seller discussion group, you can also private message me to let me add you to the group