In the past, most cross-border e-commerce sellers entered and operated cross-border e-commerce platform stores such as Amazon as domestic companies. However, due to the Sino-US trade war, VAT reform, overseas warehousing, localization compliance and stripe accounts, etc. , more sellers are beginning to wonder whether they need to register a US company in 2022 to better operate their stores.
Compared with domestic companies, what are the advantages of registering a US company?
No need to go in person, no registered capital requirements, no capital verification;
No foreign exchange control, free flow of funds;
No physical presence in the U.S. is required;
U.S. bank accounts can be opened to facilitate cross-border e-commerce collection;
Helping to apply for business visas to the United States, and children to study in the United States;
Cross-border e-commerce platforms such as Walmart, Overstock, Sears, etc. that restrict entry of American companies;
Policy care can be obtained on the local platform, such as lower commissions, title risks, category restrictions, etc.;
Withdrawal from Amazon platform and PayPal are free of charge and deposited into a US bank account.
In the cross-border e-commerce industry, conducting business with American companies can better compete with local American companies, and can rely on the perfect legal system in the United States to bring convenience to business operations, such as listing financing, obtaining a U.S. federal tax ID number EIN, and free cash withdrawal. and many more.
Whether it is a Chinese company or an American company, it needs to use the U.S. federal tax ID number EIN. You can contact Dream Business Service for registration.
EIN is very important and will be used to declare Federal Income Tax (Federal Income Tax), State Income Tax (State Business Tax), Payroll tax (salary tax) and apply for Seller Permit and other related taxes.
Why Amazon requires US site sellers to upload a tax ID
Under U.S. tax law, sales platforms are considered online marketplaces, such as Amazon, Walmart, and eBay. These sales marketplaces or e-commerce platforms are obliged to collect the buyer’s sales tax on behalf of sellers, and then the e-commerce platform will collect this portion Sales tax is paid to the government of the United States.
Although these e-commerce platforms help sellers withhold and pay sales tax, according to U.S. tax law, sellers need to apply for a sales tax number in the state where the sales tax is associated, and file a sales tax declaration.
Although there may be no actual tax to be paid at the time of declaration, the declaration must be done, which is why many sellers in the United States have recently received letters from Amazon asking to upload a tax ID number.
How to apply for a U.S. federal tax ID number for a Chinese company
For Chinese cross-border e-commerce to be tax compliant in the United States, they first need to apply for an EIN number in the United States, that is, a federal tax ID number.
The process of applying for a U.S. federal tax ID is very similar to registering a U.S. company. You need a contact address in the United States. Dream Business Services can provide customers with this address, but it should be noted that this address cannot be used as an operating address in the United States, only It is used to receive IRS letters, government notices, and scan returns.
After a Chinese company has a U.S. federal tax ID, it can apply for a sales tax ID in some states. However, each state in the United States has different regulations for Chinese companies to apply for a tax ID, so the processing method will also be different. The best way It is to contact the editor and give reasonable suggestions according to different situations.
How cross-border e-commerce sellers report sales tax in the United States
After the seller applies for a US sales tax ID, it is necessary to file a sales tax declaration in accordance with the US tax law. It should be noted that even if there is no sales, you do not need to pay taxes, but you must declare!
Generally speaking, the US sales tax rate is between 4% and 8%, which is composed of state and local taxes.
There are a total of 50 states and 2 jurisdictions in the United States, of which 5 state governments do not levy sales tax, they are: Alaska, Delaware, Montana, New Hampshire and Oregon, so sellers do not need to be in These 5 states register and file sales tax.
The reporting frequency of sales tax is determined according to the difference in sales, and can be divided into monthly, quarterly and annual reporting. Generally speaking, if the sales tax is less than 1,000 US dollars per year, you can choose to file on an annual basis.
US company questions and answers
A: Can Chinese companies and individuals set up a company that includes the United States as its business area?
Q: Companies in the United States are not registered and established in the federal government, and there is no way to register the types of companies at the federal level in the United States. On the contrary, companies in the United States are created by each state according to different state laws, and are generally managed specifically by the office of the secretary of state of that state.
Therefore, in general, many companies will be expressed as "XXX, Inc., a California corporation" (XXX company, California registered company) in their legal documents.
A: The establishment of a company in the United States is managed by state. So, which state should the company be located in?
Q: The simplest principle to solve this problem is: in which state the company's business will be carried out, it should be registered in which state. Because the company does business, it needs to hire employees, open bank accounts, lease offices, etc., and it is definitely inconvenient to hold an out-of-state company.
In addition, in some states, such as California, there are very overbearing state tax laws. The basic requirement is that as long as they hire employees or have sufficient business operations in California, foreign companies also need to pay the same taxes as local companies in California.
So, registering an out-of-state company operating in California may only add to the hassle and not bring much benefit.
But if you are a pure e-commerce company or do business in every state across the country, you may want to consider registering in a state with a lower tax burden. For example, Colorado and Washington are good choices.
If there is a plan to set up a company in the United States and conduct business in the United States, it is recommended that the customer must consult an experienced business team familiar with American law. Dream Business Service has a professional American accountant team, which can provide authoritative and Actionable guidance to save time and capital costs to the greatest extent possible.