Navigating Taxes and Legal Compliance in Cross-Border Amazon Sales

When selling on Amazon across borders, especially from the Philippines, sellers must navigate both U.S. sales tax obligations and Philippine tax compliance.

U.S. Sales Tax Compliance:

• If your sales exceed certain thresholds in any U.S. state (commonly $100,000 in sales or 200 transactions annually), you must register, collect, and remit sales tax in that state, regardless of selling through Amazon or other channels.
• Many U.S. states have marketplace facilitator laws requiring Amazon to collect and remit sales tax on behalf of sellers, but this does not fully relieve sellers of their tax responsibilities, especially if selling on multiple platforms.
• Economic nexus rules mean physical presence is no longer required; sales volume alone can trigger tax obligations.
• Using tax automation tools (e.g., TaxJar, Avalara) and leveraging Amazon’s Marketplace Tax Collection service can help manage multi-state tax compliance.

Philippine Tax Compliance:

• Income earned from Amazon sales, even if the transaction occurs abroad, must be declared and taxed in the Philippines if the seller is based there.
• Sellers must report gross sales and remit applicable taxes such as the 1% withholding tax on online sellers, filing through appropriate tax forms (e.g., 1701Q, 2551Q, 2550Q).
• Platform fees paid to Amazon can be recorded in bookkeeping but may not reduce income tax under certain tax regimes (e.g., 8% income tax rate).
• Online platforms may withhold taxes on behalf of sellers and issue certificates for tax credit claims.
• For digital services like AWS, VAT at 12% applies to non-business customers, while registered business customers must remit VAT themselves.

In summary, cross-border Amazon sellers must carefully monitor U.S. sales thresholds to comply with state sales tax laws and simultaneously fulfill Philippine tax reporting and payment obligations on their global income. Using tax automation tools and maintaining clear documentation of sales and tax filings in both jurisdictions is essential for legal compliance.