Amazon & Tax Information

Amazon & Your Tax Situation

In my first article on Affiliate Website Marketing, I explained how with one plugin, Amazon Link Engine, Amazon Associates can maximize their links and have each link automatically converted into an international link.

Since then, I have received numerous questions regarding the tax implications. Like when you, the reseller, are a US resident and someone bought an Amazon product on Amazon Australia via the redirected link. Will you have to pay taxes in the USA?

In the following paragraphs I provide to my best knowledge an answer to the most common situations.

I have distinguished 3 situations where the Amazon reseller is either:

  • A US citizen, a US Resident or a US corporation
  • A non-US citizen residing in a country with a Tax Treaty with the US
  • A non-US citizen residing in a country without a Tax Treaty with the US

US citizen, resident or corporation

Unless I am mistaken, Amazon doesn’t tell you a lot about the tax implications. When you register with Amazon.com, you’ll be asked to fill in your tax interview.

U.S. law requires Amazon.com to collect tax information from Associates who are U.S. citizens, U.S. residents, or U.S. corporations and certain non-U.S. individuals or entities that have taxable income in the U.S. Amazon is obligated to have this information on file in order to make payments. If you fall under one of these categories, then

Why do I have to take the online tax interview?

Amazon requires all Associates to provide valid taxpayer identification information. The new tax interview automatically validates your information against IRS records. The tax interview must be completed and validated with the Internal Revenue Service (IRS) before you can receive payment of fees earned as an Affiliate Marketer through Amazon Associates.

To update your tax information:

  1. Log in to Amazon Associates https://affiliate-program.amazon.com
  2. Hover over your email address at the top of the page
  3. Click on Account Settings
  4. Click on View/Provide Tax Information to review or update specific tax information
  5. Click “Take Interview”

Once the tax interview is complete, you can follow the status of your submission on your account page under “Payment Information.”

A non-US citizen residing in a country with a Tax Treaty with the US

I am a non-US person, why do I have to provide my tax information?

The US Internal Revenue Service requires Amazon to withhold up to 30% from non-US associates earning referral fees in the US unless the associate can provide a completed W-8BEN with a valid claim of treaty benefits.

I believe few associates in this category are aware of this when registering as an Amazon Affiliates.

To provide Amazon with your tax information online:

  1. Log in to Amazon Associates https://affiliate-program.amazon.com
  2. Hover over your email address at the top of the page
  3. Click on Account Settings.
  4. Click on View/Provide Tax Information to review or update specific tax information
  5. Click “Take Interview”

 

 

 

How do I know if the country I reside in signed a Tax Treaty with the US?

The United States has tax treaties with a number of foreign countries. Under these treaties, residents (not necessarily citizens) of foreign countries are taxed at a reduced rate, or are exempt from U.S. taxes on certain items of income they receive from sources within the United States.

You can check here to see if the country where you reside signed a Tax Treaty.

The ‘item’ of income here is your affiliate income. ‘Sources of income’, in this article, is Amazon.com.

Being a member of the Amazon Associates US program does not mean that you supply your services both inside and outside the United States. IE, if you are an Associate in the UK, posting links to a US based site, does not constitute US sourced income.

Reduced Rate or Exempt

Is my Affiliate Income subject to a reduced rate or is it exempt? To answer that questions, we need to know how the U.S. tax authorities treat affiliate income.

A Case Study

I am a Belgian citizen with my residence in Buenos Aires, Argentina. I, amongst others, am an Amazon.com Associate.

Belgium and the US have signed a Tax Treaty, but Argentina and the US have not. Since I am a legal resident in Argentina, the Treaty between Belgium and the USA does not apply to me. ( art. 1.1)

For the sake of simplicity and to illustrate the first case scenario where I AM a resident of a country with a Tax Treaty, let’s assume I (still) live in Belgium.

“Article 1

GENERAL SCOPE

1. This Convention shall apply only to persons who are residents of one or both of the

Contracting States, except as otherwise provided in the Convention.”

Under Art. 1 paragraph 1 of the US – Belgium Tax Treaty, the bilateral Treaty would apply to me. Applying this to the commissions I make as an Amazon.com affiliate, I have to pay taxes on that income in Belgium, the country where I reside.

Article 20

OTHER INCOME

1. Items of income beneficially owned by a resident of a Contracting State, wherever

arising, not dealt with in the foregoing Articles of this Convention shall be taxable only in that

State.

Out of all sorts of income stipulated in the Treaty, my affiliate commission income is to be categorized as ‘OTHER INCOME’. ( unless you have established a company to whom commissions are paid ). And according to the above Art. 20.1 taxes on my commission income will be due in Belgium. This of course implies I will have to DECLARE that income to the Belgian tax authorities.

Article 22

RELIEF FROM DOUBLE TAXATION

1. In the case of Belgium, double taxation will be relieved as follows:

a) Where a resident of Belgium derives income, other than dividends, interest and

royalties, which is taxed in the United States in accordance with the provisions of this

Convention, Belgium shall exempt such income from tax but may, in calculating the

amount of tax on the remainder of the income of that resident, apply the rate of tax

which would have been applicable if such income had not been exempted.

According to Art. 22.1 I as a Belgian citizen will NOT be taxed in Belgium on my affiliate commission income paid to me by Amazon.com. But that income may be taken into calculation to establish the tax rate I will be taxed under by the Belgian tax authorities.

The purpose of such Treaties is to avoid double taxation.

A non-US citizen residing in a country without a Tax Treaty with the US

If there is no treaty between your country and the United States, you must pay tax on the income in the same way and at the same rates shown in the instructions for the applicable U.S. tax return.

That would be my case. Tough I am a Belgian citizen, I legally reside in Argentina. Argentina is not on the list with which the US has signed a Tax Treaty. Before Amazon.com pays my commission, they will withhold 30%

Amazon puts it like this : “If an appropriate treaty has not been claimed while taking the tax interview, my withholding will be at 30% .”

I am a non-US person, will I get a Tax Form?

The IRS requires Amazon, to issue an information statement called the 1042-S form to Non US payees. Specifically, an IRS Form 1042-S is generally provided to non-U.S. payees that received U.S. sourced income during the calendar year.

The Form 1042-S will be issued by March 15th of the year following payment.

For example, for payments made during 2018, we will make available the Form 1042-S by March 15, 2018.

Conclusion

This article might not provide an answer to all of your questions. Your affiliate income will be taxed in function of your individual situation. That situation in many cases is governed by a Tax Treaty, in others it is not.

However, I hope this article serves as a guideline. I will follow up on changes and feedback and make the necessary corrections and additions where necessary. Therefore I welcome your comments to make sure this article has the latest, most complete and correct information.

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