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Overview
Overview
Foreign-based sellers on Amazon: Bringing in tax revenue, protecting U.S. businesses and providing national security
Foreign-based sellers on Amazon: Bringing in tax revenue, protecting U.S. businesses and providing national security
The problem (in one minute)
The problem (in one minute)
China-based sellers now make up 50%+ of top Amazon.com sellers and Walmart.com had 30% of foreign sellers of 200,000, a structural shift that tilts the marketplace away from U.S. businesses. There are 1.1 million sellers on Amazon, over ½ of them are foreign based sellers. The number of foreign based sellers have doubled since 2020. Marketplace Pulse+2Marketplace Pulse+2
New tariffs made this problem much worse: Chinese importers report a lower commercial value on their invoices compared to American importers. As a result, Chinese importers are paying much lower import taxes resulting in a price advantage for them versus U.S. importers
No patent protection against Foreign Importers: Current law does not allow US companies to sue or take action against Chinese importers for violating patent violations.
Platform structure enables tax arbitrage: Amazon requires sellers—not Amazon—to be the Importer of Record (IOR) for inventory entering the U.S., and foreign entities commonly file W-8BEN-E to avoid U.S. withholding—leaving little corporate, payroll, or local tax footprint here. Amazon Seller Central+1
Why this is a national-security and economic issue
Why this is a national-security and economic issue
Business erosion: U.S. brands that import, hire locally, and pay taxes face persistent price undercutting by offshore sellers with lower compliance costs.
Strategic dependence: Growing reliance on non-resident sellers for everyday goods weakens domestic resiliency and the U.S. business network.
What’s happening inside the rules
What’s happening inside the rules
IOR (Importer of Record) gap: Amazon will not act as IOR; many foreign sellers ship direct to FBA, with no U.S. auditability for customs valuation or product liability. Amazon Seller Central
W-8BEN-E allows foreign entities document status for no U.S. withholding; absent a U.S. entity, much activity remains outside core U.S. corporate/state/local tax systems. IRS
The solution Congress can advance
The solution Congress can advance
Require a U.S. entity for the Importer of Record (or a designated U.S. responsible party) for sellers shipping goods into U.S. marketplaces—auditable, with U.S. EIN and U.S. bank.
Close the W-8BEN-E loophole for marketplace commerce:
1099/withholding alignment for non-compliant payouts until a U.S. entity is established.
Customs & safety enforcement upgrades:
Tie marketplace disbursements to valid IOR numbers and verified customs value declarations. This allows each importer to be audited and held accountable for taxes and product liability.
Fiscal impact (conservative)
Fiscal impact (conservative)
Independent modeling indicates at least $20 billion/year in new federal revenue if foreign Amazon sellers are taxed like U.S. entities (corporate/dividend layers and payroll from at least one U.S. employee per entity), without counting potential tariff and valuation uplifts.
Side benefits: restored local/state tax bases (corporate, payroll, franchise), better product-safety compliance, and a fairer competitive field for U.S. small and medium sized businesses.
What we’re asking from your office
What we’re asking from your office
Sponsor or support legislation that:
(A) Requires a U.S. entity as IOR (or designated U.S. agent) for all marketplace sellers, and
(B) Conditions marketplace payouts on verified EIN/IOR and tax reporting, effectively closing the W-8BEN-E workaround.
Direct CBP/IRS/FTC coordination to align INFORM identity checks with IOR/EIN verification and customs valuation data sharing. Federal Trade Commission
Bottom line: This is a national-security, additional tax revenue, and U.S. based business competitiveness issue. A narrow, targeted fix—U.S. IOR + EIN for all sellers and closing the W-8BEN-E gap—can restore fairness and raise ≈ $20 billion annually for the federal government while strengthening U.S. economic resilience.
Selected references: Marketplace seller composition; CBP e-commerce/de minimis risk; Amazon IOR policy; FTC’s INFORM Act overview. Federal Trade Commission+7Marketplace Pulse+7Marketplace Pulse+7
Law already drafted: See ROS25191_2.5 Sponsored by Senator Cassidy, need more support to push this through.
Proposed Law Draft
Proposed Law Draft
ROS25191_2.5 draft.pdfProposed Tax Revenue Model
Proposed Tax Revenue Model
W-8BEN-E
W-8BEN-E
W‑8BEN‑E & Treaty Basis for Foreign Marketplace Sellers — Source Sheet
Authoritative excerpts showing how foreign entities document status and claim treaty benefits (e.g., Article 7 “business profits / no PE”) when paid by U.S. platforms.
1) What Form W‑8BEN‑E is for
“Form W‑8BEN‑E is used by foreign entities to document their status for purposes of chapter 3 and chapter 4.”
IRS — About Form W‑8BEN‑E (last updated 2025‑07‑30): https://www.irs.gov/forms-pubs/about-form-w-8-ben-e
“Give this form to the withholding agent or payer. Do not send to the IRS.”
IRS — Form W‑8BEN‑E (Rev. Oct. 2021): https://www.irs.gov/pub/irs-pdf/fw8bene.pdf
“Provide Form W‑8BEN‑E to the withholding agent or payer before income is paid or credited to you.”
IRS — Instructions for Form W‑8BEN‑E (Rev. Oct. 2021): https://www.irs.gov/pub/irs-pdf/iw8bene.pdf
2) Claiming tax‑treaty benefits via W‑8
“The Form W‑8BEN or Form W‑8BEN‑E must be provided to the withholding agent to claim a reduced rate of withholding.”
IRS — Claiming tax treaty benefits (updated 2025‑03‑14): https://www.irs.gov/individuals/international-taxpayers/claiming-tax-treaty-benefits
3) Treaty rule on business profits / permanent establishment
“The profits of an enterprise of a Contracting State shall be taxable only in that Contracting State …”
U.S.–China Income Tax Treaty, Article 7(1): https://www.irs.gov/pub/irs-trty/china.pdf
“Business profits are exempt from U.S. income tax unless the individual has a permanent establishment in the United States.”
IRS — Publication 901, U.S. Tax Treaties (Rev. Sept. 2024): https://www.irs.gov/pub/irs-pdf/p901.pdf
4) How marketplaces collect the forms
“The interview is designed to obtain the information required to complete an IRS W‑9, W‑8 or 8233 form.”
Amazon — Tax Information Interview Guide: https://developer.amazon.com/tax-interview/help?locale=en_US&nodeId=201588330
Prepared: 2025‑09‑25 | Notes: Quotes are ≤25 words each. Links to official IRS/treaty text and Amazon documentation included for verification.
fw8bene.pdfContact Information
Contact Information
John Stagge
Email: jstagge@scooch.com
Phone: +1 (317) 502-6615
LinkedIn: John Stagge
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