In the process of exporting to the United States, 3 types of taxes are imposed: customs duties, sales tax, and corporate and income taxes. However, the United States the only developed country that does not adopt a Value Added Tax (VAT) system. Since there is no VAT collected at a country level, Korean sellers, who are exporting to the United States through Amazon do not have to pay a separate VAT.
In the case of customs duties, lowercase originating from South Korea can be cleared without customs duties due to the United States–Korea FTA(Free Trade Agreement), but customs duties may incur on some cases where the country of origin is not South Korea. When selling on Amazon, export must be carried out under the condition of Delivered Duty Paid (DDP), so the seller must pay the customs duties when incurred. Also, sales tax is managed on a state-by-state basis with a threshold set for each state, and a zero tax rate is applied up to the cumulative threshold. Sellers must pay sales taxes on sales above that threshold. Meanwhile, corporate and income taxes are applied commonly to all sellers. Today, we will learn how to report operating profit and income generated on Amazon.
[Corporate Tax Rate] (Unit : KRW) (Source: National Tax Service(Korea))
[Income Tax Rate] (Unit : KRW) (Source: National Tax Service(Korea))
1. How to Report Amazon Sales Normally, corporate and income taxes are imposed on income and operating profit.
So, in the case of seller, the profit remaining after deducting various expenses from the sales generated on Amazon is the basis for calculating taxes. Thus, documents containing sales, expenses, and net income must be submitted to receive documents for tax returns. These documents can be issued through the following procedures.
The order is as follows: ‘Seller Central’ < ‘Reports’ < ‘Payments’ < ‘Date Range Reports’ < ‘Generate Reports’ < ‘Summary / Month’
[Monthly Summary Report] (Source: Amazon Seller Central)
The report that displays monthly sales and expenses can be created by reporting corporate and income taxes based on double quotation at the bottom left of the image above, and income can be created by reporting based on sales. Although this method is widely known for reporting sales on Amazon, there have been many cases in which the report did not reflect the actual profit, resulting in a discrepancy with the actual settled amount. Therefore, we would like to share how to accurately calculate and proceed with the net profit report. 2. Check Whether the Deposit Amount in the Virtual Account Matches! Compared to the amount settled by Amazon to the amount deposited into the real virtual account, the settlement is said to have been successful when the two match exactly.
You need to check the transaction amount in ‘Reports’ < ‘Payments’ < ‘All Statements’ every two weeks. In this process, Amazon deposits a part of the net profit earned by the seller as a deposit, and the amount left after deducting the deposit and expense is transferred to the seller’s virtual account.
[Amazon Settlement Page] (Source: Amazon Seller Central)
[Transaction History of Virtual Account] (Source: Payoneer)
If you check the sample image above, you can see that the details of the Amazon settlement page and the transaction history of the virtual account from July 19th to August 2nd are the same. This amount is the seller’s exact net income, and this amount must be reported annually to pay corporate and income taxes. 3. What Matters Is the Actual Amount Received. Consider Withdrawal From Virtual Account. Amazon settles the profit generated by the seller every two weeks, and the amount is deposited to a virtual account, not the seller’s domestic account. In this case, a 1-1.2% fee is charged when the seller withdraws the amount to the seller’s domestic bank account. Thus, 1.2% of the net profit generated on Amazon is deducted. If the amount deposited into the virtual account is reported as a tax base, then the amount that is 1.2% more than the actual amount is reported.
[Statement of Virtual Account] (Source: Payoneer)
As can be seen from “Fee” in the statement above, a fee of 0.9% is deducted (the owner of the statement is receiving preferential fees). Therefore, corporate and income taxes must be reported by calculating the amount indicated in “double quotation” in the statement on an annual basis. 4. If You Want to Report Sales by SKU (Stock Keeping Unit)? Sellers with small transactions can file their tax returns using the methods mentioned above, but corporate sellers with large transactions may have to report sales, expenses, and net profits by SKU. In this case, a report must be created to calculate the transaction amount for each SKU.
[Payments – Download All Statements] (Source: Amazon Seller Central)
Text files can be created by clicking ‘Reports’ < ‘Payments’ < ’All Statements’ and selecting ‘Flat File.’ It can be downloaded into an Excel file to check the transaction details by SKU. Sales, expenses, and net profits by SKU can be checked and used for tax returns through simple filtering. Cello Square that can make (you) settle logistics costs transparently and easily
Sellers should not only sell products but also pay attention to the final step of settlement. Cello Square, a digital forwarding platform, not only makes logistics easy and convenient but also makes settlement simple and transparent.
Due to its cloud-based operation, it provides a great advantage of allowing sellers to check the logistics situation anytime, anywhere. In addition, various documents such as settlement details, B/Ls, commercial invoices, etc. can be managed efficiently. Sellers can receive desired data analysis results as reports through various filters provided by each area, and the directions for improving logistics operations can be derived based on the results of data analysis.
Cello Square provides not just confirmation of quotations and logistics delivery, but also supports optimal decision-making by using the sellers’ own data. Please look forward to successful selling on Amazon with Cello Square. References  Terms and Conditions of Duty Payment. Terms and Conditions Under Which the Seller Bears Expenses, Risks, etc. for Export, Including Duties
 Calculating VAT by Applying a Tax Rate of 0, that is, Tax Exemption
 According to the 「Payoneer」 Standard
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