Becoming a Costco supplier: the buyer process, Kirkland Signature manufacturing, Costco Next's status, and tax and entity planning (2026)

Costco is a membership warehouse retailer that buys and sells for its own account: suppliers sell goods to Costco, and Costco owns the inventory, sets the retail price and collects sales tax from members. Amazon third-party selling, Walmart Marketplace and TikTok Shop are marketplaces where the seller is the seller and the platform takes a commission. That is why Costco has no seller dashboard, no onboarding form and no 1099-K.

Facts from Costco's fiscal 2026 Form 10-K (year ended August 30, 2026) that matter most to suppliers:

• Scale: 939 warehouses worldwide, 647 in the U.S. and Puerto Rico across 47 states; 84.1 million paid members, with a 92.3% renewal rate in the U.S. and Canada; net sales of $297.2 billion.
• Few items, high volume: fewer than 4,000 active SKUs per warehouse and 9,000 to 11,000 online on average; many consumables sell only in cases, cartons or multipacks. Costco says it seeks to limit most items to fast-selling models, sizes and colors.
• Thin margins: net sales less merchandise costs were about 11% of net sales in fiscal 2026 (gasoline included). Costco aims to be consistently the most competitive on price, and when costs rise it works with suppliers to share in absorbing them.
• How goods move: Costco buys most merchandise directly from suppliers and routes it to cross-dock depots or straight to warehouses; e-commerce ships through depots and logistics operations and through drop-ship arrangements with suppliers. Costco buys from numerous domestic and foreign suppliers and importers.
• Online: e-commerce sites in the U.S., Canada, Mexico, the U.K., Korea, Taiwan, Japan, Australia and China; digitally enabled sales were 11% of fiscal 2026 net sales.
• Private label: Kirkland Signature is both purchased and manufactured by Costco, generally earns higher margins than national brands, and Costco expects its sales share to keep rising.

Description: each row is a route, with its current status, who decides, your relationship with Costco, and your tax role.

Route	Status	Who decides	Your relationship with Costco	Tax role
1. Warehouse supplier	Open, but no public application portal	Category buyer	You sell wholesale; Costco issues purchase orders	Wholesaler; sale for resale; no 1099-K
2. costco.com supplier	Open, same as above	Online category buyer	You sell to Costco; some items drop-shipped by you	Same; drop-ship doesn't change who the seller is
3. Kirkland Signature manufacturing	Open, Costco picks the plant	Private-label buying teams	You make goods to Costco's specs and brand	Manufacturer; income sourced by place of production
4. Road shows and demos	Arranged by buyers, often to test new items	Buyer	Promotion; Costco still sells the goods	Marketing cost; U.S. staff status matters
5. Costco Next	Closed in early September 2026	—	Brands offered member discounts on their own sites	The brand was the seller
6. Supplier Inclusion	Open, online intake form	Merchandising team	Same as route 1	The form first asks whether the company is U.S.-owned and operated

Costco's website has no public supplier application system. Its Vendor Inquiries page says non-food and sundry prospects contact the corporate office in Issaquah, while food and sundry prospects contact the regional division office; U.S. small and diverse businesses can use the Supplier Inclusion intake form. Only if a buyer is interested do samples, quotes, the supplier agreement, item setup and factory audits follow. Buyers and supplier materials decide the exact steps and timing.

Contact routes on Costco's site (checked November 2026):

• Non-food and sundries: the corporate office; mailing address PO Box 34331, Seattle, WA 98124.
• Food and sundries: the regional office. The U.S. has eight: Northwest (Issaquah), Northern California (Livermore), Los Angeles (Garden Grove), San Diego, Texas (Plano), Midwest (Addison, IL), Northeast (Sterling, VA) and Southeast (Duluth, GA).
• Other countries: Canada, the U.K., Korea, Mexico, China (Shanghai), Taiwan, Japan, Australia, France and Spain have their own offices. Each country's Costco buys separately; the site doesn't say whether the Shanghai office handles U.S. buying, so ask.
• Supplier Inclusion: an online form whose first question is whether the company is owned and operated in the U.S.; Costco says it can't process requests that don't meet its criteria, and submitting doesn't guarantee a partnership.

Description: read top to bottom; each row is a step, with the tax and entity work to do alongside it.

Step	What happens	Tax and entity work alongside
1. Reach the right buyer	Contact by category and region; bring product data, pricing, capacity and sales history	Decide which entity signs and invoices: the overseas factory, a U.S. subsidiary or a U.S. importer
2. Samples and quote	Send samples as requested; state the price terms (FOB, DDP and so on)	Model duties, freight, deductions and margin under each term
3. Supplier agreement	Sign Costco's supplier agreement; confirm insurance, indemnity, payment, returns and deductions	Contracting entity matches the W-9 or W-8BEN-E; an attorney reviews the contract and product liability
4. Compliance and audits	Follow the Supplier Code of Conduct; disclose all facilities; product testing and certification	Book testing, certification and audit costs; document facilities and related parties
5. Item setup and systems	UPC/GTIN, packaging and pallet specs, EDI (orders, ship notices, invoices)	Orders, shipments, invoices and remittances tie to the books
6. First order and test	Test in some regions or warehouses, sometimes with a road show or demo	Before the first shipment: importer, customs broker, U.S. warehouse; review inventory-state tax
7. Ongoing supply	Reorders, regional expansion or deletion based on sales	Monthly reconciliation of payments, deductions, rebates and returns; annual returns

• Have ready: specs and samples, Costco-style packs (multipacks, larger sizes), a price quote, capacity and lead times, proof of product liability insurance, test reports, and sales data from current retail channels.
• Avoid anyone who "guarantees" placement: buying decisions are Costco's. Costco runs a confidential ethics hotline for suppliers to report policy violations by employees or suppliers.
• Keep tax in step: once the contracting entity is chosen, the W-9 or W-8BEN-E, invoicing, importing and bank account all follow it; switching later means setting up again.

What is public is mainly the Supplier Code of Conduct (December 2023) and principles in the 10-K: suppliers are contractually required to comply with product safety laws, every production facility must be disclosed to and approved by Costco, Costco may audit, and it can end relationships for non-compliance. Insurance limits, packaging and pallet specs, EDI details, deductions and returns are not on the website; they are in the agreement and supplier materials. Where something isn't public, the table below says "per the agreement" rather than guessing numbers.

Description: each row is a requirement, with what public sources say, where the details are, and the tax and accounting effect.

Requirement	What public sources say	Where the details are	Tax and accounting effect
Supplier Code of Conduct	December 2023: facilities disclosed and approved, no unauthorized subcontracting, audits, termination	PDF on Costco's site; confirmed at signing	Audit and remediation costs; clear related-party facts
Product safety and testing	10-K: suppliers are contractually required to comply with product safety laws	Agreement, category requirements	Testing and certification costs; recall readiness
Insurance	Limits not published	Supplier agreement	Product liability premiums; Costco is often named additional insured (per the agreement)
Packaging, pallets, labels	10-K: many consumables sell only in cases or multipacks	Supplier materials, depot receiving rules	Packaging redesign; rework and freight for refused loads
EDI and item numbers	Not published	System onboarding after signing	Orders, ship notices, invoices and remittance matching
Freight terms	Not published; 10-K says most goods go to depots	Purchase orders and agreement	FOB vs DDP decides importer, duties and when revenue is recognized
Deductions, rebates, allowances	10-K: Costco receives funds from vendors for discounts and other programs ("vendor consideration")	Agreement and remittance advice	Reductions of revenue; reconcile line by line
Returns	Generous member return policy; supplier share not published	Supplier agreement	Return reserves and revenue reductions
Price and margin	10-K: consistently low prices, cost increases shared with suppliers	Buyer negotiation	Thin margins; build duties and freight into the quote

• Code of Conduct points to note: suppliers must be able to trace all components and ingredients and, on request, name every entity in the supply chain; moving any part of an order to an undisclosed facility is "unauthorized subcontracting"; workers may not pay recruitment fees; records must be kept and available.
• What a low SKU count means: with fewer than 4,000 items per warehouse, an item that gets in sells in volume, and an item that underperforms can be replaced. Plan cash flow and capacity for "big orders, possibly stopping suddenly."
• Payment: the 10-K says Costco often sells inventory before it has to pay for it, while taking early payment discounts. Actual terms are in the agreement; early payment discounts reduce revenue on your books.

No. Costco Next let brands offer Costco members discounts through dedicated storefronts on the brand's own site. Around early September 2026, costconext.com began redirecting to a Costco customer service page saying that access to Costco Next storefronts is no longer available and that members should contact the vendor directly for eligible returns and warranty questions. Costco has not published a reason. Brands that want to reach Costco members now go through the supplier route.

• How it worked: press reports put it at about 80 brands with discounts of up to 40%; members clicked through from Costco to the brand's storefront and the brand shipped. Costco cited its growth on the May 2025 earnings call.
• Who was the seller: orders were completed on the brand's own site, so the brand was generally the seller: it collected and filed sales tax under each state's rules (economic nexus and marketplace rules vary by state), and its payment processor issued 1099-Ks under the usual thresholds.
• Winding down: the brand still handles returns and warranties on past sales, so reserve based on return history; book related inventory and marketing normally; handle ended contracts and prepayments under their terms.
• Next step: a brand that wants Costco members going forward pursues the supplier route (warehouse or costco.com). It then changes from retail seller to wholesale supplier, which changes sales tax, 1099 reporting and revenue recognition, so keep separate books for each.

Kirkland Signature is Costco's private label, and Costco owns the brand. Costco buys Kirkland products and also makes some in its own processing and manufacturing facilities. A factory making Kirkland products produces to Costco's specs, packaging and brand and sells the goods to Costco. Costco picks its manufacturers; there is no public application channel. For tax, a manufacturer selling goods it produced generally sources the income where it produces: made in China and delivered in China to Costco, the income is generally foreign-source and usually not taxed by the U.S.

• How plants get chosen: buyers generally choose among existing suppliers or plants with scale and a quality record in the category; the Code of Conduct applies to private-label plants too, with disclosure and audits.
• Source rule: under IRC §863(b) (as amended in 2017, for tax years beginning after 2017), income from inventory the taxpayer produces is sourced solely by where the production activities happen. Production entirely in China generally means entirely foreign-source income, regardless of where title passes.
• Exception, a U.S. office: when a nonresident has an office or fixed place of business in the U.S. and the sale is attributable to it, §865(e)(2) can make the income U.S.-source and effectively connected. A factory that opens a U.S. sales office or stations staff to serve Costco needs its own analysis.
• Trading companies differ: a company that buys and resells rather than manufactures generally sources inventory sales where title passes (§861(a)(6)). DDP delivery with title passing in the U.S. may produce U.S.-source income; the next question is whether there is a U.S. trade or business.
• Treaty: under the U.S.–China income tax treaty, the U.S. generally taxes a Chinese enterprise's business profits only if earned through a U.S. permanent establishment, and facilities used solely to store, display or deliver the enterprise's own goods generally aren't one. Relying on the treaty may call for Form 8833 or a protective Form 1120-F, case by case.

A road show is a short in-warehouse event where a brand promotes its item in selected locations; demos and sampling are a common way to launch new items. Both are generally arranged by the buyer and run under Costco's rules. Costco's website doesn't publish road show applications or fees; industry sources describe coordination through the buyer and a designated demo company, so follow the buyer's written instructions. During a road show, Costco generally still sells the goods, and your costs are promotional.

• Booking costs: demo service fees, staff wages and travel, displays and samples are promotion expenses; samples given away are booked at cost.
• Paying U.S. individuals: service fees you pay directly to U.S. individual demonstrators or brokers need a 1099-NEC from 2026 at $2,000 a year, with a W-9 collected first. Payments to corporations generally don't (legal fees and a few others excepted).
• Sending foreign staff: display and promotion alone is generally preparatory or auxiliary; staff who negotiate and sign contracts in the U.S. over time may create a permanent establishment. Their own U.S. income tax depends on days present and the treaty.
• Food safety: training and certificates for food road shows follow the buyer's and Costco's rules; we don't list specifics here.

The benefits are scale and credibility: one item in 647 U.S. warehouses is volume few channels can match, with no commission, ad auctions or review battles. The costs are hard price pressure, thin margins, dependence on a single item, and requirements that are many and mostly contractual. It suits factories and brands whose capacity and cash flow can support steady, long-term supply.

Description: the left column is a benefit, the middle its matching cost or risk, and the right what planning can do about it.

Benefit	Matching cost or risk	Plan ahead
Large per-item orders across 647 U.S. warehouses	Capacity and inventory strain; a deletion stops everything	Model cash flow; don't commit all capacity to one item
No commission, no ad wars	Low prices, thin margins	Price in duties, freight, deductions and returns before quoting
Member trust and brand credibility	Strict quality and compliance, frequent audits	Testing, certification, insurance and facility disclosure in advance
Online and in-warehouse sales, and potentially other countries' Costco	Each country buys separately	Separate entities and contracts for international supply
When Costco imports, you aren't the U.S. importer	Different terms shift liability and duty burden	Work out FOB versus DDP first
Large, steady Kirkland volume	Costco's brand, not yours; plants can be replaced	Track private-label and own-brand business separately

Four common models: (1) the factory exports FOB or FCA a Chinese port and Costco is the importer; (2) DDP to a Costco depot, with the foreign company or a forwarder as importer; (3) a U.S. subsidiary acts as importer and Costco supplier; (4) supply through a U.S. importer or distributor. Whoever is importer of record pays the duties, carries the customs liability, and is the only one who can claim duty refunds. Whether U.S. income tax applies depends on U.S. inventory, offices, staff and agents.

Description: each row is a model, with the importer, who pays duties up front, the usual U.S. income tax result, and state tax and filings.

Model	Importer of record	Duties paid by	U.S. income tax (usual case)	State tax and filings
(1) FOB / FCA China export	Costco	Costco, on the import value	Made and delivered in China: generally no U.S. income tax return; W-8BEN-E to Costco	Generally none
(2) DDP to depot	The foreign company (with a U.S. agent and customs bond) or a forwarder	You (or the forwarder, billed to you)	Own production sourced by place of production; U.S. warehouses, staff or agents call for ECI and PE analysis	Possible nexus where you hold U.S. inventory
(3) U.S. subsidiary	The U.S. subsidiary	The subsidiary, in inventory cost	Subsidiary files Form 1120 at 21%, with Form 5472 if 25%+ foreign-owned; factory-to-subsidiary price under §482	Registration and returns where it holds inventory or operates
(4) U.S. importer or distributor	The importer	The importer	The factory sells to the importer, generally like (1); the importer files its own returns	The importer's own

• Tariffs keep moving: as of November 2026, Section 301 tariffs on Chinese-origin goods remain, with another 12.5% added from July 24, 2026; IEEPA tariffs were stopped by the Supreme Court on February 20, 2026, and importers of record can claim refunds through CBP; the $800 de minimis exemption has been suspended since August 29, 2025 (bulk supply wouldn't use it anyway). The full layers and refund steps are at yclcpa.com/fba.
• Quoting: FOB and DDP prices for the same item differ by ocean freight, duties, brokerage, U.S. inland freight and risk. Duties in a DDP price are computed on your declared value; whether the contract has a price-adjustment clause for tariff changes matters (have an attorney review it).
• A foreign company as importer: customs rules allow a nonresident corporation to be importer of record if it has a U.S. agent authorized to accept service of process, and formal entries need a customs bond. U.S. inventory and U.S. sales staff then raise the ECI question.
• Watch the trend: Costco's 10-K says it is diversifying its supply chain and expanding in-country production, sourcing in the countries and regions where items are sold when costs rise. Factories dependent on China exports should plan for tariff and relocation risk.
• Other countries' Costco: mainland China has 7 warehouses, Japan 37, Korea 20 and Taiwan 14, each with its own buying office. Supplying those markets involves local VAT and import rules beyond this guide.

Costco is the retailer and collects sales tax from members. Your sale to Costco is a sale for resale, exempt with Costco's resale or exemption certificate. But in states where you have physical presence (your own U.S. warehouse or office, for example), many states still expect you to register and file returns reporting exempt sales. Washington's B&O tax is a gross receipts tax that also applies to wholesaling.

• Keep certificates on file: for each delivery state, keep Costco's certificate in a form that state accepts (the state's own form, the MTC uniform certificate or the SST certificate); without one, a state auditor may assess sales tax on you.
• costco.com drop-ship: you ship directly to members, but Costco is still the seller and collects tax; you still sell for resale. Drop-ship touches many states, so the certificates must cover them.
• When you collect yourself: if you also sell at retail (your own site, events, self-fulfilled marketplace orders), you collect where you pass economic nexus thresholds ($100,000 a year in most states); marketplace orders follow the marketplace's rules. North Carolina rules are at yclcpa.com/salestax and your own site at yclcpa.com/stripetax.
• Washington B&O: Costco is headquartered in Washington; wholesale receipts from goods delivered to Washington warehouses can count toward Washington's B&O economic nexus ($100,000 of gross receipts a year), so review it separately.

A 1099-K is filed by payment processors and marketplaces for sellers. Costco is your customer paying invoices, not your payment settlement entity, so it doesn't issue one. Payments for merchandise also aren't reported on Form 1099-NEC or 1099-MISC; the IRS instructions list them as an exception. Costco will ask for a tax form: a W-9 from U.S. companies, a W-8BEN-E from foreign companies.

• U.S. companies and individuals: a W-9 whose name and EIN match IRS records exactly; a mismatch brings matching notices.
• A foreign company supplying directly: a W-8BEN-E. Payment for goods isn't FDAP income and generally isn't withheld on, but fill the form correctly, especially the entity type in Part I and the U.S.–China treaty claim.
• A foreign-owned single-member LLC: the LLC is disregarded. Under the W-9 instructions a foreign owner gives the appropriate W-8 (generally a W-8ECI when the income is effectively connected), not a W-9 under the LLC's EIN. The full analysis is at yclcpa.com/walmart and yclcpa.com/w8ben.
• No 1099-K doesn't mean no record: your income is what the invoices and remittance advices show; Costco nets deductions and rebates out of its payments, so rebuild the gross amounts in the books.
• Other channels' 1099-Ks: if you also sell on Amazon, Walmart or TikTok, those platforms issue 1099-Ks at the federal $20,000 and 200-transaction threshold; see yclcpa.com/1099k.

Three questions: is the income U.S.-source, do you have a U.S. trade or business, and is there a permanent establishment? A factory producing in China and selling FOB China to Costco generally answers no to all three. Once you hold your own inventory in U.S. warehouses, employ people, use a dependent agent or keep an office in the U.S., effectively connected income (ECI) becomes possible; a foreign corporation files Form 1120-F and a foreign individual Form 1040-NR. Whether the U.S.–China treaty's permanent establishment protection applies has to be worked through item by item.

• U.S. inventory: under DDP or costco.com drop-ship, your goods sit in a U.S. third-party warehouse and remain yours. A warehouse used only for storage and delivery generally isn't a treaty permanent establishment; someone in the U.S. negotiating, signing or processing orders for you is different.
• U.S. staff or offices: staff stationed in the U.S. to work with buyers or sign supply contracts can create a trade or business and a permanent establishment, and §865(e)(2) may make the income U.S.-source.
• Risk of not filing: a foreign corporation with ECI that doesn't file a timely, accurate Form 1120-F can lose its deductions under §882(c)(2), leaving tax on gross income. If unsure, consider a protective return.
• Branch profits tax: a foreign corporation's U.S. branch with ECI can owe a 30% branch profits tax on top of the 21% corporate tax (a treaty may reduce it). This is one reason many factories use a U.S. subsidiary to ring-fence the risk.

With a U.S. subsidiary as importer and supplier, the U.S. side is clean: the subsidiary files Form 1120 at 21% federal and, if 25% or more foreign-owned, attaches Form 5472, with a $25,000 starting penalty per missed form. The hard part is price: what the Chinese factory charges the subsidiary must be arm's length under §482, and that same price is usually the declared customs value; §1059A caps the subsidiary's inventory cost at the customs value (plus allowed costs).

• Price too high: more duty, less U.S. profit, and the IRS may raise U.S. income under §482. Too low: less duty, and customs may question the declared value. One pricing basis has to satisfy both customs valuation and income tax.
• What the subsidiary should earn: as importer and distributor carrying inventory, Costco deductions, returns, currency and customer risk, its profit should match those risks; transfer pricing documentation with comparable-company data lowers the risk of 20% or 40% adjustment penalties.
• What goes on Form 5472: purchases from the factory, expenses the parent pays, loans and interest, service fees: all reportable related-party transactions.
• Dividends home: dividends to a Chinese parent carry 30% withholding, generally 10% under the U.S.–China treaty, with a W-8BEN-E from the parent and Form 1042-S from the subsidiary.
• Other filings: a foreign person forming or acquiring 10% or more of the vote of a U.S. company files BEA's BE-13 within 45 days. The full subsidiary checklist is at yclcpa.com/subsidiary, and Form 5472 at yclcpa.com/5472.

A U.S. owner's brand starts as an LLC and considers an S corporation election once profit is steady; a foreign factory that only exports signs with its home company; a business that will import, hold inventory or hire in the U.S. usually uses a U.S. C corporation subsidiary. A foreign-owned single-member LLC causes the most trouble and is a poor fit for large wholesale contracts like Costco's. Foreign persons can't be S corporation shareholders.

Description: each row is a common situation, with the usual entity, federal filings, the form given to Costco, and the main risks.

Your situation	Usual entity	Federal filings	Form to Costco	Main risks and notes
Brand owned by a U.S. resident	LLC, then S corporation once profitable; C corporation if raising capital	Schedule C / 1065; 1120-S; 1120	W-9	Reasonable salary in an S corporation; multistate inventory tax (see yclcpa.com/scorp)
Foreign-owned single-member LLC	Not recommended as is; consider electing corporate treatment on Form 8832	Pro forma 1120 + 5472; owner's 1040-NR if there is ECI	The owner's W-8 (often W-8ECI), not a W-9 for the LLC	After an 8832 election, generally no change for 60 months (Reg. §301.7701-3(c)(1)(iv)); see yclcpa.com/walmart
Foreign factory, FOB exports only	The home company signs directly	Generally none	W-8BEN-E	Analyze before opening a U.S. office or sending staff to sign deals
Foreign company with a U.S. subsidiary	U.S. C corporation (often Delaware)	1120 + 5472 at 21%; BE-13	W-9 (subsidiary)	§482 pricing, §1059A, dividends 30% / 10% treaty (see yclcpa.com/subsidiary)
Multichannel seller (Costco plus Amazon, Walmart and others)	One entity with channel-level books, or one per brand	Per entity	Per entity	Wholesale and retail sales tax and 1099-K handled separately; inventory states reviewed together

• The 60 months on Form 8832: once an LLC elects corporate treatment, it generally can't change again for 60 months (a newly formed entity's initial election aside). Run the numbers first; see yclcpa.com/ccorp.
• C corporation: 21% federal, profit can stay in the company; dividends to foreign shareholders carry 30% withholding, generally 10% under the U.S.–China treaty.
• States: formation and operating states can differ; states with inventory or employees need foreign qualification. California's $800 minimum franchise tax applies once you do business there; Texas levies a franchise tax on margin and requires reports even below its no-tax-due threshold. Compare states at yclcpa.com/llc and entities at yclcpa.com/entity.

Wherever your own goods sit (your warehouse or a third-party one), you have physical presence, which can mean sales tax registration and income or franchise tax in that state. When goods are sold to Costco, check in the contract where title passes and who holds inventory in which state. Federal P.L. 86-272 only protects sellers whose in-state activity is soliciting orders filled from outside the state; inventory in the state generally removes it, and it never covers gross receipts taxes such as the Texas franchise tax or Washington B&O.

• Delivery to a Costco depot: once delivered, title generally passes to Costco and the inventory is no longer yours, though FOB origin or destination terms affect when revenue is recognized.
• Drop-ship warehouses for costco.com: drop-ship inventory is yours, so that state is an inventory state.
• Multistate income tax: with nexus in several states, income is apportioned under each state's rules; corporations also face state minimum taxes and annual reports.
• More detail: how to work through inventory in many states is covered at yclcpa.com/fba.

Costco's payments are usually the invoice amount less deductions. Book revenue gross, then record early payment discounts, promotional and markdown allowances, rebates, shortage and damage deductions, and returns separately. For financial reporting, most consideration paid to Costco reduces revenue rather than counting as marketing expense; for tax, deductions are taken when fixed and determinable. Without line-by-line reconciliation, the usual result is misstated revenue and deductions never disputed.

• Reconcile to the remittance advice: for each invoice, what was paid, what was deducted and the reason code; dispute contested deductions within the agreement's deadline.
• Common types: early payment discounts; vendor-funded promotions such as member instant savings; volume rebates; new-item or markdown allowances; shortage, damage and non-compliance deductions at receiving; returns and unsaleables. Names and rates are per the agreement.
• Timing of rebates: accrue volume rebates as they are earned and document year-end balances; for tax, a liability is deductible once the all-events test and economic performance are met, so cross-year items need their own analysis.
• Returns: Costco's member returns are generous, and your share is per the agreement; reserve on return history, put saleable returns back in inventory and write off the rest.
• Duties and freight: under DDP, duties, ocean freight and brokerage go into inventory cost; under FOB they are Costco's costs, not yours.

In large-volume supply, the biggest risk is often not tax but product liability, recalls and contractual indemnities. Costco's supplier agreement generally requires insurance and indemnification, with amounts and terms per the agreement. Contract terms, product liability, trademarks and product compliance (CPSC, FDA, FCC, California Prop 65 and so on) are for an attorney and testing labs; we work on the tax and accounting side.

• Insurance: product liability limits, additional insured status and insurer ratings follow the agreement and your attorney's advice; premiums are business expenses.
• Recalls: recall costs, settlements and penalties are booked by their nature; some government penalties aren't deductible.
• Contracting entity: the entity that signs, invoices, imports and is insured should be the same set, so nothing falls between them when something goes wrong.
• Trademarks: before an own-brand product goes into Costco, a trademark attorney handles the U.S. filing.

The biggest difference is who the seller is. Costco and Wayfair are your customers, buying your goods to resell; Amazon third-party selling, Walmart Marketplace, Etsy, TikTok Shop and Target Plus are marketplaces where you are the seller and the platform collects sales tax and issues 1099-Ks. Rates and rules below are as of November 2026; each platform's site decides.

Description: each row is a channel, with who the seller is, main fees, fulfillment, who can join, sales tax, 1099 and payout.

Channel	Seller of record	Main fees	Fulfillment	Who can join	Sales tax	1099	Payout
Costco	Costco (you are a supplier)	No commission; sell at Costco's purchase price, with deductions and allowances per the agreement	Depots or warehouses; some costco.com drop-ship	Chosen by buyers; no public application	Costco collects from members; you sell for resale	No 1099-K; merchandise payments not reported	Per agreement terms (not public)
Amazon third-party	The seller; Amazon is the marketplace	Professional plan $39.99/month + 8%–15% referral fees in most categories; FBA fees extra	FBA or self-fulfilled	Sellers in the U.S. and most countries, including China	Amazon collects in sales-tax states	1099-K ($20,000 and 200)	Settlement cycles
Walmart Marketplace	The seller; Walmart is the marketplace	No setup or monthly fee; referral fees 15% in most categories (3%–20%)	WFS or self-fulfilled	Application and review (see yclcpa.com/walmart)	Walmart collects	1099-K	Settlement cycles
Wayfair	Wayfair (you are a supplier)	No commission; sell at wholesale cost	Drop-ship or CastleGate	Apply as a supplier (see yclcpa.com/wayfair)	Wayfair collects from customers	Generally no 1099-K	Per supplier terms
Etsy	The seller; Etsy is the marketplace	$0.20 listing fee, 6.5% transaction fee, U.S. payment processing 3% + $0.25	Mostly seller-shipped	Handmade, vintage and craft supply sellers	Etsy collects	1099-K	Etsy Payments
TikTok Shop	The seller; the platform collects	About 6% in most categories (see yclcpa.com/tiktok)	Platform logistics or approved warehouses	Local stores; cross-border usually by invitation	The platform collects	1099-K	Settlement cycles
Target Plus	Invitation-only marketplace (see yclcpa.com/target)	Per contract, not public	Partner-shipped	Invitation only	Target collects	See yclcpa.com/target	Per contract

• Amazon has a Costco-style model too: Amazon Vendor Central (first-party) means Amazon buys your goods; for tax it's wholesale, like Costco.
• Running several channels: wholesale to Costco and Wayfair plus retail on Amazon, Walmart and your own site means channel-level books in one company; sales tax and 1099-Ks concern only the retail channels.
• Price conflicts: Costco wants the most competitive price; the same item cheaper elsewhere strains the buyer relationship. Many brands give Costco its own pack or configuration.

Settle the entity, tax forms, importing and insurance first, then talk to buyers. Forming a company or switching entities only after a buyer says yes is the easiest way to delay the first order or sign under the wrong entity.

Description: five groups; each row is something to have ready before buyer talks or before signing.

Group	What to prepare	Status
Entity	The contracting and invoicing entity (home company, U.S. subsidiary or U.S. LLC / corporation); EIN; U.S. bank account	□
Tax forms	W-9 or W-8BEN-E done right; the W-8 / W-9 question for a foreign-owned single-member LLC resolved; past returns (including 5472) filed	□
Import and logistics	FOB or DDP; importer, customs broker and bond; which states U.S. warehouses are in	□
Compliance and insurance	Product testing and certification; product liability insurance; facility list (Code of Conduct disclosure); attorney review of the supplier agreement	□
Finance	Margin at Costco's price (duties, freight, deductions, returns); cash flow for large orders; resale certificate management; monthly reconciliation routine	□

Example (hypothetical numbers, to show the method): Factory A in Shenzhen makes cookware. A Costco U.S. buyer picks a cookware set, first order 50,000 sets. The factory compares two approaches:

Reading the example:

• Option 1 is simplest: made and delivered in China, the income is generally foreign-source; duties and import liability sit with Costco. The trade-off is a lower price, and Costco may ask to reprice when tariffs change.
• Option 2 gives more control: U.S. stock, costco.com drop-ship and other channels become possible, but there is a U.S. taxpayer filing returns and documenting transfer prices, and the subsidiary bears the duties.
• The $11.00 is the key number: it is both the customs value and the transfer price. The subsidiary earns $1.56 a set, an operating margin of about 8.7%; whether that is right depends on comparable importer-distributor data and the risks it carries. Under §1059A its inventory cost can't exceed the customs value.
• Don't forget deductions: the example assumes 3%; actual early payment discounts, promotions and returns come from the agreement and remittances, and they are often more than expected.

Start with whether you are a U.S. brand or a foreign factory, then the route you want and whether you'll hold inventory and an entity in the U.S. Common situations:

• Situation A: a U.S. brand meeting a Costco buyer for the first time. Sign with your existing LLC or corporation and a correct W-9; have product liability insurance, testing, packaging and pricing ready; review retail sales tax now and resale certificate handling for wholesale.
• Situation B: a Chinese factory, and the buyer wants an FOB price. Sign with the home company and give a W-8BEN-E; without a U.S. office or staff signing deals, there is generally no U.S. income tax return; prepare facility disclosure and audits under the Code of Conduct.
• Situation C: a Chinese factory wanting DDP or costco.com drop-ship. Compare importing as the foreign company with a U.S. subsidiary; the subsidiary is usually cleaner; set transfer pricing, customs valuation and inventory-state tax at the same time.
• Situation D: a former Costco Next brand. Close out return and warranty reserves; to keep serving Costco members, move to the supplier route and separate retail and wholesale in the books.
• Situation E: already selling through a foreign-owned single-member LLC and now supplying Costco. File any missing pro forma 1120 + 5472 first and settle W-8 versus W-9; consider a Form 8832 election or a C corporation before signing.