A Chinese Factory Selling to Lowe's: Import Vendor or a U.S. Subsidiary on the Marketplace? Importer, Tariffs and U.S. Tax

Lowe's 2026 quality assurance requirements split suppliers into two groups: import vendors, for whom Lowe's and its subsidiaries are importer of record, and domestic vendors, who deliver in the U.S. and are importer of record themselves if goods are imported. A Chinese factory selling to Lowe's as an import vendor generally needs no U.S. company, Lowe's pays the duty, and U.S. tax obligations are light. A U.S. subsidiary selling on Lowe's Marketplace controls pricing and keeps more margin, but takes on importing, duties, related-party pricing, Form 5472 and state tax. The two can run in parallel, as long as the items don't duplicate Lowe's existing assortment.

Three doors into Lowe's for a Chinese factory

As of November 2026 there are three. First, retail product supplier: register through RangeMe on Lowe's supplier page; Lowe's reaches out when a Product Line Review needs you, and a vendor number is created only on selection. Second, private-brand supplier: pitch items to Lowe's sourcing team through PROVIS for Lowe's own brands. Third, Lowe's Marketplace: sell on Lowes.com yourself.

For the first two, Lowe's 2026 QA requirements are explicit. For import vendors, Lowe's and its subsidiaries are importer of record, and the nominated factory goes through the Retail Ethical Sourcing Assessment (RESA), Enterprise Quality Assessment (EQA), product and transit testing and PO inspections, plus performance specification testing for private brands. For domestic vendors, Lowe's buys in the U.S., and the vendor is importer of record if goods are imported. For the third door, the Marketplace application says only U.S.-registered businesses with an EIN may apply, and Lowe's FAQ says international shipping isn't accepted. A factory that wants its own store needs a U.S. company and a U.S. warehouse first.

The import vendor route: light U.S. tax, but Lowe's hurdles

Who pays the duty

With Lowe's as importer of record, Lowe's files the entry, pays the duty and claims any refunds. Section 301 tariffs and Section 232 wood product tariffs don't hit the factory's books directly, though they shape the purchase price Lowe's is willing to pay.

U.S. income tax

The factory sells goods it manufactured. Under section 863(b), as amended in 2017, income from selling inventory the taxpayer produced is sourced by where the production activities occur, so goods made in China generate foreign-source income. If title passes on delivery in China and the factory has no U.S. employees, office, warehouse or agent concluding contracts for it, it generally isn't engaged in a U.S. trade or business and files no U.S. income tax return.

The payer will ask for Form W-8BEN-E to document foreign status. Payments for goods aren't the interest or dividend type of income subject to 30% withholding, so there is generally no withholding. Watch the exceptions: resident sales staff in the U.S., a U.S. warehouse used for delivery, or contracts passing title in the U.S. can change the answer, case by case. The permanent establishment article of the U.S.–China treaty may also help, but claiming treaty benefits generally means filing a return with Form 8833.

The costs you take on

This route skips forming and filing for a U.S. company, but the costs show up elsewhere: factory audits and remediation, third-party product and transit testing, inspections on every order, Lowe's pricing and payment terms, and EDI and deduction rules. Lowe's holds the pricing power.

The U.S. subsidiary route: more margin, more to manage

Company and imports

The usual setup is a U.S. C corporation wholly owned by the factory. The subsidiary is importer of record, registers with CBP, and needs a customs bond for formal entries (generally goods over $2,500). Duties, inbound freight and brokerage go into inventory cost and become cost of goods sold as goods sell. IEEPA duties stopped by the Supreme Court on February 20, 2026 can be refunded to the importer of record through CBP. The full tariff timeline is in our Amazon FBA tax guide.

Related-party pricing

The factory's sale to its subsidiary is a related-party transaction. Section 482 requires arm's-length pricing, and section 1059A limits the subsidiary's inventory cost for goods imported from a related party to generally no more than the customs value. Price too low and profit sits in the U.S., taxed at 21% federally; too high and the subsidiary loses money year after year, inviting IRS adjustments, and a mismatch between the entry value and the book purchase price draws Customs questions. Keep pricing support each year, and report payments for goods, capital and loans with the parent on Form 5472, where each missed form starts at $25,000. Our Chinese parent and U.S. subsidiary guide covers the pricing work.

State tax and getting profit home

Marketplace orders ship from U.S. warehouses, so each warehouse state brings physical presence: Lowe's collects sales tax on Lowes.com orders, but the subsidiary files income or franchise tax in its warehouse states. When after-tax profit is paid to the Chinese parent, dividends carry 30% withholding, generally reduced to 10% under the U.S.–China treaty.

Why not a foreign-owned single-member LLC

A single-member LLC held personally by the Chinese owner is disregarded for U.S. tax; shipping from U.S. warehouses usually creates effectively connected income, so the owner files Form 1040-NR, and the W-9 versus W-8 question gets harder. Factories forming a subsidiary usually go straight to a C corporation. An LLC can elect corporate treatment on Form 8832, but after a change in classification it generally can't change again for 60 months.

A side-by-side example

Example (hypothetical numbers, to show the method): a lighting factory in Ningbo makes a pendant light at $30 a unit.

As a Lowe's import vendor: Lowe's buys 10,000 units at $42 FOB Ningbo, $420,000 in all, and bears duties and ocean freight. The factory's gross profit of $120,000 is taxed in China under Chinese law; on the U.S. side it gives a W-8BEN-E and generally has no U.S. filing. It also pays for audits, testing and inspections.

Through a U.S. subsidiary: the subsidiary buys 10,000 units from the factory at $45; with duties, freight and brokerage assumed at $15 a unit, inventory cost is $60. It sells on Lowe's Marketplace at $120, with an assumed 12% commission of $14.40, LTL and parcel delivery of $12 and returns and ads of $8 per unit, for pre-tax profit of $25.60 a unit, or $256,000. Federal tax at 21% is $53,760, plus warehouse-state tax. The factory earns $15 a unit on its side. Total profit is much higher, but so are the cost and risk of a U.S. company, importing, Form 5472, state tax and annual returns, and the $45 transfer price needs support.

How to choose

For standardized, high-volume products where Lowe's pricing and QA terms are acceptable, the import vendor route is simpler. For factories with their own brand that want to set prices and are ready to build a U.S. team and warehouse, a U.S. subsidiary on the Marketplace fits better. Many factories do both: core items as an import vendor, own-brand items through the subsidiary on the Marketplace. Have a lawyer review contract terms, intellectual property and product liability.

Eligibility, product compliance, a platform comparison and an entity-choice table for both Lowe's routes are in our Lowe's guide. To assess your situation, book a free 15-minute call or add WeChat YCLUSA.

Sources

Lowe's: Quality Assurance Program Requirements 2026 (PDF)

Lowe's: Supplier Registration

Lowe's: Sell on Lowe's Marketplace (FAQ)

26 U.S.C. §863, Special rules for determining source

26 U.S.C. §1059A, Limitation on basis or inventory cost in property imported from related persons

IRS: Instructions for Form 5472

IRS: Instructions for Form W-8BEN-E

Last verified: November 9, 2026

General tax information only, not tax, legal or investment advice for any individual. Lowe's written requirements and contracts govern supplier rules; consult a professional about your situation.