Plain-language notes on U.S. tax deadlines, IRS letters, cross-border reporting and running a small business, written by the CPAs who handle these questions every day.
When a Chinese factory places goods in Wayfair's CastleGate warehouses, it has physical presence in each inventory state, which can bring sales tax registration and franchise tax, and states generally ignore the U.S.-China treaty. Federal tax turns on ECI: produced inventory is generally sourced where it's made, but a U.S. office, staff or agents can change that.
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When a Chinese factory supplies Wayfair through a U.S. subsidiary, the subsidiary's purchase price from the factory decides where profit is taxed. It must be arm's length under IRC §482 and reported on Form 5472, and under §1059A the inventory cost for income tax can't exceed the customs value. With a worked $2,000,000 example.
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Wayfair buys from suppliers and resells to customers, so your sale to Wayfair is a sale for resale: usually no retail sales tax, but keep the resale certificate, and inventory and nexus states may still require registration. Wayfair pays for merchandise and generally issues no 1099-K or 1099-NEC.
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Becoming a Wayfair supplier takes a registered business and tax registration, a North American warehouse or CastleGate, liability insurance of $1,000,000 per occurrence, compliant product content and a signed supplier agreement. Wayfair pays 60 days after invoice, net of a 5% damage allowance, ads and a monthly platform fee. AllModern, Joss & Main and Birch Lane use the same account and catalog.
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Articles are general information, not tax or legal advice for your specific situation.
