Alibaba Sales Tax & How to AVOID Paying It | ASTEP Alibaba Sales Tax Exemption Program Explained
What’s up guys, my name is Crescent. So, the long arm of the tax man has finally reached all the way to Alibaba. And if you haven’t already noticed, there’s a new line on your Alibaba invoices that says Tax. Ick. And of course, no one wants to pay taxes if they don’t have to. So, why is Alibaba suddenly charging sales tax? Well, in this video, let’s talk about that and how it affects you and I’ll show you how you can easily avoid paying this new tax added by Alibaba and do you know what else you can easily do? Smash that like button for the Youtube algorithm. It doesn’t cost you anything but it does help me out tremendously by letting youtube know to show this video to more people and I would really appreciate it, so thank you. And with that said, let’s begin.
So, if you’ve tried to make a purchase or asked for a quote recently on Alibaba, you’ve probably noticed a new tax line on the invoice. Alibaba never charged sales tax before, why the sudden change? Well, recent changes in legislation has deemed Alibaba as a marketplace facilitator to 3rd party sellers, similar to eBay and Amazon, so Alibaba is now required to collect and remit sales tax. That’s why we’re seeing this new tax line on the quotes and invoices.
But in case you didn’t know, having to pay sales tax only applies to the end user, not a retailer, wholesaler or supplier. The end user is the person that is actually going to use the product for its intended purpose. For example, if you buy a tube of toothpaste and you’re actually going to use it to brush your teeth, then you’re the end user so you have to pay sales tax. However, if you’re Target or Walmart and you’re buying the toothpaste with the intent to sell it, then you’re a retailer, and you don’t pay sales tax. This is the same if you’re doing private label and you’re manufacturing products to sell under your own brand, you don’t pay sales tax.
So, if you’re watching this video, then I’m assuming you’re not the end user. So, how do you get around having to pay the sales tax on Alibaba? Well, if you already have an Alibaba account, then you probably already got an email notification letting you know about the change and what you can do about it. You can see here that it says, To get verified as a tax exempt buyer, you can sign up for our Alibaba US Sales Tax exemption program called ASTEP.
And if we jump over to the Help Section, it says “The ASTEP is a program that can easily help buyers identify himself/herself as an eligible tax-exempt buyer for US Sales Tax purposes.” All you have to do is enroll in the ASTEP program by completing a few steps and answering some questions which I’ll go over with you in a second, and “subject to tax law requirements and changes, once Alibaba confirms you as an eligible tax-exempt buyer, your future purchases eligible for exemption will not be subject to sales tax at checkout.” And I should mention here that if you haven’t already figured this out already, this new sales tax issue only applies to US based buyers.
Alright, so in order to enroll in ASTEP, you’ll need to have the following information: the state(s) which you have sales tax exemption certificates or qualification, Entity type of your organization, Organizations address and Exemption numbers or exemption form (if applicable).
Now, as for the tax exemption certificate, this is typically issued to you by the state where you registered your business. How you get the tax exemption certificate varies by state so it’s beyond the scope of this video but if you don’t have one already, you can visit your state’s government website and you’ll probably find information on how to get it. For example, my business is registered here in Washington state. If I do a quick search for “washington state sale tax exemption certificate”, the first link conveniently takes me to what I need to do.
You can also find more information on how to apply for a sales tax exemption certificate for your state on this website here. I’ll leave a link to it in the video description below.
How to get your Sales Tax/Resale Permit
Ok, now once you have your sales tax exemption certificate, you’ll need to jump onto Alibaba to enroll in ASTEP. Now, if you don’t already have an Alibaba account, you’ll have to create one. Just click on the My Alibaba button at the top and create a new account. After you’ve signed in, click on My Alibaba > My Account > My Profile. In the My Company section, click on Edit and fill in your details. If you have a registered business, enter the business name here, otherwise, you can just make one up.
Now, once you’ve logged in to Alibaba, to apply for the ASTEP program, click on My Alibaba > Account > tax information > Add/Modify Tax Exemption
Step 1
Make sure you read through the terms and conditions here so you understand what is going on and if this is applicable to you or not. Once you’ve done that, click the check box to agree and then click on Start Your Application.
Step 2
Now select the state that your business is registered in or has tax exemption status. Now, it doesn’t matter if you’re selling on Amazon or shopify or whatever and you’re selling products all over the country, this is the home state where you’re conducting your business in. If you don’t have a registered business, this is the state where you live. In my case, my business is registered in Washington state. Click Continue.
Step 2
On the next step, you need to choose your exemption type. Here’s where you need to the reason why you need a tax exemption. Now, there’s a lot of options to choose from here but most are not going to apply to us. For most of us here, we’re doing private label or wholesale, so you’re going to choose resale which is one of the two most popular options. We are buying inventory or products with the intent to resell it. The second most popular option is Industrial Production/Manufacturing. You’d choose this option if you’re selling a product that requires you to buy parts and assemble them together for the final product. For example, if you’re selling a lawn mower and you need to buy the plastic wheels and the engine from another manufacturer and then assemble those parts into the final lawn mower to sell. You don’t need to pay sales tax on those sub components. Ok, click Continue.
Step 3
Ok, step 3. Here’s where you’ll need to provide your business details. Again, if you don’t have a registered business, just use your personal information and make up a business name. Once you’ve filled in all of the fields and click on Continue.
Step 4
Ok and now on step 4, you’ll going to need to answer a few questions here on this questionnaire. The answers you provide here will help prefill the tax exemption form or resale tax certificate for your state. Now keep in mind, the tax exemption form or resale tax certificate varies by state, so the questions you see on this step may differ from what you’re seeing now on my screen.
Ok and now click on Continue.
Step 5
Now we’re on the review page. Here you can look over everything to make sure it all looks correct and all the information is accurate. Make sure you look through this thoroughly so that your application isn’t rejected. Once you’ve done that, click on Continue.
Step 6
And now on the final step here, make your signature and click on continue.
Ok, and now you can download the completed application form. Based on all the information you just entered, it filled in the proper tax exemption form for you as you can see here and this is what is going to be submitted to the state.
Now click on Activate Certificates and it’ll tell you if it’s been activated or rejected for some reason. And so you can see here that it’s been Activated. So if we can click back to the Homepage, you can click on the Expand option here and you can see the current status of your application. We can see that it says it’s currently pending. It can take some time but you’ll just have to wait and come back to see at what stage your application is in. It’ll go from pending to received and then to Active once it’s been approved.
Alright, and that’s it. Once your exemption is active, you should no longer see you’re being charged tax on Alibaba. However, if for some reason you still see the tax line, contact Alibaba support. Don’t contact the supplier, they can’t help you, all transactions are taken care of by Alibaba, not the supplier.
Ok, so if you want to get in touch with me, you can find all of my contact details in the video description below. I’d love to hear your thoughts, so leave a comment or question in the comment section below, I answer every single one.
And as always, if you found value in this video, consider subscribing. And do me a favor smash that like button for the youtube algorithm it really does help me out and I’d appreciate it, and ring the bell so you never miss a future video! Alright, thanks for watching!
REFERENCES
Watch the Video
