What Amazon's New China Tax Reporting Means for US Sellers

You've seen it happen over and over.

A product looks profitable. You run your numbers and need to price around $24.99 to make reasonable margin after fees and advertising.

Then you check the market. Chinese sellers are at $16.99, selling hundreds of units daily.

You know the product costs at least $8-10 to manufacture. You know Amazon's fees. You know shipping costs. The math doesn't math.

So you move on, because competing with impossible pricing isn't a business strategy.

Here's what you were missing: they weren't paying taxes.

On October 31, 2025, that changed. Amazon started reporting detailed seller data—revenue, transactions, identity information, bank accounts—directly to Chinese tax authorities every quarter.

It's already happening. The first report covered July through September 2025, and audit notices are landing in Chinese sellers' inboxes right now.

This isn't a policy that might eventually matter. Chinese tax authorities investigated 173,000 businesses for suspected tax crimes in 2023 alone. Now they have direct access to everyone's Amazon revenue data.

The competitive landscape where certain sellers could price products at mathematically impossible levels is shifting. Not overnight, but it's shifting.

Here's what's actually happening and what it means.

The Policy and Enforcement Reality

What Amazon Reports and Who It Covers

Starting October 31, 2025, Amazon began submitting quarterly reports to Chinese tax authorities under State Council Order No. 810. This isn't voluntary—it's a legal requirement for any platform facilitating sales for China-based sellers.

What gets reported every quarter:

• Seller identity (names, national ID numbers, business registration codes)
• Total transaction volumes and revenue
• Platform commissions and FBA fees
• Banking and payment account details

Think of it like a 1099 form that's comprehensive, automated, and goes directly to Chinese tax authorities every 90 days.

The reporting covers all sellers based in China, regardless of where they're selling. A Chinese seller exclusively on Amazon.com? Reported. Amazon.de? Reported. This is about the seller's location and tax residency, not where their customers are.

Enforcement Is Active Right Now

This isn't a policy sitting on paper. Chinese sellers are receiving tax self-inspection notices via text message. Third-party tax consulting agencies in China report a surge in panicked inquiries from cross-border sellers.

The tax system is directly connected to platform data now.

Why This Exists

For years, cross-border e-commerce operated in what Chinese officials called "tax gray zones." Sellers generated substantial revenue on international platforms while under-reporting or not reporting that income to Chinese tax authorities.

Tax authorities couldn't see what sellers actually earned on Amazon, eBay, or Walmart. Sellers could report whatever they wanted—or nothing at all.

That information gap is now closed. Platform data flows directly to tax authorities every quarter. As one Chinese industry analyst put it: "Every transaction, every dollar earned will now be visible to tax authorities. Under-reporting income? Not an option anymore."

Who This Actually Affects (And Who It Doesn't)

The Split: Compliant vs. Non-Compliant

Large, established Chinese brands like Anker, RAVPower, and Aukey? Nothing changes. They've been operating with full tax compliance from day one—proper corporate structures, quarterly tax filings, accounting teams. They were already paying taxes on their Amazon revenue.

These brands aren't the ones pricing products at impossible margins.

Smaller sellers operating in "tax gray zones"? They're facing a reckoning. We're talking about sellers maintaining 10-15% lower prices specifically because they weren't accounting for tax costs. That's the difference between winning the Buy Box at $16.99 versus pricing at $19.99.

One Chinese e-commerce founder put it bluntly: "The era of tax gray zones is officially over. Every transaction, every dollar earned will now be visible to tax authorities."

The Numbers

Chinese sellers represent 50.03% of Amazon's global active seller base as of September 2025. At the million-dollar revenue level, 57% of approximately 51,000 Amazon.com sellers are Chinese versus 39% American.

But here's the key context: US sellers still generate more total revenue—$157 billion versus $132 billion for Chinese sellers. The average US seller does $885,000 annually compared to $394,000 for Chinese sellers.

What Happens Next

Affected sellers face three options: properly report income and raise prices, continue under-reporting and risk serious penalties, or exit the marketplace entirely.

This doesn't mean half of Amazon's Chinese sellers are disappearing. Many were already compliant. Many will become compliant and adjust pricing. But sellers who built their business model around tax avoidance are facing a fundamental recalculation of their unit economics.

Expect changes to play out over 6-12 months as sellers receive audits, consult with tax professionals, and make decisions. Some categories will see more impact than others.

The LLC Workaround Attempt

The Address Shell Game

If you've been watching Amazon seller demographic data, you might have noticed the percentage of China-based sellers dropped from around 60% to under 40% recently.

That sounds like a massive exodus. It's not.

Chinese sellers aren't leaving—they're changing their business addresses. Some are registering US LLCs and updating their Amazon accounts with American addresses to dodge the China tax reporting requirements.

The logic makes sense on the surface: if Amazon's reporting is based on registered business location, a US LLC with a US address might exempt you from Chinese tax reporting. For a Chinese seller, forming a US LLC is straightforward—states like Wyoming or Delaware have minimal requirements.

The Problems With This Strategy

For Chinese tax obligations: If a seller is actually based in China—living there, operating from there—simply having a US LLC doesn't exempt them from Chinese tax obligations on their worldwide income. China taxes based on residency and where the business is actually conducted, not just where it's registered.

For US compliance: Foreign-owned LLCs face strict reporting requirements. Foreign owners must file Form 5472 with the IRS and submit Beneficial Ownership Information Reporting (BOIR) to FinCEN within 30 days of forming the LLC or making ownership changes.

Non-compliance penalties reach up to $25,000.

These aren't optional filings. Even with no US tax liability, if you're a foreign person owning a US LLC, these reporting requirements still apply.

The Reality

This isn't a clean workaround—it's trading one compliance issue for potential problems in two jurisdictions.

Chinese tax authorities aren't likely to accept "I registered a US LLC" as a valid reason for not reporting income from a business you're operating from China. The sellers attempting this strategy are betting they can operate in a gray zone between two countries' tax systems.

Given that this situation started because China decided to close gray zones in cross-border e-commerce, that's a risky bet.

Bottom line: When you see data showing Chinese seller percentages dropping, take it with context. The actual number of Chinese nationals operating Amazon businesses hasn't changed dramatically. The competitive landscape still includes those sellers—they're just showing up in the data differently now.

What This Means for Marketplace Competition

The Pricing Reality

Sellers who weren't properly reporting and paying taxes could maintain artificially low prices because they weren't factoring tax costs into their pricing structure.

That's not a minor advantage. Tax obligations can represent 10-20% of revenue depending on income levels and business structure. A seller who prices at $16.99 without accounting for taxes versus a seller at $19.99 with proper tax compliance—that difference often determines who gets the Buy Box.

When non-compliant sellers suddenly need to account for tax obligations they were avoiding, their unit economics change. Either margins compress significantly, or prices need to increase to maintain viable profit.

Three Likely Outcomes

Some sellers will exit. If their entire business model was built on unsustainably low pricing enabled by tax avoidance, they may not have a path to profitability with proper compliance.

Some sellers will raise prices. Sellers with established listings, good reviews, and actual customer bases may maintain their presence but adjust pricing to account for tax obligations. A product at $16.99 might become $19.99 or $21.99.

Compliant sellers continue unchanged. Large Chinese brands that were already paying taxes and smaller sellers operating properly don't face business model shifts.

The Timeline

This isn't a light-switch moment. Audit notices started going out after October 31. Sellers need time to consult with tax professionals, understand their exposure, and make decisions about restructuring or exiting.

Expect changes to play out over 6-12 months across different categories. Niches heavily dominated by non-compliant sellers will see more dramatic shifts. Categories where compliant brands already controlled most market share will barely notice.

The Market Shift

One e-commerce compliance expert described it simply: "For compliant sellers, this levels the playing field. For others, it is a warning that the era of unregulated competition is ending."

The "Wild West" era of cross-border e-commerce—where information gaps between platforms and tax authorities created opportunities for arbitrage—is maturing into a more regulated, compliance-focused marketplace.

Competition shifts from "who can avoid the most obligations" to "who can deliver the most value." For sellers who've been operating with proper compliance all along, that's not a threat—it's the market finally catching up to how they've been doing business.

The US Seller Landscape Context

You're Already Playing by These Rules

US sellers generate $157 billion in total revenue versus $132 billion for Chinese sellers, despite representing less of the seller base. The average US seller does $885,000 annually compared to $394,000 for Chinese sellers.

This revenue difference exists because US sellers have been competing on factors beyond lowest price—customer service, shipping speed, product quality, and reliable fulfillment.

If you're a US-based seller, nothing about your tax obligations changes with this policy. You're already filing taxes on your Amazon income, reporting revenue properly, and factoring tax obligations into your pricing. You've been doing this the entire time because the IRS already had visibility into your earnings.

This is about the Chinese tax system catching up to where the US tax system already was.

What Changes (And What Doesn't)

The change isn't that Chinese sellers are disappearing. The change is that a specific segment—those maintaining artificially low prices through tax avoidance—are facing a cost structure adjustment.

You might notice shifts in:

• Products with heavy Chinese seller concentration and extremely compressed pricing
• Categories where that price gap narrows as non-compliant sellers adjust
• Buy Box dynamics in categories that were heavily price-compressed

What stays the same:

• Manufacturing cost advantages for Chinese factories
• Established Chinese brands like Anker that were already compliant
• FBA and fulfillment logistics
• Overall market structure and global supply chain dynamics

The marketplace is moving toward the compliance-based competition model you've already been operating within. The playing field isn't perfectly level—manufacturing costs, supply chains, and economies of scale still vary widely—but it's more level than when some sellers could simply opt out of tax obligations.

A Market in Transition

Amazon's quarterly reporting of Chinese seller data to Chinese tax authorities started October 31, 2025. Audit notices are going out. The "tax gray zones" are closing.

Large Chinese brands that were already compliant continue unchanged. US sellers operating with proper tax compliance continue unchanged. The shift affects sellers who maintained artificially low pricing through tax avoidance.

Changes will play out over 6-12 months. Some categories will see noticeable pricing adjustments. Others won't.

This is a maturation of cross-border e-commerce—moving from tax arbitrage competition to sustainable business models. For sellers who've been competing fairly, this isn't a threat. It's the market catching up to how they've been doing business all along.

Watch how this unfolds in your categories. The competitive landscape is adjusting in real-time.