Hey everyone! In today’s video, I’ll be walking you through the full process of how to get tax-exempt status on Alibaba for your wholesale purchases. This will save you a lot of money, so make sure to follow along!
Why Get Tax Exemption?
Wholesalers and resellers are exempt from paying sales tax when buying goods intended for resale. This exemption exists because sales tax is meant to be paid by the end consumer of a product, not by businesses acquiring goods to sell to customers.
Getting tax exempt status on Alibaba can provide big savings on your wholesale orders. Depending on your state’s tax rates, you could potentially save 8-10% on every order.
This adds up fast especially if you’re purchasing large volumes from suppliers. Tax-exempt status is definitely worth looking into if you purchase inventory from Alibaba regularly.
Even if you’re just starting out with lower order values, the tax savings still make a significant difference in your bottom line and profit margins.
Obtaining tax-exempt status should be a top priority for any wholesaler or reseller sourcing products on Alibaba.
Requirements to Qualify for Exemption
To qualify for tax-exempt status on Alibaba, your business needs to have a valid tax ID number, also known as an EIN or federal ID.
Valid Tax ID Number or Federal ID
You need a federal tax ID number (also known as an Employer Identification Number or EIN). This number identifies your business and is used for tax purposes.
Acquiring an EIN is quick and easy. You can apply online for free directly through the IRS website. The EIN will be issued immediately upon completing the application.
You can use your federal national ID, passport number, or driving license for the Alibaba tax exemption form.
Business Activity of Reselling
Your business needs to be structured for reselling products. This means you purchase finished goods and resell them without making further changes. You do not manufacture or alter the items yourself.
As long as your activities involve buying and reselling products in their original form, your business qualifies for tax exemption in most states.
If requested, you should be prepared to provide documentation showing your business is structured for resale activities. This may include your business registration, licensing, sales invoices, website, etc.
Step-by-Step Guide to Getting Alibaba Tax Exemption
Follow these steps to get fully approved for tax-exempt wholesale orders through Alibaba:
Step 1: Register an Alibaba Account
Getting set up is simple. Go to Alibaba.com and register for an account. Make sure to choose a business account when signing up.
Step 2: Navigate to Tax Information Section
After creating your account, go to the “My Account” section. Next, click on “Tax information” which will be listed under Settings.
Step 3: Add Tax Exemption
According to your business area, click the “Add tax exemption” button. This will initiate the application process for sales tax exemption. In this video, I selected the US as the tax exemption territory.
Step 4: Accept Terms & Conditions
You have to accept the Alibaba Tax Exemption Program’s terms and conditions before proceeding. This program allows qualified businesses to make tax-free purchases on Alibaba.
Step 5: Select Your State
Then select the state you want to register for tax exemption. For sellers registered overseas, choose the state where inventory shipments are received.
Step 6: Choose Exemption Type
Select the exemption type that fits your business activities. For wholesalers/resellers, choose “Resale”.
Step 7: Fill Business Information
On the application form, fill out key details about your business. This includes:
- Business name
- Business category/industry
- Business address
- Name of authorized representative
Double check that all information entered is accurate.
Step 8: Answer Eligibility Questions
Next, answer a series of yes/no questions that determine your eligibility. Read each question carefully and answer honestly based on your business structure and activities.
Step 9: Enter Valid Tax ID Number
In the Tax ID field, enter your valid federal Employer ID Number (EIN) which was obtained from the IRS. This is required to verify your business identity and tax exemption eligibility.
You can enter your federal ID number (national ID, passport number, or driver’s license).
Step 10: Submit Your Application
Double check that all fields are filled out properly. Once everything looks good, click Submit at the bottom to complete your application.
Alibaba will review your documents and verify your tax-exempt status. This usually takes a few hours to 2 days. You can check the real-time status in the Tax Information section of your Alibaba account.
Order Tax-Free Once Approved!
Once your tax exemption application is approved, you will see a status of “Tax exemption verified”. At this point, you can begin placing wholesale orders without paying sales tax!
The tax will be automatically deducted during checkout. Be sure to double check orders are tax-free before submitting payment.
Maintaining Your Alibaba Tax Exemption
Once approved for tax exemption on Alibaba, there are a few things to keep in mind:
- Duration: The tax exemption status lasts for 1 year. You will need to renew annually to keep your tax-free purchasing privileges.
- State Changes: If you move your business registration to a new state, make sure to update the tax exemption details.
- Audit Requests: Keep all your tax exemption documents available. Alibaba may request them again later for periodic auditing.
- Status Checks: Check your “Tax information” page periodically to ensure your status remains as “Verified”. Let Alibaba know immediately if you see any changes.
Following Alibaba’s tax exemption guidelines will ensure you have no issues. This will allow you to save thousands on your wholesale orders!
Final Tips & Next Steps
A few final tips as you move forward with tax exemption:
- Obtain your federal EIN as soon as possible since it is required. This ID number can be acquired online for free.
- Gather any documentation about your business operations and structure. This supports that you qualify for tax exemption under the “resale” category.
- Apply for tax exemption as soon as you create your Alibaba account. The sooner you apply, the faster you can begin placing tax-free orders.
- If you import shipments through a freight forwarder, make sure to provide them with your tax exemption documents too.
Getting approved for tax exemption only takes a few steps, but it’s one of the best ways to maximize savings on Alibaba. The application process is quick, easy, and completely free. There’s no reason not to do it!
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Let us know in the forum if you have any other questions. Happy tax-free ordering!