Chinese Sellers Dodging Taxes By Creating U.S. LLCs
If you look at the number of Chinese sellers on Amazon, something very odd seems to be happening.
It appears as though there are FEWER Chinese sellers on the platform.
Recent data shows that the percentage of China-based sellers on Amazon is now less than 40%, well down from the 60% reported during the height of COVID.
So are there really fewer Chinese sellers? Nope. It appears there are simply more Chinese sellers dodging taxes in response to new Chinese regulations.
New Chinese Laws Make Amazon Obligated to Report Tax Information on Sellers
For years, Chinese sellers have made up well over half of all third-party sellers on Amazon (much to the chagrin of Western sellers).
SellerSnooper now reports that under 40% of sellers are Chinese.
Marketplace Pulse reports similar numbers and shows a noticeable dip in the overall percentage of Chinese sellers. 
Both SellerSnooper and Marketplace Pulse report only on the business addresses supplied to Amazon. And, as we’ll see, a seller on Amazon can very much be a China-based business operating under a U.S. LLC shell company.
China Enacts New Tax Laws Requiring Internet Companies like Amazon to Report Tax Information
China has increasingly been cracking down on corruption and perceived tax evasion.
Last year, the government of China enacted a new law requiring internet companies to report tax information about China-based businesses. In 2023, the CCP reported investigating 173,000 Chinese businesses for suspected tax crimes.
In 2018, one of China’s top stars, Fan Bingbing, “disappeared” before admitting to tax crimes and paying a fine of over $120 million USD. It proved to many in China that no one is safe from the tax authorities.
So last year, when rumors began spreading that the CCP was increasing scrutiny on Chinese internet-based businesses like Amazon sellers, panic struck within seller communities.
Those fears were realized in June of this year when the CCP announced new laws requiring internet companies, such as Amazon, to report the business activities of China-based sellers.
The press release states: “…internet platform companies are required to submit the identity information of operators and employees, as well as income data for the previous quarter, to their respective tax authorities.”
Chinese Sellers Ditch China-Based Businesses for U.S. LLCs
In response to the new laws, sellers in China began aggressively pursuing a tried-and-true strategy to hide business information from Chinese tax authorities:
Chinese businesses started hiding their operations in offshore entities, such as U.S. LLCs.
Some of the largest Chinese sellers, such as Anker and Great Star, have long had U.S. LLCs despite being unmistakably Chinese companies. But after news broke that Amazon would begin sharing tax information with Chinese authorities, the trend spread even to smaller sellers.
An eCommerce seller based in China told me, “There’s been a big trend in the last year in China to structure your business as a U.S. LLC. Partly because people on Amazon ‘don’t like’ Chinese sellers, and partly because Amazon is now sharing sales information with China.”
It’s difficult to pinpoint exactly how many sellers have switched from operating under China-based businesses to U.S.-based LLCs. However, public U.S. data on the number of U.S. LLCs created over the last year shows a staggering increase in new retail LLCs categorized as “retail trade.”
The number of U.S. LLCs registered in the past year has increased by almost 400% year over year.
Amazon Chinese Sellers – The Numbers Lie
In conclusion, the next time you see data about the number of Chinese sellers operating on Amazon, take the numbers with a very heavy grain of salt.
The truth is that, given Amazon’s ongoing and aggressive push for more Chinese sellers to join the platform, the actual number of sellers based in China is, without a doubt, far larger than the official numbers suggest.
