China targets tax dodges by sellers on Amazon, e-commerce sites

Chinese tax authorities ordered e-commerce giants including Amazon.com Inc. to hand over sales data for the first time, according to people familiar with the matter, in a rare move to crack down on tax evasion by merchants who use the online platforms for cross-border business.

Tax bureaus across China in recent months told major platforms to submit some Chinese merchants' third-quarter revenue in a bid to curb underreported sales, according to online sellers based across the country, who asked not to be named as the information is sensitive. 

Amazon started sharing data in mid-October, while China-origin competitors including Alibaba Group Holding Ltd.'s AliExpress, Temu and Shein Group Ltd. handed it over after being asked weeks earlier, the people said. Tax authorities are not accusing the platforms themselves of any wrongdoing. 

The data has given Chinese regulators a more accurate picture of online exporters' sales, which are often far higher than the figures they report to tax bureaus, the people added. If they amend filings to match platform data, sellers could face as much as 13% in value-added taxes plus corporate levies, the people said, with back taxes wiping out profit margins. 

Based on China's tax laws, companies with annual sales of more than 5 million yuan (about $703,000) need to pay up to 13% in VAT. Merchants are exempt from the levy only if they can provide customs clearance documents and other proof of export — which most online sellers struggle to do under their current business structure.

Chinese sellers now make up just over half of Amazon's global active seller base — their first time crossing the 50% mark across all international marketplaces — a September Marketplace Pulse report said. 

An Amazon spokesperson told Bloomberg that the company "complies with all applicable laws and regulations in every country where we operate." 

China's State Taxation Administration, Shein, Temu and AliExpress didn't respond to requests for comment. 

The move comes as China's need for fiscal revenue overpowers its desire to support smaller exporters who have been roiled by Donald Trump's new tariffs. Beijing has already intensified efforts to collect taxes on its citizens' overseas income, Bloomberg reported in June, a push that follows China's earlier implementation of the Common Reporting Standard — a global information-sharing system aimed at preventing tax evasion. 

It's the latest blow in a turbulent year for Chinese e-commerce, already hit by Trump's removal of the de minimis exemption — a rule that let cheap packages enter the U.S. duty-free and helped power Temu and Shein's rise. While exporters were heartened by lower U.S. tariffs after a summit between the US and China late last month, they said they still wanted to hedge exposure to any future setbacks in trade ties. 

Texts, calls

It's common for online exporters in the mainland to register dozens — or even hundreds — of companies across different cities to attract traffic, since platforms like Amazon allow only one store per registered entity. 

Merchants typically route goods through a mainland firm to a Hong Kong company, which formally owns the stores and sales — a structure that allows them to sidestep corporate taxes in mainland China. In China itself, they then report sales of just one store to authorities so that taxation is minimal. 

Tariff uncertainty was more manageable as merchants were able to pass the costs to consumers — or under-report product value to U.S. customs agents — several of the people familiar said.

Online marketplaces link global consumers directly to Chinese sellers, often offering cheaper goods and faster shipping. The sector's export value grew nearly 17% in 2024 — outperforming 7.1% for total exports — customs data show, despite growth slowing amid trade tensions.

Multiple sellers told Bloomberg they received text messages from local tax authorities demanding immediate payment after the correct sales figures had been reported by platforms like Amazon. Two merchants whose companies are registered in smaller, poorer cities or counties said they had gotten urgent calls or visits from staffers from local tax bureaus asking for payment.

Several of the people said they would choose to wait and see how determined the tax authorities were to collect payment, or whether any industry experts come up with workarounds to help them avoid paying back tax.