U.S. Tax Storm Continues: E-commerce Sellers Facing Comprehensive Audits and Double Taxation Reality in 2025

Compliance wave has arrived—systematically strengthening tax frameworks is the only path to safeguard cross-border business

The word “tax” continues to sweep the cross-border circle. As U.S. tax authorities made e-commerce sales a key audit focus for 2025, many e-commerce sellers are now experiencing an unprecedented wave of comprehensive audits.

The warnings from multiple U.S. authoritative media have become reality. The Internal Revenue Service (IRS) has indeed identified e-commerce sales as a key audit focus this fiscal year. Sellers on platforms such as Amazon, Shopify, and Etsy are under review, especially those who have incomplete income records, rely on multiple payment channels like PayPal or Stripe, or have a history of interrupted declarations.

Regulatory Tools Already Deployed

Tax authorities are now tightening their supervision network with two key tools:

1. The scope of application for Form 1099-K has been expanded, leading to a significant increase in transaction data transparency.

2. In-depth collaboration with third-party payment platforms is now implemented—real-time comparison between payment flow and declared data has become a powerful audit tool.

Any discrepancy in declarations may trigger an audit alert, and sellers who rely on multi-platform payments or have discontinuous declaration records are facing the highest risks.

Threshold for “Effectively Connected Income (ECI)” for Cross-border Sellers Has Been Lowered

The new rules have strictly defined the essence of U.S.-related business: If any of the following conditions are met, the profits will be deemed “Effectively Connected Income (ECI)” and subject to U.S. corporate income tax:

• Goods are stored in Amazon FBA warehouses or other storage facilities within the U.S.;
• U.S.-registered trademarks or patents are used in sales;
• A sales team or operating entity is established in the U.S.

This means that as long as the fulfillment process or intellectual property involves the U.S. mainland, regardless of the platform used for sales, the relevant profits must be declared and taxed in the U.S. Sellers who fail to declare in compliance are facing a deemed tax of 30% of total sales, with a lookback period of up to three years.

Shadow of Double Taxation Now Looming

Chinese cross-border sellers face particular hardships—China and the U.S. have not yet established a targeted tax coordination mechanism. After declaring ECI in the U.S., sellers may easily fall into the predicament of double taxation on the same profits by both countries.

The wave of cross-border e-commerce compliance has arrived. From the implementation of tax reforms to the tightening of cross-border audits, platform rules and regulatory requirements continue to escalate. Sellers must systematically strengthen their tax compliance frameworks and comprehensively sort out their business processes to protect the security of their accounts amid risks and ensure the stable and long-term development of their cross-border businesses.