How Much Revenue Is the U.S. Losing?
A transparent, bottom-up estimate of recoverable federal and state tax revenue from foreign marketplace sellers operating in the United States — built from verified platform data, not top-down assumptions.
Executive Summary
Foreign sellers — primarily from China — generate an estimated $220 to $335 billion in annual U.S. marketplace sales across Amazon, Temu, Shein, TikTok Shop, Walmart, and other platforms. They pay zero U.S. income tax on this revenue.
Applying existing domestic law (IRC §864, the TCJA) and established withholding mechanisms (FIRPTA, §3406, §1441) would recover between $9 billion and $60 billion annually — entirely from foreign sellers, without raising taxes on a single American citizen.
Conservative
$9B
Federal + state income tax owed by direct foreign sellers
Mid-Range
$17B
Including shell entities, higher margins
Withholding Ceiling
$30–60B
Gross collection via marketplace withholding (before refunds)
Step 1
Establish the Revenue Base: Bottom-Up by Platform
Rather than applying a blanket percentage to total U.S. e-commerce ($1.192 trillion in 2024, per the U.S. Census Bureau), we build the estimate from verified per-platform data. This avoids overstating the base by including non-marketplace direct retail sales where Chinese sellers are not a significant factor.
Source: U.S. Census Bureau — Quarterly Retail E-Commerce Sales, Q4 2024
Platform
Est. Chinese Seller U.S. Revenue
Source
Amazon (3P marketplace)
~$132B
Temu (U.S. portion)
~$20–25B
TikTok Shop (U.S.)
~$15.8B
Walmart (marketplace)
~$3–5B
Other (eBay, etc.)
~$5–10B
Conservative estimate for remaining platforms with Chinese seller presence
Tier 1 Total (Direct Sellers)
~$190–223B
Bottom-up from platform data
Tier 2: Chinese Sellers Operating Through U.S. Shell Entities
Many Chinese sellers operate through U.S.-registered LLCs or subsidiaries to avoid classification as foreign entities. These sellers should technically already be filing U.S. tax returns but largely are not. IRS enforcement against foreign-owned marketplace sellers is functionally nonexistent.
Estimated additional revenue: $50–100B. This figure is inherently uncertain because the use of shell structures is designed to obscure foreign ownership.
Source: EcomCrew — Chinese Sellers Dodging Taxes By Creating U.S. LLCs
Combined Total (Tier 1 + Tier 2)
~$240–323B
Why This Differs from Top-Down Estimates
Some analyses apply the 50% Chinese seller ratio (from Marketplace Pulse) to total U.S. e-commerce ($1.192T), yielding a ~$600B base. However, that ratio measures third-party marketplace sellers, not all e-commerce. Total e-commerce includes first-party retail by Amazon, Walmart, Target, and direct-to-consumer brands where Chinese sellers are not a significant factor. Our bottom-up approach yields a more defensible range of $240–323B.
Step 2
Calculate Recoverable Tax Revenue
We model three scenarios: income tax owed (conservative and mid-range) and gross withholding collected. These represent different enforcement approaches, not competing estimates.
Note: Uses 21% C-corp rate. Many sellers operate as individuals (up to 37% federal). Pass-through rates would increase this estimate.
Note: Tier 2 (shell entity) estimates are inherently uncertain. The 20% margin reflects scale advantages and CCP subsidies documented by ITIF.
This scenario models mandatory withholding at the marketplace level, where platforms withhold a percentage of disbursements to foreign sellers before funds leave the United States. This is not “tax owed” — it is gross collection. Foreign sellers who overpay can file a U.S. tax return to claim a refund, which brings them into the system.
Note: Gross withholding ≠ net revenue. Sellers can file returns for refunds. But withholding at the platform level guarantees some collection and brings sellers into the U.S. tax system. Rates shown are existing statutory rates, not recommendations. The IRS should determine the appropriate rate.
Step 3
Key Assumptions & Limitations
Profit Margins (15–20%)
E-commerce profit margins vary widely by category (5–30%). We use 15% for the conservative scenario and 20% for the mid-range. The 15% figure is commonly cited as a midpoint for large-scale marketplace operations. Chinese sellers may have higher margins due to CCP subsidies, lower labor costs, and zero tax burden — or lower margins due to aggressive pricing strategies.
Tax Rate (21% Federal + ~5% State Average)
We use the 21% federal corporate rate (IRC §11). Many sellers operate as individuals or pass-throughs, where federal rates reach 37%. Using the corporate rate is conservative. State rates vary from 0% (Texas, Nevada) to 13.3% (California). We use 5% as a blended average across states where marketplace activity occurs.
Platform Fees (~40% of Gross Revenue)
Amazon referral fees (8–15%), FBA fees (15–20%), and advertising costs (5–10%) typically total 35–45% of gross revenue. We use 40% for the withholding model, yielding net receipts of 60%.
Tier 2 Shell Entity Estimate ($50–100B)
This is the least precise figure. Chinese sellers using U.S. LLCs are designed to be difficult to identify. The range reflects significant uncertainty. We include it in the mid-range scenario but exclude it from the conservative estimate.
Temu and TikTok Shop U.S. Revenue Estimates
Neither Temu nor TikTok Shop publishes official U.S.-only revenue figures. Our estimates are derived from global GMV data, geographic traffic distribution, and analyst reports. These figures may shift as platforms adjust their U.S. strategy in response to tariff and de minimis policy changes.
What Is Excluded
This analysis excludes: import duties and tariffs (addressed separately by de minimis closure), sales tax (already collected by marketplace facilitators post-Wayfair), economic multiplier effects (employment, secondary spending), and potential penalties and interest on unpaid past obligations.
Sources
Source: U.S. Census Bureau — Quarterly Retail E-Commerce Sales, Q4 2024
Source: Marketplace Pulse — China Reaches Global Majority on Amazon
Source: Marketplace Pulse — Amazon's Significant Reliance on Chinese Sellers
Source: Marketplace Pulse — American Sellers Are Losing Walmart to China Too
Source: Backlinko — Temu Revenue and Statistics
Source: Business of Apps — Shein Revenue and Usage Statistics
Source: Resourcera — TikTok Shop Statistics
Source: Momentum Works — TikTok Shop U.S. GMV
Source: EcomCrew — Chinese Sellers Dodging Taxes By Creating U.S. LLCs
Source: ITIF — How China's State-Backed E-Commerce Platforms Threaten American Consumers
$9 to $60 billion in annual revenue. From foreign sellers. Not American taxpayers.
This is not a new tax. It is not a tariff. It is revenue already owed under existing law by foreign entities profiting from American consumers and American infrastructure — collected through established withholding mechanisms that marketplace platforms already have in place.