Personal Finances

Entry Type 86: Avoid Taxes the Legal Way

There are a large number of different benefits associated with becoming an entrepreneur. Not only do you get to decide when and where you work, but you also have the opportunity to exponentially increase your income over time.

This is especially true for those who run an eCommerce business. More people than ever before are starting online businesses, causing the eCommerce industry as a whole to explode in growth in recent years.

To help save extra money, many entrepreneurs file entry type 86 to reduce the amount that they pay in taxes. Let’s explore what you should know about this opportunity.

So, What Is Entry Type 86?

This deduction applies to low-value goods that are imported into the United States of America.

It’s called the goods and services tax (GST) entry type 86. It means that you’re not paying GST on the item when it enters the country.

To understand how much you can save, let’s say that you buy an item for $500 from a supplier in China. This is much less than the value of your imports, so you would normally pay GST. However, with entry type 86, the customs department doesn’t charge you GST because your supplier charges you instead.

So What’s the Catch?

You have to claim these savings with your income taxes. However, this isn’t a taxable benefit because you’re not receiving money from a third party.

It’s simply a deduction that lowers the amount of tax that you owe on your business income or profits.

What Goods Don’t Qualify?

You can’t use entry type 86 on certain goods. These include:

  • Working animals
  • Motor vehicles
  • Racing horses
  • Items that you import for personal use (not business)

As you see, there are many benefits to filing under entry type 86.

If you’re ever unsure whether something qualifies for this deduction, contact your customs broker or import agent. They will be able to help you out. For assistance in determining if filing under entry type 86 is right for you, speak with your tax professional to determine the best course of action that you should take.

How Much Can I Save?

It’s impossible to say exactly how much you’ll save without knowing what you’re importing and the customs value of your goods.

However, if we use an example from above, a $500 purchase would potentially save between $30 and $70 in taxes versus paying GST. Over time, this can easily begin to add up.

Can I Cancel Entry Type 86 Shipment After Release?

No, you can’t cancel a GST-free import because it has already been released by the customs department.

All that you can do is request a refund from your supplier to regain any money that was paid in GST on this item. However, you are able to correct customs entry type 86 filing before it is released. This means that you will be able to resolve any errors before they become nonmodifiable.

Who Can File Entry Type 86 in the US?

There is only one type of person who can file entry type 86, and that’s a GST registrant. This means that your business must be able to charge tax in order to qualify for this deduction.

Remember, if you’re an individual using your eCommerce business as a side income source, then you don’t qualify for this deduction.

For business owners in New York, you can check out this resource to learn more about the process:

When Is Entry Type86 Filing Required?

Interestingly, filing is entirely voluntary.

You aren’t required under any circumstance to do so. Since it is entirely at your discretion, you can decide whether or not filing would be worth it for your business.

If you find that you would not save a significant amount of money, it often won’t be worth the time or effort.

How Is the Value of Goods Determined?

The value of your goods for entry type 86 is based on the customs value of the item.

This includes not only the price that you bought but also international shipping charges and insurance. Remember, if you paid GST on these items already when buying them, then you must include this amount in their total customs value.

How Do I Choose Entry Type 86?

Remember that this option isn’t for everyone. The level of savings will depend on individual circumstances, so speak with your tax professional to determine which filing method is right for you. Otherwise, you might find yourself encountering obstacles that you could have circumvented.

Can I File Type 86 at a United States Commercial Port of Entry?

Yes, as long as the broker filing on your behalf has the necessary permit to do so.

However, you can also file through the United States customs department either online or on paper. If you are filing electronically, then you must list your GST number so that the customs department knows who is filing it.

What Information Do I Need to File Entry Type 86?

To file this way, you will need your GST number as well as:

  • Name and address of the supplier
  • Country of origin
  • Goods description and name
  • Code number of the tariff schedule that applies to your goods
  • The total value of your shipment

 As long as you include this information, you should not encounter any issues.

Navigating Entry Type 86 Might Seem Difficult

However, it’s not nearly as complicated as most people believe. The above guide on entry type 86 has key information that can help you make the decision that’s best for your business.

Be sure to check out the rest of our blog for other useful financial information that you can take advantage of.


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