NVIDIA and AMD to Pay Washington 15% Income Tax on China Flea Sales

Nvidia & AMD Resume Chip Sales to China Amidst US Tariff Threat

SAN FRANCISCO, CA – In a dramatic shift, Nvidia and Advanced Micro Devices (AMD) are set to resume sales of advanced chips to China, despite ongoing tensions between Washington and Beijing over technological dominance. the move comes after the US government eased certain export restrictions,paving the way for renewed commerce in critical semiconductor technology.

Nvidia, led by CEO Jensen Huang, will once again offer its H20 chips to Chinese companies. Together, AMD will remit 15% of its revenue from sales of its Mi308 chips – previously prohibited from export – back to the US government.

Sources indicate this agreement could generate over $2 billion for the US Treasury, as reported by The New York Times.

However, the situation remains volatile.Just hours after the announcement, former US President Donald Trump signaled a potential reversal, stating his intention to impose a 100% tariff on “fleas and semiconductors.” The timing and implementation of this new tariff remain unclear.

The Bigger Picture: US-China Tech War & Semiconductor Control

This back-and-forth highlights the complex dynamics at play in the US-China tech rivalry. Semiconductors,the building blocks of modern technology,have become a key battleground. Washington has long sought to limit China’s access to cutting-edge chips, fearing their use in military applications and to bolster China’s economic competitiveness.

California’s Silicon Valley, home to both Nvidia and AMD, finds itself squarely in the middle of this geopolitical struggle. The easing of restrictions, while providing a financial boost to the US government, represents a delicate balancing act.

Why This Matters Long-Term:

Semiconductor Supply Chains: The global semiconductor supply chain is incredibly intricate. Restricting access for any major player,like China,has ripple effects across industries – from automotive to consumer electronics.
Geopolitical Leverage: Control over advanced chip technology is increasingly seen as a source of geopolitical power. The US is attempting to maintain its lead in this critical area, while China is investing heavily in developing its own domestic capabilities.
The Future of Innovation: The ongoing tension could stifle innovation if companies are forced to prioritize geopolitical considerations over research and progress.
Tariff Volatility: Trump’s threat of new tariffs introduces significant uncertainty for the semiconductor industry, possibly disrupting investment and trade.

The situation is rapidly evolving,and the long-term implications for the tech industry and international relations remain to be seen. Archyde.com will continue to provide updates as this story develops.

What are the potential challenges in accurately tracking and taxing “flea sales” of semiconductors in China?

Understanding the New Washington State Tax Law

As of August 11,2025,a new Washington state law mandates that semiconductor companies like NVIDIA and AMD will be subject to a 15% income tax on sales originating from China,even those considered “flea sales” – referring to smaller,individual transactions or sales thru unofficial channels. This unprecedented legislation targets revenue generated from the gray market in China, where products are frequently enough resold after initial purchase. The law aims to capture tax revenue previously lost due to the complexities of tracking and taxing these smaller, dispersed sales. This impacts GPU sales,CPU sales,and related semiconductor revenue.

Why This Law Targets NVIDIA and AMD Specifically

Washington state is home to significant operations for both NVIDIA and AMD, making them prime targets for this new tax. The legislation specifically focuses on these companies due to their substantial market share in the Chinese semiconductor market and the documented prevalence of grey market activity involving their products.

Dominant Market Position: NVIDIA and AMD control a large percentage of the discrete graphics card market and processor market.

China’s Demand: China represents a massive consumer base for high-end GPUs and CPUs, notably for gaming and AI applications.

Grey Market Prevalence: The resale market in China, often bypassing official distribution channels, is substantial, leading to untaxed revenue for these companies.

State Revenue needs: Washington state is actively seeking to increase its tax base, and this law is seen as a way to tap into previously unrealized income.

How “Flea Sales” are Defined & Tracked

The definition of “flea sales” within the context of this law is broader than it initially appears. It encompasses:

Individual Resales: Sales made by individuals who purchased the products for personal use and are now reselling them.

Small-Scale Retailers: Unofficial retailers operating without proper licensing or tax registration.

Online Marketplaces: Transactions occurring on Chinese online marketplaces where the seller is not an authorized distributor.

Tracking these sales is proving challenging. Washington state is relying on a combination of methods:

1. Data Analysis: Analyzing sales data provided by NVIDIA and AMD, looking for anomalies and patterns indicative of grey market activity.
2. Market Monitoring: Utilizing third-party firms to monitor online marketplaces and identify unauthorized sales.
3. Cooperation with Chinese Authorities: Seeking collaboration with Chinese authorities to gather facts on sales activity (though this remains a complex undertaking).
4. Blockchain Technology: Exploring the use of blockchain to track the origin and ownership of GPUs and CPUs, potentially identifying unauthorized resales.

impact on NVIDIA and AMD’s Financials

The 15% tax is expected to have a noticeable impact on NVIDIA and AMD’s financial performance. While the exact amount is difficult to predict, analysts estimate:

Reduced Profit Margins: The tax will directly reduce net income from sales in China.

Potential Price Increases: To offset the tax burden, NVIDIA and AMD may consider increasing prices on products sold in China, potentially impacting demand.

Supply Chain Adjustments: Companies might explore adjustments to their supply chain to minimize exposure to the tax, such as shifting more sales through official channels.

Increased Compliance Costs: Both companies will incur costs associated with tracking sales and complying with the new tax law. Semiconductor industry analysis suggests these costs will be significant.

Legal Challenges and Industry Response

The law has faced immediate legal challenges. NVIDIA and AMD have argued that:

Extraterritorial Reach: The law attempts to tax sales occurring outside of Washington state, raising questions about its legality.

Enforcement Difficulties: The practical challenges of tracking and taxing “flea sales” are immense,making the law difficult to enforce.

Double Taxation: Concerns exist about potential double taxation if similar taxes are levied by Chinese authorities.

Industry associations,such as the Semiconductor Industry Association (SIA),have expressed concerns about the precedent this law sets. They argue that it could lead to similar taxes in other states, creating a complex and burdensome regulatory surroundings for the semiconductor manufacturing sector.

implications for Consumers

Consumers in China may experience:

Higher prices: As mentioned, NVIDIA and AMD may pass the tax burden onto consumers through price increases.

Limited Availability: Companies might reduce the supply of products to unofficial channels, leading to limited availability.

Increased Scrutiny: Increased monitoring of online marketplaces could lead to greater scrutiny of individual sellers.

Washington State’s Rationale and Future Plans

Washington state officials defend the law as a necessary step to ensure fairness and capture lost tax revenue. They argue that:

Level Playing Field: The law creates a more level playing field between official distributors and unauthorized resellers.

Increased State Funding: The additional tax revenue will be used to fund essential state services, such as education and infrastructure.

Potential Model for Other States: Washington state hopes that this law will serve as a model for other states seeking to address similar tax challenges.

The state is also exploring ways to refine the law and improve its enforceability,including investing in new technologies and strengthening cooperation with Chinese authorities. This includes exploring tax compliance solutions specifically tailored to the