February 24, 2019

Amazon Sales Taxes in USA 2019: Ultimate Seller Guide

Amazon sellers might have diverse experiences than selling in a store. However, you’re still subject to Amazon sales taxes in the USA,and it’s vital to know how it works. In this sales tax guide for Amazon FBA sellers, allow us to help you everything you need to know about sales tax for Amazon FBA sellers.

You see Amazon FBA sellers are in a one-of-a-kind position when we talk about collecting and remitting sales tax. To a newbie seller, that position can be overpowering. But, fret not.

Blog image

The Beginning of Tax Collection

In the case of Amazon FBA, for all the benefits it offers to merchants, utilizing the service might cause you to activate sales tax nexus in just one state. That establishes possible tax collection and remittance stresses for your business.

Nexus is the minimum link between the state and your business which is needed before a state could oblige you to collect and remit their sales and employ tax. A state couldn’t tax you without some connection to your business. Conventionally, that link is triggered when your business boasts a physical presence in a state.

  • Economic Nexus.

It obliges an out-of-state retailer to collect and remit sales tax after the retailer meets a specific set of sales transaction within the state. No physical presence is needed here.

  • Notice & Reporting Requirements.

A retailer obliges a retailer to notify its buyers to pay and report use state tax on their purchases. The retailer might be compelled to deliver purchases and the state an annual statement of their purchases from the retailer.

  • Marketplace Nexus.

When an online marketplace runs its business in a state and offers e-commerce infrastructure, the marketplace facilitator is obliged to register and collect the tax.

  • Affiliate Nexus.

A remote retailer gains a massive interest in, and the retailer sells a similar line of products under the same business name. The legislation might not need common ownership, though.

The Differences Between Origin-Based and Destination-Based Sales Tax States

Depending on the state, sales taxes might be charged on a destination basis or origin basis.

Origin basis needs you to charge your client sales tax according to your business’ location with city/county/state sales tax rate. Some states utilize origin basis for taking those out-of-state sellers.

On the other hand, destination basis needs you to charge sales tax at the rate within the state where your items are delivered. It’s the most widely utilized method.

Filing Sales Tax Returns

When filing your Amazon FBA sale taxes, you should report both the gross annual amount and gross amount per month you made. The gross amount you make each month should be given to fixing inconsistencies with information filings and fiscal year filings.

The frequency of reporting sales tax is identified by the state which issues your sales tax permit. What’s more, the frequencies could be on a monthly, quarterly, or yearly basis.

How Amazon Collects Taxes?

On Amazon, once you created your settings in your Amazon Seller Central US account, they will start collecting sales tax on your behalf. Amazon has its tax collection service for Professional Sellers. They charge 2.9% of the sales tax you collect as their charge.

For instance, if you collect $10 in sales tax, then Amazon will ask you an extra $0.29 as their charge.

The alternative, however, is not to collect sales tax from your Amazon customers and to instead pay out of your profits.

When Does the Seller FBA Must Collect Taxes?

An FBA seller knows it’s time to collect taxes if there is sales tax nexus or product taxability. Each state that Amazon has a warehouse in considers your inventory nexus.

From their perspective, any online seller who makes use of their resources within their state has nexus. For that reason, FBA sellers might have sale tax nexus in a state just from keeping their FBA inventory within an Amazon fulfillment center. You can get an inventory report using Amazon Seller Central.

Are There Any Exceptions?

New York and Virginia are the two states that are exempted to the rule. The two regions have governed that when your only nexus with their state is as a third party seller, you don’t need to collect sales tax within the state.

What’s more, Arizona also issued 2-letter rules which seem to apply, although they don’t mention Amazon FBA by name.

How to Set Up an Account to Collect Taxes?

Now, follow these steps on how to collect sales tax on Amazon. But first, you need to go over setting up sales tax collection on Seller Central Amazon.

  • Login to the Seller Central.
  • Click “Settings” then go to “Tax Settings” found in the dropdown menu.
  • Select the option: “View/Edit your Tax Collection and Shipping & Handling and Giftwrap Tax Obligations Settings.

There, you can select in which states you prefer to collect sales tax and if you wish to collect at the county or other local levels. You can also input a custom sales tax rate.

How to Get a Tax Collection Report?

If you want to get a tax collection report, there’s no need to worry because you have two options. You can download it straight from Amazon, or you can take advantage of a third party products. Third party solutions will connect with all of your shopping marketplaces and carts to offer you a detailed report of the sales tax you collected from buyers in a state.

How to File a Declaration?

You can file a declaration online by logging on to the state’s taxing authority website and send a sales tax return. After that, you can now make your payment via the payment gateway of the state. You can also use a special program for automating accounting and tax collection. This enables you to file your sales tax return automatically and pay what you owe to the state.

To Wrap Up

Now, take a deep breath. We understand there’s a lot of information presented in this article about Amazon sales taxes in the USA. But fret not. You can consider this as your guide which you can bookmark and come back to now and then to refresh your skills.