If you are an eCommerce seller, you must read this article for the following reasons:
- What is Amazon Tax Exemption Program and Why You Should Know As a Seller?
- How To Enrol For Amazon Tax Exemption Program?
- Benefits Are Sellers Going To Derive From Amazon Tax Exemption Program?
Do you know that, as an Amazon Seller, it is your responsibility to handle buyer exemptions in case you sell goods to customers with a tax-exempt status? Are you aware that an Amazon Seller can participate in Amazon Tax Exemption Program (ATEP) to handle buyer exemptions automatically directly through his seller account?
Well, if not, then this article will describe in detail what is Amazon Tax Exemption Program (ATEP) is, how does it work, and how to enroll in the ATEP. Besides this, we will also discuss how to remove tax exemption from Amazon Account as a seller?
What is Amazon Tax Exemption Program (ATEP)?
ATEP is a program in which certain buyers and organizations making eligible purchases from Amazon.com and affiliates or other participating sellers get sales tax exemptions. That is, such organizations do not have to pay any sales tax on the purchase of eligible items from Amazon.com.
However, these buyers receive tax exemptions from Amazon.com only when they comply with the ATEP Terms and Conditions. Also, such buyers must make purchases through their Amazon business account. For instance, the staff members of an educational institution having a business account on Amazon and enrolled in ATEP can make tax-exempt purchases through such an account on behalf of the institution.
On the other hand, Amazon Sellers also have the option to enroll in the Amazon Tax Exemption Program (ATEP). Provided, such sellers or affiliates sell products through their business accounts with Amazon. Also, they must comply with the terms of the tax calculation services Amazon makes available to them.
Therefore, those sellers who enroll in ATEP have the facility to use the Tax Calculation Service for accepting sales tax exemptions from buyers enrolled in ATEP.
This service automatically calculates sales tax exemptions on the seller’s orders on which they choose to accept buyer exemptions. What this means is that the sellers part of ATEP do not have to undergo the hassle of calculating the tax exemptions on buyer orders eligible for such exemptions.
It is important to note not all Amazon sellers participate in ATEP, given its large marketplace. Thus, sellers selling products through the following platforms are also eligible to become a part of ATEP:
- Amazon.com LLC
- Amazon Digital Services LLC
- Warehouse Deals LLC
- Amazon Services LLC
- 3rd Party Sellers who participate in ATEP
Customers Eligible For Amazon Tax-Exempt Status
ATEP is a program in which certain buyers and organizations making eligible purchases from Amazon.com and affiliates or other participating sellers get sales tax exemptions. Such buyers and organizations include:
- Charitable organizations
- U.S. Government, state and local governments
- Direct payment holders, and
- Educational institutions
How Can Sellers Enrol in ATEP?
Amazon Sellers can enroll in ATEP using the following process:
- Go to your ‘Amazon Seller Central account.
- Select the ‘Settings’ drop-down menu and click ‘Tax Settings’.
- Then, select the box next to ‘Enroll in the Amazon Tax-Exemption Program’.
- Click ‘Save Settings’ once you have configured your tax settings.
It is important for a seller to enroll in ATEP in case it wants to use Amazon’s Tax Calculation Service to calculate the tax exemptions that ATEP buyers desire to avail. Note that both the buyer and seller must participate in ATEP for a buyer to use exemption on a seller’s offer.
The above process lays down the steps that an Amazon seller must follow to accept buyer exemptions through Amazon’s Tax Exemption Program.
Thus, a seller’s participation is automatic when he saves his ‘Tax Settings’ in his ‘Amazon Seller Central’ account unless he chooses to opt out.
Reasons Why Sellers Should Participate in ATEP?
Sellers obligated to calculate tax exemptions on their orders to be delivered to customers with tax-exempt status must participate in the Amazon Tax Exemption Program. This is because such a program offers a host of benefits to the sellers as well as the buyers.
- The exemption automatically applies to all items in the order of a participating buyer purchasing items from a participating seller. Provided, such a buyer has an active exemption for the destination of the order. In case a particular item does not qualify for the exemption, the buyer can remove the exemption from one, many, or all items on the order during checkout.
- AETP enables sellers to automatically handle or manage buyer exemptions. Automatic handling means that Amazon will collect the buyer exemption document automatically on a per order basis on behalf of the seller. Further, it will store the document in its system. Thus, the seller can access the document through his account’s ‘Tax Document Library’, whenever he needs it.
- In addition to this, the buyers making purchases from AETP sellers can search for products using filters. Such filters would help them to include or exclude seller offers that accept exemptions in their search results. There can even be a possibility that a seller may not participate in AETP. If this is the case, then the seller’s offer may not be included in a buyer’s filtered search.
- Sellers can identify an order with a tax exemption easily using the reports available under ‘Tax Document Library’ in their Amazon Seller Central account. Note that the buyer’s tax exemption data gets populated in the seller’s ‘Sales Tax Report’ automatically. Also, the exemption documents become available in the ‘Tax-Exemption Certificates’ tab within 72 hours of order completion.
What are Tax Exemption Certificates?
A seller enrolled in Amazon’s tax calculation services and participating in the Amazon Tax-Exemption Program (ATEP) must obtain the tax-exemption certificates. The tax-exemption certificates are the documents related to each of the tax-exempted sale transactions. Each of these certificates reveals seller’s information. Hence, sellers can use these to confirm whether the seller information mentioned in the document is accurate or not.
As mentioned earlier, the seller’s ‘Sales Tax Report’ in his Amazon Seller Central Account will auto-populate the data in the Buyer Exemption columns. As a result, the Exemption documents will become available in the ‘Tax-Exemption Certificates’ section of the seller’s central account within 72 hours of order completion.
In case the tax-exempt orders are to be delivered to a location that is a ‘Marketplace Tax Collection’ jurisdiction, sellers will not have access to download customer exemption certificates for such orders. This is because for such orders, Amazon is responsible to calculate, collect, and remitting sales tax, regardless of the fulfillment type.
In simple words, sellers will not have access to customer exemption certificates for tax-exempt orders shipped to jurisdictions where Marketplace Tax Collection laws have been enacted.
How Can Amazon Sellers Access Tax Exemption Certificates?
Thus, a seller who is enrolled in Amazon’s tax calculation services and is a participant in the ATEP can get the tax-exemption certificates from his tax-exempt sales by following the steps below:
- Sign in to your Amazon Seller Central as the primary account holder. Note that only the primary account holder can get access to tax-exemption certificates.
- Under Reports, click ‘Tax Document Library’.
- Then, in the ‘Tax Document Library’ drop-down list, click ‘Tax-Exemption Certificates’.
- On the ‘Tax-Exemption Certificates’ page, enter your search criteria. The search criteria include either order ID or date range.
- Once you fill in the search criteria, click the ‘Get Report’ button.
- Then click the ‘Download Report’ button under the ‘Reports (CSV)’ column.
- Next, from the downloaded report, copy and paste the secure link into your browser.
- Finally, sign in to your ‘Seller Central account. Your tax-exemption certificate will generate automatically.
What To Do If Sellers Are Unable To Access Tax Exemption Certificates?
There can be a scenario where a seller, you are unable to get a tax-exemption certificate even by following the above-mentioned steps. If this happens, you need to ensure that you meet the following criteria:
- You are enrolled in ATEP.
- You are not enrolled in Fulfillment by Amazon (FBA). As mentioned before, FBA sellers need to contact ‘Seller Support’ to request for tax-exemption certificates.
- Your order ID is valid.
- The date range you provided is valid.
- You have tax-exempt sales for the order ID or the date range you provided.
- You confirmed the shipment of your order more than 48 hours ago.
Types of Tax Exemptions In Amazon Tax Exemption Program
The following are the various exemption types that eligible customers can avail through Amazon Tax Exemption Program on Amazon.com:
|Buyer Exemption Code||Description|
|DIRECT||Direct Pay Permit|
|HO||Hospital (Nonprofit or State)|
|NPR||Nonprofit Religious Organization|
|MPU||Digital Products/Software Exemption|
|SBE||Small Business Exemption|
What Happens if Sellers Do Not Participate in ATEP?
There can be a scenario where sellers selling items on Amazon do not want to participate in ATEP. Besides this, there can even be a possibility that buyers are unable to apply for their exemptions at the time of making a purchase from Amazon.
In such scenarios, the buyer may request a tax refund from sellers. Now there can be two scenarios under this.
I. ATEP Seller Receiving A Customer Request for a Post-Order Tax-Only Refund for a Seller-Fulfilled Order
The first case is the one where an ATEP seller receives a tax-refund-only request from a customer after such a customer places the order with the seller and which is to be fulfilled by the seller himself. In such a case, the seller must first determine the validity of the customer’s request. He needs to do this by communicating with the customer through buyer/seller messaging.
This means that it is the responsibility of the seller to obtain, validate, and retain any necessary supporting documentation in this case. Further, the seller must process a refund for all taxes and other transaction-based charges calculated through the tax calculation services. He can do so only when he is able to authenticate that the customer request is valid.
In case, the seller decides not to grant a tax refund, then he must inform the customer and provide a valid reason.
II. ATEP Seller Receiving A Customer Request for a Post-Order Tax-Only Refund for an Amazon-Fulfilled Order
The second case is the one where an ATEP seller receives a tax-refund-only request from a customer after such a customer places the order with the seller and which is to be fulfilled by Amazon. In such a case, Amazon will refund the tax to the customer only if it receives supporting documentation that meets the necessary requirements.
Responsibilities of Sellers Who Participate in ATEP
The following are the responsibilities of the AETP participant sellers with regard to using Amazon’s Tax Calculation Services:
- Understanding their obligation to determine tax-exempt transactions.
- Issue a refund of taxes calculated on orders fulfilled by them as sellers at any time.
- Direct the buyer to Amazon Customer Service or issue a concession refund on the order fulfilled by Amazon.
- Communicate with any buyer to answer any tax setting-related questions and process requests for post-order refund of taxes on all orders fulfilled by them as sellers. This may include reviewing supplied information and complying with all applicable laws and regulations related to tax-exempt transactions and tax calculations.
- Obtain, validate, and retain any exemption documentation necessary to support a buyer’s tax-only refund request on orders that they fulfill as sellers. However, sellers may not be able to obtain the exemption document in case they issue any refund prior to obtaining any necessary documentation.
Need Help With Your eCommerce Accounting / Tax?
We at freecashflow.io are an agency that focuses on helping online business owners like you. Our partners have worked in multi-billion dollar MNCs such as Warner Brothers, EY and paramount. If you want a trusted partner to help you with your tax/accounting, Freecashflow.io is here to help.