Amazon Sales Tax Collection

Do I Have To Do Sales Tax Collection As A Seller?

Getting paid for your amazon sales is exciting, right? But the joy of getting sales tax on amazon sales can be dented by the pain of collecting sales tax.

Every seller faces different sales tax rules and requirements. But if you’re an ecommerce seller, things get a little bit complicated. 

This blog breaks down the different types of sales tax and how you can do Amazon Sales Tax collection online. We also talk about the rules of collecting sales tax online and how to automate it so that you don’t have to worry about it anymore.

What Is Sales Tax And Who Needs To Collect It?

Sales tax is a one-time tax charged by the state and local governments of the United States. It’s determined by the state tax rate and the sales tax collection rate for that particular jurisdiction.

Businesses must collect sales tax from their customers in almost every state, with the exception of

  • Alaska
  • Delaware
  • Montana
  • New Hampshire  
  • Oregon

This includes online sales. Sellics deals with Amazon sales tax by adding the same amount as a cost, so the total equals zero. 

Consumption taxes typically apply to goods and services purchased within a state’s borders. Businesses must collect these taxes from their customers too. This is different from sales tax because it’s a percentage charge on revenue rather than a fixed sum.

That said, businesses should always confirm which tax law applies to their online sales.

Alan Chen, CPA at Freecashflow.io, helping eCommerce businesses with their tax and accounting

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How Do I Know If I Need To Collect Sales Tax?

Professional Amazon sellers must collect sales tax on all sales, due to Marketplace Facilitator Laws in most states.

You may still need to register for a sales tax permit in your state, even if you are an Amazon seller.

Sales tax calculations and remittances can be handled automatically by Amazon, but you should still track and report your sales taxes.

Origin- or Destination-based sourcing may apply, depending on the state you are selling in. If you’re selling on amazon and collecting sales tax in a state other than where you’re collecting revenue from, you’ll need to complete Form 1099-misc for each seller with a tax nexus of that state.

Finally, if you have a fulfillment center in that state and sell items through amazon, you’ll likely be required to collect sales tax for those items as well.

What Are The Rules For Collecting Sales Tax On Amazon?

As a seller on Amazon, you must be a Professional Seller in order to collect sales tax. This means that you must be collecting sales tax for the state in which your amazon sales are occurring, and have a valid tax license or permit from that state.

Most states have marketplace facilitator laws, in which amazon is responsible for collecting and remitting sales tax on behalf of sellers.

However, sellers are still responsible for tracking and reporting their sales taxes and correcting any differences. As a seller on amazon, you’re automatically collecting sales tax in states where marketplace facilitator laws exist.

However, it’s important to note that amazon collects this tax at the states’ discretion, so if amazon does not collect sales tax on your amazon sales, it’s because the state has chosen not to do so.

How Can I Automate My Sales Tax Compliance Process On Amazon?

You can register with amazon seller central and automatically calculate, collect, and remit sales tax.

To do so, you need to create an amazon seller central account and register with your state tax authority.

Once that is done, amazon will let you know if sales tax is applicable for your state.

You must then collect sales tax for the state where the seller has a valid sales tax permit.

Find reports containing sales tax details in amazon seller central under ‘reports’ and ‘tax document library’.

If you use marketplace facilitator law, the seller must collect and remit sales tax for states where it has a valid sales tax permit.

Also, check the amazon seller central Help Center for more details on collecting and remitting sales tax

Conclusion 🤔

Sales tax is a central tax that is generally imposed by states and local governments. As of today, sales tax is imposed by 32 states of the United States of America (U.S.A.) and the District of Columbia.

Besides these states, sales tax is also imposed in some collectible territories such as Guam, Puerto Rico, American Samoa, the U.S. Virgin Islands, and the Northern Mariana Islands. 

A sales tax is typically imposed on the total sales price of an item or service as well as any applicable shipping charges or tax-collecting fees (if any). It is also commonly referred to as value-added tax (VAT) or state sales tax.

In most states, online retailers collecting sales tax are required to collect sales tax based on their shipping address rather than their seller’s shipping address. 

The collection of sales tax varies from state to state and depends entirely on individual laws and regulations.

However, it is essential for online retailers to collect sales tax in every state where they do business so that they can be in compliance with individual laws and regulations across the country.

Want Help With eCommerce Taxes?

Alan Chen, CPA at Freecashflow.io, helping eCommerce businesses with their tax and accounting

Book A Call Now

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