The Ultimate Guide : How US Sales Tax Work With Amazon FBA
An overview of Amazon FBA and its working in the US
All About Amazon FBA And Its Working
Amazon offers its sellers the Fulfillment by Amazon service, which handles product storage, distribution, and delivery. Once you've registered for FBA as an Amazon seller and business owner, you send your shipments to Amazon fulfillment centers and keep track of them. You get assistance from Amazon's online seller tools as you go along.
Customers who have Amazon Prime receive free, extremely quick shipping on your products, and many other customers also qualify, increasing the competitiveness of your goods. These orders are filled by Amazon, which also informs the customer of the status of their order.
Additionally, Amazon FBA handles all of your customer service needs, including buyer questions, refunds, and returns.
Pro tip: Keep track of which FBA centers are storing and organizing your products. because your company now has a sales tax nexus as a result.
Well, there are over 100 Amazon FBA warehouses in the USA all over the country. The following states have at least one Amazon fulfillment center:
- New Hampshire
- New Jersey
- North Carolina
- South Carolina
How do you comply with US sales tax using Amazon FBA
All About US Sales Tax Compliance Using Amazon FBA
- Sales taxes are collected statewide by 45 states plus the District of Columbia. (There are none in Alaska, Delaware, Montana, New Hampshire, or Oregon.)
- A local tax of some kind is levied in 38 states, either entirely or in part. The result is that the US has thousands of tax jurisdictions!
There are three simple procedures to ensuring tax compliance if you are aware of your company's nexus locations. Additionally, you can get some assistance through your Amazon FBA account.
- Apply in that state for a seller's license
- Customers who reside in that state must pay sales tax
Each of these must be individually configured in Amazon Seller Central. Amazon won't do anything for you until you set up your account to collect these taxes.
- Report sales tax to that state
The foregoing is all true, however, there is a significant and expanding exception! And at that point, a state's "marketplace facilitator statute" takes effect.
What Are US Marketplace Facilitator Laws
All About US Marketplace Facilitator Laws
Marketplace facilitator rules are a type of tax regulation that mandates that online marketplaces like Amazon, eBay, and Etsy collect and submit sales tax on behalf of all of their vendors, including you!
These rules aim to make it easier for the state to recover as much sales tax as possible. It is undoubtedly simpler to hold Amazon, as a single corporation, liable for the taxes resulting from all of the purchases made on its platform than it is to track down each individual Amazon vendor.
For you, this implies that you won't have to worry about paying taxes for any sales you make on Amazon in the "marketplace facilitator" states where you have nexus. That tax money needs to be charged, gathered, and sent via the market.
However, you are still in charge of collecting tax from sales made through the state's other channels and outlets. And even if you solely sell on Amazon and never collect sales tax yourself, you're still likely obliged to keep a current tax permit for as long as you have linkage there.
Marketplace facilitator laws are increasingly spreading across the globe. Versions of a marketplace facilitator tax policy are currently in effect or being developed in the following states (although considering how quickly these laws are evolving, this list may not be entirely up to date!):
Alabama, Connecticut, Iowa, Minnesota, New Jersey, Oklahoma, Pennsylvania, Virginia, and Washington are among the states on this list.
The word "versions" is crucial there. The rules for marketplace facilitators vary. Every state has unique nuances. For instance, even if you are not responsible for managing the tax collection on your Amazon sales, some states may nonetheless require you to file tax returns.
What type of Amazon products and services are taxable in the US
Amazon Goods and Services Taxability In The US
There are plenty of exceptions to the above rule. Why? Let’s see.
- The 46 US states that have a sales tax enact their own regulations and laws.
- States are broadening their tax bases, and in some cases, this entails imposing sales tax on previously exempt services.
- The distinction between goods and services is becoming hazier in the digital age. An ebook can be downloaded, but is that a tangible product or a service? Consider using the software as a service. The choice is up to each state.
How Tax Is Calculated
The following are just a few of the many variables that affect how much tax is added to your order:
- The seller's identity
- The nature of the goods or services gotten
- The moment and place of completion
- Your order's shipping or delivery address
Your order will be subject to the state and local tax rates in effect at the place where it will be delivered or fulfilled. For instance, even if you reside in a jurisdiction without sales tax, your order may still be subject to tax if it is transported to another state. A shipment to a domestic location as opposed to a corporate address, for example, could affect the tax rates that are applied to your order. Additionally, the overall selling price of an item will typically include gift-wrapping fees, item-level discounts, and shipping and handling fees. These fees may be allocated to the specific products in order if they are applied at the order level.
You may be charged the appropriate country tax rate if you order from Amazon.com and ship to a nation outside of the US.
- Gift cards are not subject to taxes when purchased, but they may be taxed when used to make purchases.
- There is a tax associated with renting textbooks from Warehouse Deals and having them delivered to locations in Delaware.
What can help you handle Amazon FBA sales tax
Handling Amazon FBA Sales Tax
Once you have everything set up to collect sales tax, the first thing to do is to make sure you are aware of the deadlines for each state you are reporting in. You may easily find these deadlines by searching "STATE NAME sales tax return due date" on Google or visiting the state's website that applies to you. It's crucial to verify them to ensure compliance because each state has various standards, some of which vary depending on how frequently you file. In order to avoid forgetting these deadlines, we advise adding calendar reminders.
The actual payment of the sales tax you have accrued to the states is what comes next. When it comes to acquiring the data required to submit sale tax reports and remit payments to the states, there are two major alternatives. Using Amazon's reports, you can do it manually, or you can utilize a tool to help automate the process.
The alternative is to streamline the process by using a service. The information you require to file your sales tax returns in each state will be generated by this service, which may also be able to file them automatically in some circumstances.
Simply ensure that you are paying your sales tax using whichever method works best for you. Either choice will be acceptable.
Top 3 Amazon FBA Sales Tax Pro Tips
- Sales volume and sales tax frequency are frequently related. A state will urge you to submit and pay sales tax more frequently the more sales there are in that state. You may even be able to adjust your filing frequency in some places, including Arizona if you ask. It might definitely pay to get in touch with your state's taxing authorities to find out if this might be a possibility for your company as most sellers prefer to file annually or quarterly when it's feasible.
- Even if you didn't actually collect any sales taxes for a particular state, you'll still need to file a return for each one where you applied for a sales tax permit. To do this is to submit a "zero return." Failure to file in states where you are registered may incur fines or potentially result in the revocation of your sales tax authorization.
- Another piece of advice: certain states offer a discount for timely reporting of sales tax. To be sure you are taking advantage of any reductions that might be available for your business, we'd advise checking with each state in which you file.
Which sales tax collection system and frequency are applicable in your state?
- Sales Frequency And Due Dates
- Destination-based versus Origin-based
Final Key Takeaways
Let’s Recall Some Important Points
The Fulfillment by Amazon service, which covers product storage, distribution, and delivery, is available to Amazon's sellers. As an Amazon seller and business owner who has registered for FBA, you send your shipments to Amazon fulfillment centers and maintain track of them. As you continue, you receive support from Amazon's online selling tools.
- Observe which FBA facilities are housing and arranging your merchandise. because as a result, your business now has a sales tax nexus.
- Sales volume and the frequency of sales taxes are typically correlated. The more you purchase in a state, the more frequently you will be urged to submit and pay sales tax. If you inquire, you might even be allowed to change your filing frequency in Arizona and other states. Most sellers prefer to file annually or quarterly when it is possible, so it may pay to contact the taxes authorities in your state to see if this is an option for your business.
- You must still submit a return for each state where a sales tax permit application was made, even if you didn't actually collect any sales taxes there. This is known as submitting a "zero return." In states where you are registered, failure to file could result in penalties or even the cancellation of your sales tax permission.
- Another piece of advice is that certain jurisdictions provide a discount for timely sales tax reporting. We suggest checking with each state where you file to make sure you are utilizing any discounts that may be accessible to your company.