SALES TAX REQUIREMENTS FOR NEW AMAZON FBA SELLERS
Are you planning to start an online business and want to sell your products on Amazon? Sounds like a dream come true, but the sales tax has you confused?
Don’t worry, we’ve got you covered. In this blog, we’ll talk about understanding sales tax basics for Amazon sellers and how to register for sales tax as an Amazon seller.
We’ll also cover the basic structure of sales tax the filing and payment process. Besides, we’ll tell you how much you need to pay as sales tax as an FBA seller.
Sales Tax Basic Structure
Visual representation of the basic structure of sales tax with the tax period
Sales Tax Settings
If you leave a state unchecked, Amazon will not collect tax on your behalf.
For example, As New Hampshire is not listed, you will have to collect and submit the tax information on your own for all sales in New Hampshire.
Understanding Sales Tax Basics for Amazon FBA Sellers
As an Amazon FBA seller, you must select between the Individual and Professional account plans to be eligible to collect sales tax.
The Individual account is better suited for sellers who have a single physical presence in the state where they’re collecting tax. With the Individual account, sellers can collect tax on all sales made to customers in that state.
The Professional account is better for sellers with a physical presence in multiple states or countries. With this account, sellers can collect tax on specific items sold within their amazon business’s taxable territory.
Each seller must also set up a tax registration account with the relevant tax authority.
Establishing a tax registration account is vital as it allows amazon to calculate and collect sales taxes owed.
However, sellers are responsible for tracking and reporting their sales taxes, and correcting any discrepancies.
Sales tax tools for amazon FBA can help save time and effort by automating the sales tax collection process and providing guidance on filing tax returns.
It’s important to understand the sales tax requirements upfront to avoid headaches in the long run.
What Are the Sales Tax Requirements for Amazon FBA Sellers?
Amazon Fba sellers are required to collect sales tax in most states where they have a sales tax nexus.
Sales tax is determined by the product sold, where the business operates, and where the customer is located.
In general, sales tax is paid for sales made on your business account with amazon FBA where nexus exists. If you meet the nexus requirements, sales tax will be added to every order automatically.
However, sales tax rates vary from state to state and amazon FBA sellers may need to collect and remit sales tax themselves.
For amazon FBA sellers based in states without a sales tax nexus, they must collect sales tax on any orders that they fulfill from that state.
To work within U.S. tax laws, amazon FBA sellers must collect sales taxes when they meet the sales tax nexus and product taxability requirements.
The amazon FBA seller’s responsibility for collecting and remitting sales tax varies depending on their amazon FBA business structure.
If you use amazon FBA as your main business structure and collect sales tax for each separate amazon FBA seller account in your account, you should ensure that you have received all required registration and collection information from that seller before collecting or remitting any taxes for them.
How High are Sales Taxes in Your State
Most states require amazon sellers to collect sales tax on items sold through their seller account. Based on the seller’s tax nexus, sales tax rates vary across states.
Most states tax sales made within their jurisdiction at a rate of between 2 and 6 percent, but some states have higher rates.
It’s important to keep track of sales tax rates in the state where you’re collecting sales tax so that you don’t end up paying more than necessary.
You may need to add together district, city, county, and state sales tax rates to get a combined rate. This is because each county or region may have a different rate than the others.
Before collecting sales tax, amazon sellers must register with their state’s Tax Commission or equivalent body. After collecting sales tax data, amazon sellers must file Form 1099-MISC with the Internal Revenue Service (IRS).
How to File and Pay Sales Tax as an Amazon FBA Seller
Sales tax nexus– the tax must collect tax for the same state where the seller’s physical presence is located.
Product taxability– If a product is taxable by a state or country, that tax must be collected and remitted by amazon FBA sellers. To determine if you need to pay sales tax, you must consider sales tax nexus and product taxability.
When you collect sales tax, Amazon automatically adds it to the customer’s purchase.
Amazon does not report or remit FBA taxes on the FBA seller’s behalf, so sellers must file and pay sales taxes themselves.
Amazon sellers can find the required information on the marketplace tax collection page.
Sales tax filing obligations– sellers must file sales tax returns with the applicable state or local jurisdiction if they had $20,000 or more in gross sales during the year or if they had 100 or more transactions of $10,000 or more during the year.
Conclusion
To successfully sell on Amazon, you must understand the tax laws and regulations surrounding sales tax. It is also essential that you know how to collect sales tax as an Amazon seller.
If you use third-party sellers to fulfill your orders, sales tax law requires you to collect sales tax for every sale. Although collecting sales tax is a hassle, your business can benefit from collecting taxes. Besides, complying with sales tax law helps build trust with customers and streamline your business processes.
