- On January 3, 2018
- 1 Comments
Amazon recently announced that they would begin collecting sales tax on behalf of 3rd party sellers from buyers in the state of Washington. While this is good news for Amazon FBA sellers worried about sales tax nexus, this has created a lot of confusion for sellers. We spoke with the Washington Department of Revenue and four sales tax experts to get the scoop. You can watch the entire expert panel here:
Here’s a recap:
Amazon FBA Sales Tax: What’s changing?
Washington passed a “Marketplace Facilitator Law” designed to compel online marketplaces like Amazon to collect sales tax on behalf of 3rd party sellers (like Amazon FBA and merchant fulfilled (MF) sellers.) Amazon agreed to comply with this law and will begin collecting sales tax from Washington buyers on behalf of 3rd party sellers starting January 1, 2018.
This means that Amazon sellers – whether you live in Washington or just have sales tax nexus in Washington due to storing inventory there – are no longer required to collect sales tax through Amazon from Washington buyers.
There will also be a slight change in the way you file your Washington sales tax return. While you will still be required to file a Washington sales tax return, the Washington Department of Revenue advised us that sellers should now report the sales tax that Amazon collected on your behalf as “Other” under deductions. There’s a space to label your sales tax deductions on the Washington sales tax returns, so you should label this deduction “sales tax remitted by third party.”
This also means you will no longer be required to break down the sales tax Amazon collects on your behalf by city, county or other special taxing jurisdiction.
Amazon FBA Sales Tax: What stays the same?
Other than Amazon now collecting sales tax on behalf of 3rd party sellers, most everything else regarding Washington sales tax stays the same.
Sellers are still required to register for a sales tax permit if they have sales tax nexus in Washington. According to Washington’s tax code, storing inventory in the state for sale creates sales tax nexus. You can read what creates sales tax nexus in Washington here.
Also, because sellers are still considered to have nexus in Washington, they are also still required to collect sales tax on their other sales from buyers in Washington. For example: Suzy’s Sock Store has nexus in Washington because she sells via Amazon FBA. But Suzy also sells on Shopify. Even though Amazon is now collecting sales tax from her Washington buyers, Suzy is still responsible for collecting sales tax from buyers in Washington who make purchases through her Shopify store.
Amazon FBA sellers will also still be required to file Washington sales tax returns by the due date, and to pay Washington Business & Occupation (B&O) tax. B&O tax is about half a percent of your gross sales in Washington and is filed and paid at the same time and on the same filing with your sales tax return.
Though Amazon FBA sellers are no longer required to break down Amazon sales on their Washington sales tax returns, they’ll still be required to break down non-Amazon sales by city, county and special taxing district.
You can read more questions and answers about Washington and Amazon sales tax here.
I hope this has helped you determine how to go forward with your Washington sales tax filings now that Amazon is collecting sales tax on behalf of 3rd party sellers. Have questions or something to say? Start the conversation in the comments!
TaxJar is a service that makes sales tax reporting and filing simple for more than 10,000 online sellers. Try a 30-day-free trial of TaxJar today and eliminate sales tax compliance headaches from your life!
About the Author
Jennifer Dunn is TaxJar’s Chief of Content. Her passion is making tough sales tax topics simple so you can get back to doing what you do best – running your business! Connect with Jenn on Twitter @TaxJarJenn.