Your Top 7 Amazon Sales Tax Questions, Answered by TaxJarSeller Labs
I was thrilled to appear on Facebook Live with Seller Labs’ Jeff Cohen yesterday to talk about sales tax. Taxes can be a dreaded topic, but the dirty little secret of sales tax is that it really isn’t that difficult once you get started.
In case you couldn’t attend, or your mind is reeling from information overload, I compiled the top questions from our Facebook Live event and answered them here.
1. Amazon.com started collecting sales tax in all U.S. states on April 1. What does that mean for me?
The good news is that this was Amazon.com’s decision and it does not affect your business at all, even if you sell on Amazon as a 3rd party. Long story short, states are hungry for revenue and blame online sellers for not collecting sales tax. Amazon had a big target on its back and was feeling the pressure from states to collect sales tax from buyers. But this decision only affects items sold by Amazon.com to their customers. Your sales tax collection obligations are not affected by Amazon’s actions on April 1.
2. What is sales tax nexus?
Sales tax nexus is just a fancy way of saying “a significant connection” to a state. When a business has sales tax nexus in a state, that means you are required to collect sales tax from buyers in that state.
Business activities like a location (even a spot at your kitchen table,) employee, salesperson, an affiliate, a drop shipping relationships, or inventory in a warehouse for sale create sales tax nexus. Here’s a definition of sales tax nexus so you can check whether your business activities create nexus for you.
3. Does selling on Amazon FBA give me sales tax nexus in multiple states?
Remember how I said inventory for sale in a warehouse creates sales tax nexus? This means that, if you sell on Amazon FBA, you have sales tax nexus wherever Amazon stores your inventory. Don’t take my word for it – here’s a list of every state’s sales tax laws regarding sales tax nexus.
Does that sound overwhelming? I totally get it. Read more about “When to Register for a Sales Tax Permit?” for more information about considering when to get sales tax compliant. Remember, you may also qualify for sales tax amnesty under some conditions.
4. How can I find out where Amazon is storing my inventory?
There are several ways to find out where your Amazon inventory is being stored.
- Inventory Event Detail Report – Find this report in your Amazon account. Keep in mind it only shows you a daily snapshot of where your inventory is stored, and so you may need to pull multiple reports.
- Use a paid service like Wherestock.com – This service will give you a one-time snapshot of where your inventory is located, but for a fee.
- Your TaxJar account – If you use TaxJar, we’ll show you this automatically as part of your subscription.
5. Okay, I hear you. What is my first step to collecting sales tax in a state?
To legally collect sales tax, you’ll need to register for a sales tax permit with each state where you have sales tax nexus. You can find DIY steps to register for a sales tax permit here, or you can use a vetted CPA (who will charge you a fee).
6. How do I set up sales tax collection via Amazon Seller Central?
You can set up sales tax collection on Amazon under “Tax Settings” in your Amazon Seller Central account. You can find a step-by-step guide to setting up sales tax collection in Amazon, including sales tax settings for each individual state here.
7. How much hassle is it to be sales tax compliant?
The good news here is that getting started is the hardest part. Navigating state legalese to get registered can be painful, but once you’ve registered with the state and started collecting sales tax, filing and remitting sales tax is just another administrative task. And if you’re spending too much time on sales tax, you can easily buy back your time with sales tax simplification technology!
I hope this post answers your most common sales tax questions. For more information, get in touch with me at firstname.lastname@example.org.
This post is brought to you by Jennifer Dunn of TaxJar, a service that makes sales tax reporting and filing simple for more than 8,000 online sellers. Try a 30-day-free trial of TaxJar today and eliminate sales tax compliance headaches from your life!
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