Finding tax reports on Amazon is easy. But understanding them is another world. The complication of these reports increases, even more, when we are selling in more than one country. And if we sell in the UK, even worse.
Why is so difficult? Well look, it's very easy. Amazon is not interested in giving you precise data on what you are earning or spending on its platform because, the more you understand it, the more chances there are that you will stop selling on Amazon.
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That being said, let's take a walk around Amazon taxes to try to understand them.
Amazon Logistics taxes
E-commerce sellers are treated the same as all other online retailers. As an Amazon Logistics seller, you must collect sales tax in states where your sale meets two criteria: sales tax nexus and product taxability.
Sales tax nexus
To have nexus in a State is to have a legal responsibility to collect sales tax from buyers in the State. You will always have nexus in your home State, but certain business activities also create nexus in other States. For example:
- Location: the physical presence of the business.
- Staff: a person who works for your business.
- Affiliate: a person who advertises your products in exchange for a share of the profits.
- Dropship relationship: if you have a third-party shipment to your buyers.
- Product sale: at a trade show or other event.
- Inventory: storing inventory for sale.
- Economic Nexus: surplus dollar sales or state-mandated transactions.
Inventory Nexus and Amazon FBA
Storing inventory for sale in a State is especially relevant for Amazon FBA sellers because, from the State's perspective, any online seller using resources in their state (roads for delivery, public safety in case of emergency, etc.) has a nexus.
The States with an Amazon logistics center at the time of this writing are Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Hampshire, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington, Wisconsin.
An important exception
Almost every state with an Amazon logistics center has a Marketplace Facilitator Act, these hold the online marketplace responsible for collecting sales tax on behalf of sellers. That is, if you sell on a marketplace, that marketplace must collect and remit sales tax on your behalf.
But you must have a valid sales tax permit and file sales tax returns in states where a) you have sales tax nexus b) your marketplace collects and remits sales tax on your behalf. And if you make sales on other platforms, you must collect sales tax on all sales to buyers in the states where you have nexus.
Generally, tangible personal property is taxable, services are not. Also note that some common product categories are not taxable or are taxed differently in some states (groceries, clothing, and textbooks). Most tangible goods are taxable in most states.
How to comply with sales taxes
The next step after determining the nexus and taxability of your product is to register in that state to collect sales tax. You must do this before you begin collecting sales tax as states consider it illegal to collect sales tax without a permit.
Doing so will assign you a sales tax filing frequency and due date, which will depend on your sales volume. Therefore, it is important to watch for letters or other communications from your state once you are registered.
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How to collect sales tax on Amazon
Amazon collects sales tax on behalf of sellers in most States with an Amazon logistics center, it collects 2.9% of each transaction to collect sales tax.
In states that do not require Amazon to collect sales tax on behalf of sellers, you will need to ensure that you are collecting sales tax from your Amazon FBA customers.
Amazon's tax collection engine, once you tell it what you want to collect, will charge the correct rate, allow you to add “tax codes” to products, and allow you to choose whether or not to collect sales tax on shipping and gift wrapping.
How to Report and File Amazon FBA Sales Tax
When your sales tax filing due date arrives, you will need to report how much sales tax you have collected from customers in each state and file your sales tax returns.
Report sales tax collected from Amazon Amazon Logistics
States want to know how much sales tax you have collected in the state and how much you collected from shoppers in each county, city, and another taxing district.
To download an Amazon report form:
- log into Seller Central and click Seller Central
- Go Reports
- Go to Payments
- Generate Date Range Report (choose the filing period)
- Use sales tax automation to generate a report for you
File Amazon Sales Tax Returns Amazon Logistics
It's time to file your sales tax returns and remit the sales tax you collected, you can do this:
- Online by logging into your state's tax authority website and submitting a sales tax return.
- Automatically through your sales tax software.
- File sales tax returns in states where you have an active sales tax permit, even if Amazon collects on your behalf. Be sure to report ALL sales to avoid discrepancies in your returns and questions from the state revenue department.
- Always file “zero returns”: if you didn't collect any sales tax during the taxable period, states still require you to file by the deadline, and some of them will even impose a penalty if you don't file.
- Take advantage of discounts: just over half of U.S. states allow online sellers to keep a small percentage of the sales tax you have collected as a small monetary “thank you” for their efforts to collect and remit the tax.
About the author
I work as an independent eCommerce and Amazon consultant.
Estrella Damm, Intersport, Bella Aurora, Lladró, Textura Interiors, Nice Things Palomas, Castañer, Due-Home and many other clients.
Lecturer & Teacher
I teach and have been a speaker at: Meet Magento, Prestashop, Prestashop Day, SEMRush, Cambra de Comerç Barcelona, ClinicSEO, Ecommbeers, Ecommbrunch, Ecommercetour.com, Ecommfest, EOI, ESIC-ICEMD, Foxize, Generalitat de Catalunya, Inesdi, Quondos and The Valley.
In addition, I have done in-company trainings for brands such as Orange and Adidas.
Finally, I collaborate writing articles for Helium 10, Carbon 6, Shopify, SEMRush, Prestashop´s official blog, Brainsins, La Vanguardia, eCommerce-news.es, Marketing4ecommerce and other blogs and media.
- About Jordi Ordonez