Understand Sales Tax Basics
Being an Amazon seller comes with its perks, like access to the Amazon’s marketplace and two-day shipping capabilities. But with these perks comes complications, especially when we’re talking sales tax.
Sales tax is a state tax charged on a the sale of an item. The United States doesn’t have a national sales tax, so each state determines their sales tax policies. Some states don’t even have a sales tax, while other states have hundreds of different rates, broken down by local jurisdictions.
eCommerce sellers previously were able to make sales without having to worry about sales tax. This is changing. From your home state onward, states are working to find ways to charge eCommerce businesses sales tax, especially Fulfillment by Amazon users.
You have to worry about sales tax when you have nexus. What’s this? Nexus is just a fancy way of saying you’re obligated to collect and remit sales tax in a given state. (No nexus? No problem. You’re off the hook for sales tax.) Any given business can have nexus in multiple states.
So Where Do I Have Nexus?
Basically, you have nexus in each state where your business gets any benefits from their services or infrastructure. Here are some common questions to ask to help determine if you have nexus:
» Do you use the roads and bridges?
» Have your employees ever been to the state for business (including events/tradeshows)
» Do you store products in a warehouse in the state? (this is HUGE for Amazon sellers)
» Do you generate trash? (Yes, this is for real. Apparently it is a pretty big deal.)
If you do… you’re on the hook and owe sales tax in that state. As we’ve moved to the digital age, states are looking for ways to continue to pay their bills.
For FBA sellers, this is relevant because those fulfillment warehouses that give you customer-delighting two-day shipping can also give you nexus. This means purchases you make in a state where you also have a warehouse are obligated to be taxed. Failure to do so can lead to trouble down the road!
Now that you know what nexus is, you’re ready to dive-in to step 2, where you’ll choose where you want to remit sales tax.
Disclaimer: While we know an awful lot about sales tax, we’re not CPAs. To get in-depth advice for your business, check with your CPA, bookkeeper, or attorney after reading this guide to get advice about your specific situation.
Taking advantage of Amazon’s vast distribution network and name recognition can quickly translate into more opportunities for your business, but what about some of the fine details, like sales tax? We’re here to answer that question.
Since you’re an Amazon seller, figuring out where you owe sales tax is the very first step. Good news—it’s super simple! Use our tutorial to quickly find out where Amazon is storing your products, and where you should consider remitting sales tax.