Believe us, it does not really matter whether you sell on Amazon, eBay or run a physical store. A sales tax is a fact of life that we have to admit and obey without any objections.
For example, compared to other types of sales taxes, sales tax for Amazon FBA sellers is more complicated and has lots of important aspects that every FBA seller should be aware of. If you want to learn everything about sales tax, we suggest that you read our blog which is a perfect guideline for the beginners. Meanwhile, let’s return to our main topic and try to understand all the scrupulous aspects regarding FBA sales tax.
When You Should Collect FBA Sales Tax!
First of all, you should keep in mind that when it comes to sales tax, online sales are treated like other e-commerce sellers. Generally, FBA sellers are allowed to collect sales tax in case you have both sales tax nexus and your product is taxable in a certain state. Once you figure out that you meet the following criteria, you can confidently start charging sales tax from your FBA customers. Read this blog and you will learn how to report and file FBA sales taxes.
But, let’s try figure out the meaning of these two expressions first.
Sales Tax Nexus
Simply put, sales tax nexus is a connection between you and the state where you are going to run your business. If you have nexus in a state, then you can confidentially charge sales tax to your customers. As a rule, every American has a sales tax nexus in their home state, but if your products are stored in Amazon’s FBA warehouse which is located in a completely different state, then you are required to obtain it.
So, if you meet the following criteria, then you are allowed to have sales tax nexus in different states:
- You have an office, warehouse, store or affiliates in this state.
- You have a staff which works remotely from other states.
- If you are a drop shipping seller, you can also create tax nexus in a certain state.
- Your goods are stored for sale in a certain state.
- You use the resources of the state where your goods are stored for sale.
Now that we have learned about the main requirements concerning tax nexus, let’s try figure out which states currently have Amazon fulfilment centers. Thera are more than 23 states with FBA fulfilment centers, among them 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
Generally, the states which have Amazon fulfilment centers also have a Marketplace Facilitator Law in place. The main goal of this law is that online marketplaces like Amazon, eBay and Walmart are responsible for collecting sales tax on behalf of sellers. So, if you run your online business through Amazon FBA, then, it will collect sales tax from your customers instead of you. But, keep in mind that you are still required to have a sales tax permit to file sales tax returns in the state where you have a tax nexus.
Product Taxability
Now that you have figured out that you have tax nexus in your state, you have to understand whether the products that you sell are taxable. As a rule, personal property is taxable and services are tax exempt. However, there can be several exceptions. For example, there are some categories of products which are tax exempt or are taxed in different ways.
It does not matter whether you run your business through Amazon FBA, Walmart or eBay; when it comes to taxes, the first thing that you have to implement as a seller is to contact a tax attorney who will help you handle this process on a professional level.
Prestige Auditors are an acknowledged leader in providing different services concerning business formation and taxes. You can visit our website where you can find full information concerning services provided by our team. So, contact our team and we will help you solve any issues with e-commerce taxation including Amazon FBA sales tax, Walmart tax exemption and other vital aspects concerning e-commerce business. Moreover, we will help you form an LLC for online business, which is by the way, the best option for e-commerce sellers.
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