Doing a business on Amazon and wondering how to get a tax-exempt? This complete step-by-step guide will help you get tax-exempt on Amazon easily.
With more than 9.7 million sellers, Amazon is considered to be one of the most popular and trustworthy e-commerce marketplaces all over the world.
Moreover, every day millions of new people join this platform and become owners of successful online businesses.
Yup, being a seller on Amazon is extremely beneficial, especially when you play by the rules, have best-selling products, and are on good terms with the platform!
But there’s one small nuance that not everyone pays attention to!
And yes, we are talking about taxes, one of the oldest enemies of every entrepreneur!
So if you started your selling career on Amazon without thinking about taxes and the financial burden they cause, it is time for you to wake up and open your eyes.
Yes, taxes are charged even in the online sphere and that’s something you should be careful with!
Let us not forget that after all, eCommerce taxation exists!
We have some good news for you and believe us, you will be more than happy to hear them!
As a future or existing Amazon seller, you should be aware of the fact that there are lots of ways to simplify your presence on Amazon and avoid overpaying unnecessary taxes.
So yes, avoiding taxes in a certain way is POSSIBLE!!! You just have to find the right prestige tax services and initiate the process!
Today, we are going to bring to your attention a comprehensive guideline created by our specialists.
This article will familiarize you with eCommerce taxation in general, show you how to get Amazon tax exemption, explain how Amazon Tax Exemption Program works.
And finally, talk about how to become tax-exempt on Amazon!
But, first of all, let’s try to figure out what it means to get a tax exemption or more specifically, an Amazon tax exemption.
To put it simply, being tax exempt means that all your transactions are exempt from paying taxes. In this case, you have a unique chance to decrease your tax bills, hence, saving a decent amount of money.
So basically, getting Amazon tax exempt means that you will spend much less money on taxes and will enjoy your business more!
Amazon’s Tax Exemption Program (ATEP): What You Should Know About It
It is a rule of thumb that when you buy products from online stores, you have to pay sales tax. Yes, we are talking about a certain type of tax that is charged for the sales of certain goods and services.
And guess what?
Sellers are the ones who are responsible for collecting sales taxes and passing them to tax collectors, which is not an easy task to deal with.
Let’s agree that as a new and inexperienced Amazon seller, you do not wish to interfere with taxes, and what is more, you do not wish to make a mistake.
Because you know, the IRS and other nightmares…
So, we are rushing to bring you good news, since you can easily avoid this annoying process of collecting sales taxes. Moreover, you can save a decent amount of money and not overpay in taxes. Sounds too good to be true? Well, in this case, it is real!
Once your business becomes tax exempt, you should have all of the documentation proving your tax exempt status at hand.
Obviously, Amazon needs proof, which you are going to get by any means if you want to sell on this platform!
First of all, you should have a certificate proving your tax exemption status. Collecting all of the necessary paperwork is quite boring and is extremely time-intensive.
So you’d better prepare yourself for the process.
However, as you may already know there’s a special program that can drastically simplify your life!
Amazon itself has come up with its Tax Exemption Program (ATEP) and know you are the one to use it to your advantage!
The most exciting thing regarding this program is that once you decide to enroll in this program, Amazon takes care of all tax exemptions. Upon registering in Amazon’s Tax Exemption program, Amazon provides you with your tax exemption certificate.
So, you can confidently start purchasing from other stores without worrying about paperwork.
Here’s a short video explaining how to get tax exempt on Amazon, for instance, for Dropshipping:
How Does a Sales Tax Certificate Work?
If you intend to start selling on Amazon or other eCommerce platforms, then we are rushing to bring you good news.
Did you know that you can save up to 10% on state and local taxes?
Everything is pretty simple, you just save on items that you purchase for reselling through your store.
To use these advantages, you should apply to your state for a sales tax certificate. The main mission of this life-saving document is to reduce the amount of taxes that you pay.
Keep in mind that depending on your state, this document may also be called a resale certificate, reseller’s license, reseller’s permit, or just a tax-exempt certificate.
Believe us, we know!
How to Qualify for a Sales Tax Certificate?
The requirements for obtaining a sales tax certificate can vary depending on the type of your business entity.
As you can understand, there is no one golden rule that applies to all cases!
Above all, a sales tax certificate applies to corporations, individuals, partnerships, and other types of business entities that are going to make sales in a certain state.
In any case, before doing anything, you’d better consult prestige tax services to be 100% sure you are on the right track!
However, if you are an individual who is not involved in the business, you are not eligible for obtaining a resale certificate.
And by the way, to qualify for the tax exemption status, you should keep in mind that the products that you purchase must be new and undamaged.
How to Apply for a Sales Tax Certificate?
Before going into the details, let’s try to understand what a sales tax certificate is.
Remember, always start from the basics in order not to get lost in this already complicated and twisted industry!
A sales tax certificate is an agreement with your state’s tax agency that allows collecting sales tax on items that you sell.
Additionally, this document allows sellers to collect both state and local sales taxes in a certain state which issued a sales tax certificate and remit that sum to your local taxing authority.
If you intend to apply for a Sales Tax Certificate, you have to apply to your state revenue department.
However, if you are a lucky one and run your business in Montana, Alaska, Oregon, Delaware, or New Hampshire, then you do not have to pay sales tax in those states.
Surprised? Don’t be!
Thanks to its unique system, all the states have their own sales tax rate, which is why certain states have more companies than others.
The entire process of applying for a sales tax certificate is pretty simple.
First of all, you should go to your local state’s tax department’s website and find the name of this document used in your state.
Your next step should be looking for a certain product that you are interested in.
The main reason is that not all of the products are qualified for tax exemption status. This mostly depends on the state where you run your business.
To complete the form, you have to provide information regarding your business and the reason why you want to get an exemption.
Sometimes it can be information about your business like address or just a phone number.
Then you are asked to select your business type from a list.
Finally, you are asked to check the reason for the exemption, from the list of allowable reasons.
However, if you intend to run your business on Amazon, you can drastically simplify your way. We suggest that you pay attention to Amazon’s Wizard Program which can bring lots of benefits to your e-commerce business.
Sales Tax Certificates in the Multiple States
Sometimes, business owners decide to expand and operate their business in more than one state.
If you think that having one document applies to the rest of the states, you’re sadly mistaken.
Unfortunately, there is no specific formula that applies to an entire country which is why you need to pay attention to certain details.
So, if you intend to run your business in multiple states, you have to apply for a sales tax certificate in each of the states separately.
That’s a lot of work, isn’t it?
One of the first aspects that you should figure out is whether you are eligible for tax nexus in a certain state or not.
However, if you have a physical location or employees in a certain state or you sell products in that state, you have tax nexus there.
To know more about the sales tax nexus, contact us at Prestige Auditors for the best tax consultation!
Let’s say, you have figured out that you are eligible for tax nexus in different states where you intend to set up your business, now’s the time to proceed further.
If you do not want to spend endless time filing multiple sales tax certificate applications, we have good news for you, again!
Here, you have a chance to use the multi-state application form.
Non-Profits & Sales Tax Certificates
If you are an owner of a non-profit organization, then the IRS can certify your business as a tax-exempt organization.
However, this tax exemption status can be used solely for income taxes which means that you still have to pay sales taxes.
Only the state where you have registered your non-profit is eligible to determine whether your organization has to pay state and local sales taxes or not.
The reason is that there are several states where non-profit organizations are exempt from paying sales tax only for the purchase of items related to their non-profit activities.
Generally, the information that buyers have to provide for completing the enrollment process includes the name of the purchasing organization, type of organization, jurisdictions, etc.
Once you submit the necessary information, Amazon starts the process of verification. Here, you should bear in mind that Amazon does not validate the information delivered during enrollment with any tax authority.
Most Frequently Asked Questions (FAQ) on Amazon Tax Exemption
Am I required to participate in Amazon Tax Exemption Program?
No, signing up for this service is entirely up to you. Amazon Tax Exemption Program offers various benefits.
However, you may work with other prestige tax services that offer similar services while being more affordable.
Can I issue a post-order refund of taxes?
Yes. You can issue a refund of taxes calculated on an order at any moment for merchant completed orders. You can advise the buyer to Amazon Customer Service or offer a concession refund on orders fulfilled by Amazon.
What information does Amazon collect from buyers during enrollment?
According to the sources provided by Amazon, this is the information that is being collected:
- Purchasing organization name, type of individual or organization (e.g. government, reseller, charitable organization, etc.)
- jurisdictions (state and/or local jurisdictions) for which their exemption is applicable
- other information, such as signed exemption certificates when applicable.
Does Amazon validate buyer exemption information?
Amazon will check to see if a buyer has submitted all of the required information for the exemption type being enrolled.
Buyers are responsible for providing and maintaining accurate exemption information, as well as using their exemption correctly for purchases.
And Amazon doesn’t consult any tax authorities to verify information provided during enrolment.
There is no doubt that the advantages provided by the AmazonTax Exemption program are enormous and can help you a lot.
All you need to do is just follow the steps that Amazon mentions and everything will be just fine!
In any case, we would like to allow you to have various choices.
Sometimes, sellers do not trust Amazon and its services which is why they contact Prestige Auditors for additional help.
So, if you still feel unconfident in implementing this process by yourself or in working with Amazon, you can reach out to Prestige Auditor’s team and we will gladly assist you in this process.
Our team consists of tax professionals and lawyers who are ready to help overcome all of the issues regarding your business.
Additionally, you can always visit our webpage where you can find tons of interesting and useful blogs regarding taxes, business, and law.
So, do not hesitate and give us a call right now and we will solve all your tax issues within a few days.