Understanding Amazon Sales Tax
Amazon sales tax is a one-time percentage of the purchase price of an item paid to the state government. Amazon sellers are responsible for collecting and reporting their state’s sales tax.
How Amazon Sales Tax Collection Works
Amazon calculates, collects, and remits tax on sales made by merchants shipped to customers located in the states that have enacted laws shifting the collection responsibility from the merchant to the marketplace.
State Variations in Sales Tax Rates
Online brands should know how Amazon sales tax collection works. State and local policies determine fees, with varying rates like 2.9% in Colorado and 6.25% in Illinois.
Factors Contributing to Sales Tax Nexus
In the US, retailers only collect sales tax from buyers in states where they have sales tax nexus, which can be established through various factors such as physical locations, personnel, inventory in a warehouse, affiliates, or dropshipping relationships.
Managing Sales Tax Obligations on Amazon
Amazon sellers need to be aware of their responsibilities in obtaining permits, licenses, and managing sales tax returns to ensure smooth tax filing and compliance.
Setting Up Sales Tax Collection on Amazon
To set up tax collection on Amazon, sellers need to log in to Seller Central, navigate to Settings > Tax Settings, and select the states for which they wish to collect sales tax and enter their sales tax registration number.
Tax Collection Costs and Considerations
While Amazon charges 2.9% of each transaction for collecting sales tax, sellers can choose to pay sales tax out of profits as an alternative method.
Importance of Understanding Amazon FBA Taxes
For Amazon FBA sellers, understanding and complying with the tax obligations is crucial to avoid legal issues and maintain a trustworthy reputation as a seller.
Summary
Amazon is responsible for collecting and remitting taxes as required by state law, emphasizing the importance of aligning with tax regulations and filing processes.