Amazon Sellers Sales Tax FAQs

So in this video I want to answer four questions. First being, what is Amazon doing for me, what is Amazon taking care of. Second being, what do I still need to do as a marketplace seller, what is Amazon not doing for me. Third, where can I find the report to file my sales tax returns. And last one is, where do I find the report to understand where my inventory is stored, in which FBA warehouse, in which state, which city, so I know where I have physical presence.

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1:18 What Amazon takes care of

So selling on Amazon has become such a popular way, and most of our clients do sell on Amazon. Some of them sell exclusively on Amazon. So I know that you guys have lots of questions about sales tax, you have your worries, and I'm here to help you answer all of your questions.

So the first question is, what does Amazon taking care of on behalf of their sellers? And the answer is, up to today, Amazon is calculating, collecting at checkout, and remitting to the states for 44 states plus DC. The only state that has the sales tax that Amazon is not collecting for is Missouri, and that's going to change on January 1st, 2023, that Amazon will start collecting.

So as a marketplace seller, you don't need to calculate, you don't need to worry about collecting or remitting. But some states do ask you to still register and report if you have a physical presence in a state, whether it's your home state or you have FBA inventory stored in a state. We recommend you to consider registering, because a lot of the states consider inventory a physical presence, which creates nexus for you.

2:41

So if you are an Amazon only seller or marketplace only seller, know that the marketplace facilitator is collecting and remitting on your behalf, because the state, they see marketplace as a retailer. And for the states, Amazon has passed economic nexus threshold and physical nexus in all the states. So Amazon has nexus in all the states, so it's filing on behalf of the sellers as well as its own sales.

So you as a seller, you don't owe the state anything if all of your sales are through Amazon. But some states still want you to register, especially where you are located. You need to register either way, and they want you to report to the states, telling them this is how much I sold, all of them is through Amazon so I don't owe you anything. But they still want that information.

So Amazon is collecting and remitting for you, but you might still need to file an informational return in your home state and potentially the states where you have physical presence in. So that's the answer to the first question.

3:54 What Amazon does not cover

Second question is, what is Amazon not taking care of for me? So we've had lots of great questions around this topic and I just want to give you a summary of what I've gathered so far.

First of all, Amazon is not collecting and filing for you in home rule cities. So there's a good amount of home rule cities in Colorado that's still not essentially administered by Colorado's Department of Revenue, and Amazon is not collecting on those home rule cities. So if you have a physical presence in those home rule cities, you need to separately register and remit, and there's no way to tell Amazon to collect all those transactions into those home rule cities.

So I feel really bad for the sellers, but if you are selling into a local jurisdiction that is a home rule jurisdiction, like maybe a parish in Louisiana, or tribe in Arizona or New Mexico, or a home rule city in Colorado, Amazon is not collecting everything for you in those states, and you can't make Amazon do it. So it just needs to come out of your pocket, unfortunately, for the home rule cities.

5:10

And so that's the first scenario. Second scenario is other type of taxes Amazon is not collecting. And the most obvious and not really obvious, the most common example would be Washington's business and occupational tax. Amazon is not collecting for you. So if you're located in Washington, or if you have a physical presence in Washington, yes, Amazon is collecting and remitting sales tax for you on your Washington sales, and they're remitting it to Washington's Department of Revenue, but they're not paying business and occupational tax for you. You still should register and file that portion of tax to Washington by yourself.

Similarly, if you are located in California, you will need to file California franchise tax. You need to register and do that. If you are in Texas, or if you're selling into Texas and you pass the economic nexus threshold, you have a liability to file franchise tax return in Texas as well. And same goes for Wisconsin and Pennsylvania, that are actively pursuing sellers that have inventory stored in FBA warehouses in Pennsylvania and Washington, and they want those sellers to register and file income tax in those states.

6:36

So just to summarize, what is Amazon not taking care of for you. Local jurisdictions that are home rule jurisdictions, as well as other type of taxes. Examples are Washington B&O tax, California franchise tax, Texas franchise tax, income tax in Wisconsin and Pennsylvania if you have physical presence, which means inventory stored in FBA warehouses.

7:10 Where to pull the sales tax report

So that's the second question. The third question is, people always ask us where to pull the report, why is the report empty. So I just want to quickly show you where to pull the report and which report to pull.

Okay, so I'm just going to quickly share my screen. This is the Amazon Seller Central account. After you log in, go to reports, and the very bottom one is tax document library. I'm here. So the first one is your 1099-K. We're not worrying about that during this video. The sales tax report is what we're going to do.

So you click on generate a report. Under the report type there is tax calculation report, marketplace tax collection report, and combined sales tax report.

I want to explain this again, because Amazon is collecting on behalf of the sellers in most, all the states except the five states that don't have sales tax, or like state level sales tax, because Alaska has local jurisdiction tax.

8:19

Okay, I want to explain this report again, because Amazon is collecting and remitting on behalf of sellers in most states except for Missouri and the states that do not have a state level sales tax. So your sales tax calculation report won't show much unless you sell a lot into Missouri.

Then, because Amazon's collecting it, all of that will show up under marketplace tax collection report. But for remittance purposes, we recommend you to download the combined sales tax report. It says it's informational only, and that makes sense, because whatever return you are filing to the states, if all of your sales are only through Amazon, you're filing an informational only return anyways. So you need the informational report to file an informational return, if that makes sense.

And then you can select the previous month or select the custom date, and then hit generate. So download the combined sales tax report instead of the sales tax calculation report.

9:29 Where to find your FBA warehouse locations

So this is the third thing I want to show you guys. The last thing is where to know where you have FBA.

So go to reports again and click on fulfillment. And then on the left hand side, under inventory, click on show more. And there's a few places you can see this. You can see the inventory event detail is usually what we recommend to our clients. So under here, warehouse, this is where your inventories are.

Or you can always go to, there is like a daily report and a monthly report, like monthly inventory history or daily inventory history, that would have the warehouse ID number as well. So this is where you know where you have inventory in the FBA warehouses.

10:28 Recap and whether to register in FBA states

Okay, that's a lot of information. So comment below, let me know if you have any follow-up questions on those four most commonly asked questions that we get. First being, what is Amazon doing for me. Second being, what is Amazon not covering. And third, how do I find the report to file my taxes. And fourth is, how do I find the report to know where my inventories are located.

10:53

Okay, so we mentioned that having inventory in the FBA warehouse creates physical nexus for you, and technically you should register. At the end, this is towards the end of the video, and I just want to caution you that even though technically physical presence is created by FBA warehouses, having inventory stored in those warehouses, and some states are actively pursuing sellers that do have FBA warehouses in their states, I want to repeat those states so it's on your guys's radar. California, Washington, Pennsylvania, Wisconsin. Massachusetts is the most recent one. Illinois is getting very aggressive. And what's the other one that I talked about at the beginning? Texas.

12:01

So any of those states, if you have inventory in a FBA warehouse, I would recommend you consider registering and filing the informational return. Any other states though, if it's not your home state, you have to weigh the cost of compliance versus the risk of being audited, because at the end of the day you don't owe the state anything. Everything's been remitted by Amazon. So if the state comes after you and tell you, okay, you didn't file these returns, you still don't owe them anything unless there's a penalty for failing to file informational or zero dollar returns.

So this is when we suggest you to talk to a sales tax expert like us, so we can help you strategize and make decisions that's best suitable for your business. So if you have more questions about anything related to sales tax, please [unclear] please subscribe to our channel, like it, share it to your other ecommerce friends so they get this information as well.

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