Selling products on Amazon through the FBA (Fulfilled by Amazon) program is becoming more and more popular as Amazon continues to grow. While this program provides sellers with the convenience of having Amazon do most of the work for them, it also brings new responsibilities, including the obligation to collect sales taxes. With every state having its own sales tax laws, this can be a tricky process to understand and manage.
That’s why we’ve created the Amazon FBA Sales Tax Guide for 2023. This special guide will cover everything you need to know about sales tax when selling on Amazon, including how to calculate and collect sales tax, common mistakes to avoid, and best practices for staying compliant. Stay legal and stay safe!
Sellers must provide sales tax registration numbers and rates from each of the states where they must collect sales tax. This guide will provide the necessary steps for Amazon FBA sellers to meet their obligations in 2023.
Sales tax is required when your products are sold in states where you have a “sales tax nexus.”
But, you might be curious what's a sales tax nexus?
Well, a sales tax nexus is the connection between your business and the territory governed by a taxing authority.
Generally, if you have a physical presence in a state, such as an office or warehouse then this creates a nexus for that state. And, you must collect sales tax in that state because of having a presence in it.
Here are some ways you can create nexus in different states:
These are just some of the ways that could lead to the creation of nexus, thus requiring you to collect sales tax from purchasers in that state. It’s important to note that there may be variations by each state on what activities constitute nexus, so make sure to research the laws in any state where your business may have activities.
For Amazon FBA sellers to become compliant with sales tax obligations, they need to obtain a certificate of authority from the state government where they have nexus - this allows them to legally collect taxes from customers.
Many states provide online application processes; although some may require additional paperwork or registration fees prior to obtaining a certificate.
Once you are compliant and have obtained all necessary permits for collecting sales tax on Amazon transactions, it’s time to set up your Amazon account with this information. You will need to input your compliance information into the system in order for it to properly calculate taxes when customers purchase items from your store. If you set it up correctly, then collecting taxes on Amazon orders will be automatic and hassle-free!
At the end of the year, it’s important to report and file your collected sales taxes with respective states. In most cases, this includes completion of Form 1099-MISC (for services) and mailing payment for collected taxes with applicable forms.
It’s also important to stay up-to-date with any changes to reporting and filing requirements so that you remain in compliance with applicable laws at all times.
A. Yes, Amazon is obligated to collect and remit sales taxes in all states that have passed laws requiring it to do so.
A. Yes, Amazon is required to collect sales tax from third-party sellers in 2023. The sales tax collection requirements may vary depending on the type of items being sold.
A. Yes, Amazon is required to collect sales tax on all applicable items in all states that impose a sales tax. In order to charge sales tax on any purchase made through Amazon, a seller must have nexus in that state.
By following this guide and taking the necessary steps to getting compliant with Amazon FBA sales tax rules for 2023, you can help protect yourself from costly fines or other legal issues while still being able to run your business smoothly.
