Amazon FBA sellers in the United States, please take a look! Here is a guide on how to set up and collect sales tax!

Each state is different when it comes to administering sales tax. As a result, each of the 45 states (and Washington, D.C.) has different sales tax laws and rates.

· Have a physical presence : a shop, office, showroom, warehouse or any other place of business;

Inventory : usually inventory ready for sale (such as Amazon FBA inventory);

· Personnel : salespeople, employees, installers, independent contractors or any other personnel;

· Third-party affiliates : Click-Through Nexus, hires some affiliate marketing websites to help you drive traffic;

· Dropshipping : Some dropshipping services may have sales tax nexus;

Temporary sales : Sales generated at offline events such as trade shows or craft shows may also have sales tax nexus.

If you are an Amazon FBA seller, you have sales tax nexus when you sell products in Amazon warehouses to states that collect sales tax, but Virginia is an exception.

When you get your sales tax permit, you will also receive sales tax and tax filing deadlines. Depending on your sales volume, you can file taxes monthly, quarterly, or annually. When you have higher sales volume in a particular state, you will need to file more frequently.

To charge sales tax, you must register with the appropriate state. To do this, you will need:

• Gather important information such as your EIN (Employer Identification Number) and other important business details;

• Go to the state Department of Revenue website and look for “Sales & Use Tax”;

• Use the appropriate link to register your business for sales tax.

If you are an FBA seller, you can charge taxes if the following conditions are met:

• The business has nexus sales tax with the state;

• Physical products or TPP products;

• The product has high sales volume;

• Taxes on your products may change within a particular state;

• Taxes are important to you.

After registering for a sales tax license, the next step is to make sure you collect sales tax from Amazon-related buyers.

Amazon provides a powerful and practical sales tax collection system that displays accurate rates based on the corresponding state, even including complex details.

Additionally, Amazon’s tax collection system is designed to attach a “Product Tax ID” ​​so you can see the exact amount you’re charged for a specific product, whether it’s apparel, healthcare, beauty or groceries.

Note: Amazon will charge a 2.9% handling fee on top of the tax.

Another approach is to not charge any sales tax to the buyer and deduct the sales tax from the profit.

To set up to collect sales tax on Amazon, follow these steps in Seller Central:

Step 1: Log in to Amazon Seller Central;

Step 2: Click on the “Settings” button and select the “Tax Settings” option from the drop-down menu;

Step 3: Select “View or Edit the Tax Collection, Shipping, and Handling…. Giftwrap Tax Obligation Settings”.

Follow the steps above to select the states where you want to charge sales tax. You can also enter a custom sales tax rate, but it is not recommended to enter it manually because tax rates change frequently.

Also, remember that you need to register for a sales tax number before Amazon will allow you to set up your store to charge sales tax.

Click on “Tax Settings” in Seller Central: Seller Central > Settings > Taxes. Next, select the option to “View-Master Product Tax Codes & Rules” and then under the Help option, find the product tax code that matches the product you sell.

Some examples include:

• A_CLTH_GEN: Indicates that the product is clothing. Keep in mind that in some states, clothing is generally tax-free. However, there may be instances where sportswear, formal wear, accessories, and other clothing materials are still taxable.

  Therefore there may also be separate tax numbers, such as A_CLTH_CSTUMS for clothing, or A_CLTH_HBAGS for handbags.

• A_FOOD_GEN: Usually used to mark food products. Like clothing, not all food products are taxable. Therefore, there are separate tax numbers for products such as A_FOOD_SFTDK (for carbonated drinks) or A_FOOD_CNDY (for candy). Sometimes you may not be able to find a tax number for a specific product, which may be because the product is always taxable. In this case, you need to mark the product as "A_GEN_TAX". On the other hand, if you do not want to charge sales tax on the product, you can mark it as "A_GEN_NOTAX".

  
  

  Which states are included in the Amazon FBA sales tax amnesty?

Considering that Amazon FBA sellers want to comply with tax policies but are afraid of states retroactively paying unpaid taxes, several states in the United States have launched Amazon FBA sales tax amnesty, which allows Amazon FBA sellers to register and start collecting state sales tax without having to worry about state governments retroactively paying unsubmitted taxes.

States that currently have an Amazon FBA sales tax amnesty include:

• Arkansas

• Alabama

• Connecticut

• Colorado

• Florida

• Idaho

• Kansas

• Iowa

• Kentucky

• Louisiana

• Missouri

• Massachusetts

• Minnesota

• Nebraska

• New Jersey

• North Carolina

• Rhode Island

• Oklahoma

• South Dakota

• Texas

• Tennessee

• Utah

• Washington, D.C.

• Vermont

• Wisconsin

*Note: If you currently do business in a state that Amazon has granted amnesty to, it is best to consult the appropriate tax agency for professional advice before registering to collect Amazon FBA sales tax.

• If your product sales are extremely low, you don’t have to force yourself to collect sales tax;

• Sellers need to understand that taxes can increase over time. Therefore, many states allow up to 10 years of unpaid taxes.

• As a seller, if you happen to be in a state that is not part of the FBA amnesty, then you have a higher chance of receiving a bill with a clear tax history after registration.

• If you have a high outstanding tax balance, you may be subject to penalties. If you are not registered and unexpectedly have high sales of your product, it is a good idea to fill out a VDA (Voluntary Disclosure Agreement) before registering for sales tax. This will prevent you from paying a heavy back tax, interest and penalties.

Report and submit Amazon FBA sales tax

Once you start collecting Amazon FBA sales tax, it’s important to keep the tax collector informed of all your business activities. You’ll undoubtedly need to note the sales tax filing date (you can check this information on the authorities’ website) so that you can submit a refund to the tax authorities and account for the amount of sales tax you accrued from your customers.

Most authorities will certainly want to know the amount of sales tax you collect in a state, as well as the amount you collect from consumers in each city, county, and taxing district.

To report all this information, please download a detailed and clear reporting form from Amazon. To do this, you need to do the following:

Step 1: Log in to Seller Center;

Step 2: Select the “Seller Central” option and click on “Reports”.

Step 3: Under “Reports”, select “Payments”.

Step 4: Click Generate Date Range Report.

Step 5: Select your tax filing date.

At this point, you can manually calculate the taxes you have accumulated so far in a specific area. However, this is time-consuming. Alternatively, you can use Amazon Seller Tax Software to quickly calculate, and it also supports multiple seller accounts.

The next step is to file your tax return, which can be done online. Follow these steps:

Step 1: Go to the official website of your state tax authority;

Step 2: Submit sales tax return following the guidelines given there;

Step 3: Make payment through the website’s secure gateway.

When filing your taxes, always file "Zero (0) Returns." This means that even if you did not collect sales tax during a specific time period, you still need to file your taxes by the same deadline.

Be aware of some sales tax discounts, though, as most states allow eCommerce sellers to receive a small portion of their sales tax refund, similar to an incentive.