Disclaimer: This is how our company manage sales taxes when selling on Amazon FBA. As each business can have their own unique structure and situation, please consult with your tax advisor. Here is a list of tax advisors or companies that TaxJar recommends.
Selling on Amazon using FBA is great, but many neglect the fact that they are required to pay taxes in certain states. Here is a simple check list for what we do to collect taxes from those states.
Sign Up for TaxJar
TaxJar is an online tool that connects with your Amazon Seller account and keeps track of sales made in states in which you have Nexus. Having nexus in a state means that you have a significant presence in a state and is required to collect sales tax from customers and pay the state sales taxes.
In addition to their online platform which is great, their blog has a plethora of relevant posts specifically targeting Amazon FBA sellers.
File for Sales and Use Tax Permit in All The States You have Nexus In
This is most likely the most time consuming part of the process. Once you’re signed up to TaxJar, you will be able to see all the states you have nexus for. Luckily TaxJar has great articles on how this is done. You basically have to go to each states website and sign up for your tax permit with your company’s information and your tax manager’s information (or whoever is managing this part of the process for you)
TaxJar has compiled a list of states and how you can file for each state here. This lis is very useful as it provides you links to the states websites where you can register for a tax permit.
Note: Some states require applications to be mailed in.
Once You Get Your Tax Permit, Enter it In Amazon’s Seller Central
After obtaining your tax permit, you will need to login to your Seller Central account, go to “settings” -> “tax settings” -> “View/Edit your Tax Collection Obligations”
Once you are here you will see the state and various check boxes to select what type of tax you want to collect (state, county, city, district) and the shipping and handling and gift wrap taxability. This varies by state. Luckily TaxJar provide FBA sellers what they should be entering in these fields on this PDF reference guide.
Note: After saving your values, it may not be reflected on the screen until after 24-72 hours. If you make changes the same day by going on the same web page, you will not notice the original values you entered. Amazon works on a delay so you may need to reenter all the information you wish to edit or add before saving the form again.
After you have begun collecting taxes and you have all the permits for each state, the fun part begins: Actually paying those states. Many states are integrated with e-filing which allows you to pay online. Some states allow you to pay via credit card but there’s typically a 2-5% fee associated with paying using credit cards.
TaxJar has a feature which allows you to enroll in that states AutoFile programs directly on their website. This makes paying easier. For states without AutoFile you will need to pay on the state’s website, e-filing websites, or via mailing a check.
Note: Often times, even if you didn’t make sales in certain states, you will need to file returns.
Notes and Tips
- Filing and paying each FBA state may be seem daunting, make sure you keep track of all the login information for the websites and correspondence between you and each state’s support representative in a single document for your reference.
- New state rulings can affect whether or not you have nexus in certain states. Keep up to date with these laws by following TaxJar’s blog and other industry news. For example. Virginia recently ruled that Amazon FBA sellers do not have “nexus” in the state and therefore do not need to collect and remit taxes for that state.
Tools and Resources
- TaxJar – Website that helps you manage taxes where you have an Amazon FBA nexus
- FBA Reference Guide – Gives you the run down on paying taxes if all you do is sell via Amazon FBA
- A List of States that require renewal of tax permits
- Sales Tax Calculator
- States that require tax if you sell using only Amazon FBA