Does Amazon Pay Sellers Sales Tax?

When selling on Amazon, understanding who is responsible for sales tax can be a bit confusing. In the U.S., the responsibility for collecting and remitting sales tax largely falls on the seller, but Amazon provides some assistance, particularly through its Fulfillment by Amazon (FBA) program. Here’s a detailed breakdown of how sales tax works for Amazon sellers and what you need to know.

Understanding Sales Tax

Sales tax is a tax levied on sales of goods and services. In the United States, sales tax regulations vary by state, and each state has its own rules regarding tax rates, exemptions, and filing requirements. Generally, sales tax is collected from the customer at the point of sale and then remitted to the state by the seller.

Amazon's Role in Sales Tax Collection

For sellers using Amazon's platform, the responsibility for sales tax can be divided into two main areas:

1. Marketplace Facilitator Laws: Many states have enacted "marketplace facilitator" laws, which require marketplaces like Amazon to handle sales tax collection and remittance on behalf of sellers. Under these laws, Amazon is responsible for collecting sales tax on orders shipped to customers in states where Amazon has a tax obligation. This means that Amazon automatically calculates, collects, and remits sales tax for these transactions. Sellers are not required to manually collect or remit sales tax for orders in these states.

2. Seller's Responsibility: Even though Amazon handles sales tax for many transactions, sellers are still responsible for managing sales tax in states where Amazon does not have a tax obligation or where the marketplace facilitator laws do not apply. Sellers must ensure they comply with local tax regulations, file sales tax returns, and remit any taxes due in these states. This requires sellers to register for a sales tax permit in each state where they have a tax obligation, track their sales, and file periodic sales tax returns.

Fulfillment by Amazon (FBA) and Sales Tax

For sellers using Amazon’s FBA service, the scenario becomes slightly more complex. FBA involves storing inventory in Amazon’s fulfillment centers, which are located in various states. This means that Amazon has a physical presence in multiple states, and as a result, it may be required to collect sales tax on behalf of sellers in those states.

However, if you are not using FBA and are fulfilling orders directly, you are responsible for handling sales tax in the states where you have a tax obligation.

Impact of Sales Tax on Sellers

Sales tax can have significant implications for sellers:

• Pricing: Sellers need to consider sales tax when setting prices. If sales tax is not included in the listed price, it may affect the final purchase price for customers.

• Compliance: Ensuring compliance with sales tax laws can be complex, particularly for sellers operating in multiple states. It involves understanding each state's regulations and filing requirements.

• Software and Tools: Many sellers use sales tax automation software to help manage their sales tax obligations. These tools can integrate with Amazon’s platform to automate the calculation and reporting of sales tax.

Sales Tax Nexus

One of the key concepts in sales tax is "nexus," which refers to a connection between a seller and a state that triggers a tax obligation. Nexus can be established through various means, such as having a physical presence in the state (e.g., an office or warehouse) or economic presence (e.g., meeting certain sales thresholds). Amazon’s FBA service can create nexus in states where Amazon stores inventory on behalf of sellers.

Recent Changes and Trends

Sales tax regulations are continuously evolving. For example, the Supreme Court’s decision in South Dakota v. Wayfair Inc. (2018) expanded the ability of states to impose sales tax obligations on sellers based on economic presence rather than physical presence. This has led to more states implementing marketplace facilitator laws and changes in sales tax collection requirements.

Summary

In summary, while Amazon does handle sales tax collection for many transactions through its marketplace facilitator role, sellers are still responsible for managing sales tax in states where Amazon does not have a tax obligation. Sellers should stay informed about sales tax regulations and consider using automation tools to ensure compliance. Understanding the nuances of sales tax collection and remittance can help sellers avoid potential issues and manage their business effectively.