Guide to Sales Tax Collection in Amazon
Chapter 3: Fulfillment by Amazon
How Amazon Collects Sales Tax
Amazon collects sales tax for all fifty states, Washington DC, and some local jurisdictions. It does not collect product specific excise and gross receipt taxes. States that refer to sales tax as “excise tax” or “gross receipts tax” are not excluded. It is commonly agreed that those terms are synonyms for “sales tax”.
Taxable items sold through Amazon are taxed based on the total selling price of the item. This price includes item-level shipping, handling, and freight charges, item-level discounts, and charges for gift-wrapping. At an order level, there is also an allocation of shipping and handling charges and discounts.
The total amount of sales tax applied to an order depends on a number of factors including who the item is being sold to, the type of product being purchased, and the ship-to address.
Fulfillment by Amazon
Amazon has created one of the most advanced fulfillment networks in the world. With Fulfillment by Amazon (FBA) your products are stored in Amazon fulfillment centers around the United States. Amazon picks, packs, ships, and provides customer service for these products.
How does this impact your sales tax obligation? As mentioned previously, one criteria for establishing nexus in a state is having product stored within that state. Having nexus in a state means your business needs to register with the state DOR to collect and remit sales tax within that state. Let’s consider how to best manage your exposure when participating in Fulfillment by Amazon.
Amazon’s fulfillment center network spans the following twenty-five states. In some cases, the state houses fulfillment warehouses while in others, the state houses sortation centers. Some states even have a combination of both:
|Kentucky||Maryland||Massachusetts||Minnesota||Nevada||New Jersey||New York||North Carolina|
Fulfillment by Amazon represents a giant step forward in logistics management for small business owners around the world.