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Does Amazon FBA Inventory in Illinois Trigger Nexus?

  • Jul 29, 2016 | Laura McCamy

Poet Carl Sandburg famously called Chicago “Freight Handler to the Nation.” There’s a good reason for that. Even in our digitally connected world, Illinois’ physical location in the center of the United States makes it an indispensable hub for shipping.

Amazon has at least one fulfillment center in Illinois. If you use FBA, your Amazon FBA inventory in Illinois can trigger sales tax nexus.

In a General Information Letter on the sales tax liabilities of remote sellers from 2009, the Illinois Department of Revenue defines an “Illinois Retailer,” in part, as a business that “maintains an inventory in Illinois and fills Illinois orders from that inventory.” The letter goes on to state that:

[a]ny type of physical presence in the State of Illinois” will trigger nexus. A publication about sales and use for retailers notes that sellers have nexus if they have in Illinois “a place from which you deliver or produce a product (e.g., a warehouse).

Illinois calls sales tax collected by some out-of-state retailers "use tax." Use tax is normally the term for sales taxes when they are paid by consumers rather than retailers, but some states use the word to describe taxes collected by remote sellers. However, if your nexus in the state comes from Amazon FBA inventory in Illinois, your Illinois sales will be considered in-state and you will collect sales tax, rather than use tax.

In that same vein, while Illinois requires out-of-state vendors to charge a flat 6.25 percent sales tax, those who ship from an Amazon FBA location in Illinois are subject to a different rule:

If an out-of-state retailer ships a product from an Illinois warehouse, distribution center, etc., the transaction is subject to sales tax rather than use tax and the Illinois location where the product is shipped from determines the rate of tax.

Illinois is an origin-based sales tax state, so the rate you charge your Illinois customers is determined by the sales tax rate of the FBA warehouse location.

It’s always a good idea to check your Amazon Inventory Event Detail Report regularly to see the locations from which your products are being shipped. If you have Amazon FBA inventory in Illinois, you will need to register with the state to collect and remit sales taxes.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Laura McCamy
Avalara Author Laura McCamy