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Amazon voluntarily collects sales tax in 10 new states

  • Mar 8, 2017 | Suzanne Kearns

Amazon has been the subject of many discussions regarding its position on remote sellers and sales tax laws. It all started in 2008, when New York passed the first affiliate nexus law, which says remote retailers must collect sales tax if they generate more than $10,000 in revenue from commissions paid to New York residents who refer the company to others. Amazon was affected because its Associates Program pays commissions to website owners in New York and other states when they advertise their products on their site. Amazon filed suit in court and lost, and over the years has fought other states over sales tax rules, but recently the mega retailer seems to have had a change of heart.

It came as a surprise to many that Amazon has recently agreed to voluntarily collect sales tax in states where it’s not required. Since last fall, it has agreed to voluntary collection in Iowa, Louisiana, Mississippi, Missouri, Rhode Island, South Dakota, Vermont, Nebraska, Utah, and as of March 1, Wyoming, Arkansas, and Oklahoma.

So what’s behind Amazon’s sudden change of heart?

There has been much speculation on the matter. Is it because Amazon is secretly cutting deals with states to keep some of the sales tax it collects, like it did with Utah? Or is it an attempt to avoid new use tax notification laws being passed in some states, like Colorado, which require online sellers without nexus to inform purchasers of their duty to pay use tax? Or is Amazon preparing to collect sales tax across the nation because its plans to develop a flying fulfillment center are going to become reality?

No one knows the real reason because Amazon is being tight-lipped about the matter, but state tax departments are rejoicing. Many of them have experienced budget shortfalls because they’re losing millions in sales tax revenue to online stores that don’t have nexus and aren’t required to collect and remit sales tax in their state.

What does all this mean for Amazon sellers?

If you’re an Amazon seller who does business in one of the states listed above, you’ll need to change your settings to allow Amazon to collect the tax in those states. To do this, go to your Seller Central page and click on Settings. Next, go to the Tax Settings page and click on the states where you want Amazon to collect sales tax for you.

No one really knows what Amazon is up to, or whether or not it will enter into voluntary sales tax agreements with any of the remaining four states that have a sales tax, but one thing we do know: Amazon is changing the way people buy products, and states are putting up a fight about the revenue they’re losing to remote sellers without nexus. In addition, some in the federal government are seeking to enact laws that would make it possible for states to force remote sellers to collect and remit sales tax.

It's anyone's guess as to how this will turn out, but if you’re an Amazon seller, it’s important that you stay in compliance by updating your settings to include the states listed above.

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
Suzanne Kearns
Avalara Author Suzanne Kearns