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What Amazon sales tax policy means for FBA sellers

  • Apr 21, 2017 | Laura McCamy

After initially fighting hard to keep from collecting sales tax in states where it lacked collect sales tax in all 45 states (and the District of Columbia) that levy a sales tax. Perhaps the ecommerce giant saw the writing on the wall, as states and localities become more aggressive about recapturing sales tax revenue lost to ecommerce. Or maybe the move is a precursor to a fulfillment center expansion, so Amazon can offer its customers instant gratification (here come the drones!).

If you are an FBA seller, having your goods stored in Amazon’s fulfillment warehouses can trigger a requirement for you to collect and remit sales tax in additional states. You might be wondering what the new Amazon sales tax policy means for your business. Here’s what you need to know.

Amazon sales tax nexus

The first thing to understand is nexus. Nexus is a connection to a state, most commonly a physical presence that triggers the responsibility to register and collect sales tax in that state. If you spend time playing the slots in Reno, that won’t give you Nevada nexus. But if your products are stored in an Amazon FBA warehouse in Nevada, boom — nexus. Next thing you know, you’re collecting and remitting Nevada sales tax when you ship your next box of glitter makeup to Caesars Palace.

Amazon sales tax policy and FBA

The new Amazon sales tax policy applies only to sales made directly by Amazon, or a bit more than half the sales on the site. If you’re a third-party seller on Amazon, even if you use FBA, this Amazon sales tax policy doesn’t have a direct impact on the states where you need to collect and remit sales taxes.

If you don’t have -sales-tax-guide in one of the newest Amazon sales tax states (Arkansas, Hawaii, Idaho, Iowa, Louisiana, Maine, Mississippi, Missouri, Nebraska, New Mexico, Oklahoma, Rhode Island, South Dakota, Utah, and Wyoming), you won’t need to register to collect and remit sales tax in those states. Amazon doesn't have FBA fulfillment warehouses in those states (yet), so your products won’t hang out and create nexus there.

The future of Amazon sales tax

Just because the change in Amazon sales tax collection doesn’t affect FBA sellers now doesn’t mean there won’t be changes in ecommerce sales tax collection coming at you in the future. There are four related bills awaiting consideration by Congress: the Marketplace Fairness Act, the Online Sales Simplification Act, the Remote Transactions Parity Act, and the No Taxation Without Representation Act. Or Congress could opt to draft a new law that would require ecommerce sellers to collect sales tax on every online sale.

Another possible pitfall for FBA sellers: states might ask Amazon to provide information about FBA sellers. One state is even going so far as to try to use internet cookies to oblige ecommerce sellers to pay taxes. Even with the new Amazon sales tax policy, states are still missing out on a lot of sales tax from smaller ecommerce businesses. If you don’t have a physical presence in a state, you could still have click-through or affiliate nexus. If you have been flying under the sales tax radar, you may not stay invisible for much longer.

Being confused about where you have nexus and what your state sales tax obligations are doesn't mean you’re a dummy. Constantly changing sales tax regulations are enough to make Einstein tear his hair out. Fortunately, you don’t have to get a Ph.D. to stay on top of your sales taxes: you can add a whole bunch of sales tax nerds to your team just by using sales tax compliance software.

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