Amazon has one of the most robust sales tax systems out of all of the eCommerce shopping carts, but some sellers have noted that what Amazon collects and what the state of Virginia expects to see can be slightly different.
When viewing TaxJar’s Expected v. Sales Tax Due Reports, Virginia Amazon sellers are seeing amounts that are slightly off. Here’s why:
Amazon Collecting Sales Tax Based on Virginia Data Center
Virginia is a destination-based sales tax state. In a nutshell, that means that sellers who have sales tax nexus in Virginia and sell a taxable item to a buyer in Virginia should collect sales tax based on the sales tax rate at the buyer’s address.
But from running millions of Amazon transactions through TaxJar, we’ve seen that this is not the case. In Virginia, Amazon appears to collect sales tax from their buyers based not on the buyer’s location, but based on the location of Amazon’s data center in Chantilly, Virginia. This goes not just for sales from Amazon.com, but for sales made by FBA sellers through the Amazon system.
Long story short, Amazon collects sales tax from all Virginia buyers at the Chantilly rate, regardless of the buyer’s location.
How to Deal with Erroneously Collected Virginia Sales Tax
Fortunately, all of Virginia’s sales tax rates are fairly close to one another, so even when Amazon collects at the Chantilly rate for all customers it is still almost correct.
That said, Virginia still wants you to report how much sales tax you collected (or in this case, should have collected) from buyers in each taxing district.
That’s where TaxJar’s Expected vs. Actual Sales Tax Collected report can help. When you login to your TaxJar account and click on your Virginia sales tax report you’ll see what Amazon collected on your behalf and what they should have collected, all broken down by taxing jurisdiction. If you want to see what Amazon collected vs. what they should have collected on each individual transaction, you can do that by looking at your Detailed Sales Tax Analysis (DSTA) report on your TaxJar dashboard.
If you Amazon collected the wrong amount of sales tax from your buyers in Virginia, just use the “Expected Sales Tax Due” tab when filing your Virginia sales tax return. This will assist you in reporting and remitting the correct amount of sales tax to the state.
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Also keep in mind that Virginia is one of two states (along with New York) to rule that using a 3rd party fulfillment service only does not create sales tax nexus for merchants in the state. You can read our separate blog post for a whole lot more about Virginia’s sales tax ruling on 3rd party sellers.
Do you have questions or something to say about how Amazon collects sales tax in Virginia? Start the conversation in the comments!