This week’s guest blog is courtesy of Mindy M. Santema of TNTax Business Services, Inc., who helps give us a heads up on potential tax responsibilities for online sellers.
With so many people signing up and registering for sales taxes in the Amazon FBA states, I thought it would be a good time to mention some important additional information regarding sales taxes. When a seller registers in a state to collect and turnover the sales taxes collected to that state, it’s not just your sales from Amazon that need to be reported. Many sellers may have more sales on other sites such as eBay. If you sell an item from eBay, or have other online sales, and those items are warehoused, or being shipped from within the state that you have already registered, then those sales may need to be reported and have taxes collected on them.
In a nutshell: Just because FBA caused sales tax nexus in a state doesn’t mean that you only have to collect sales tax from FBA buyers in that state. If you have sales tax nexus, you are now responsible for collecting sales tax from buyers in that state through every platform on which you sell.
Nexus Extends Beyond Just One Sales Channel
Once a seller is registered within a certain state, and they sell items that are being shipped from that state, those sales may be subject to state and local sales taxes. Many of you have heard the word “nexus” thrown around; nexus can mean different things by different states. What it basically means is that, if your business has a physical presence in that state, such as a warehouse, an office, a store, or even your home (if your business is out of your house) then you may be responsible for collecting sales tax from all sales within that state and remit the taxes to your own State’s Department of Revenue.
In addition to having “nexus” in a state, because of a warehouse, for example, not only are you responsible for collecting and remitting taxes on the sales shipped from that warehouse, but you may be potentially responsible for collecting and remitting taxes on items sold from your own state. This could happen if you have sales from eBay and/or from your home, (again if your business is being run out of your home). If you sell other items utilizing other eCommerce sites, or ship and sell from your home or place of business to a customer, you should check with your own state to see if you should be collecting and remitting sales taxes to your state.
If you are a seller working out of your own home, or a brick and mortar store within your own state, you might be required to report the sales to your own state and collect and remit the sales taxes collected to that state. There may be confusion because each state may be a bit different in their taxation laws. Some states, for instance, say that if your revenue is less than $10,000, you wouldn’t file sales taxes for that state. Yet other states it might be $2,400, or even less, and you would be required to collect and remit sales taxes. The great news is that if you have your business in Alaska, Delaware, Montana, New Hampshire, or Oregon, there aren’t any sales taxes for those states. In that case, you wouldn’t have to worry about your own state’s sales taxes, because there aren’t any; only worry about the states that you would have nexus in.
The Question You Must Ask
In summary, not only are you potentially required to collect and remit sales tax for your sales through Amazon, but you may be required to collect and remit sales taxes on all your sales, regardless if they are sold through Amazon.
So once you realize you have nexus in a state, whether it’s through FBA or another means, ask yourself: Am I collect sales tax from buyers in that state on every platform on which I sell? If not, it’s time to have another look at your sales tax collection practices.
If you have any questions that our staff may help you with further, please don’t hesitate to contact us, and we’ll be happy to help!