Amazon Sales Tax 101

3 Things You Must Do Before Collecting Sales Tax on Amazon FBA

by Mark Faggiano

Set Up Sales Tax Amazon FBASo you’ve started selling on Fulfillment by Amazon. Congratulations!

FBA is a lucrative direction in which to take your eCommerce business.

Let Amazon handle the fulfillment and customer service while you spend all your time on the fun stuff, like sourcing new product!

But selling on FBA isn’t all fun and sourcing. Amazon stores your products in Amazon Fulfillment Centers around the country, and this creates sales tax nexus in states where you may not have had it before. Long story short: selling on FBA takes a lot of the work out of selling online, but it also creates new burdens that online sellers may not be aware of.

Because of this, you must make sure you are setting up sales tax collection correctly in your Amazon seller account. If you aren’t, then you may find yourself on the hook for paying the sales tax you owed out of your own pocket. Yikes!

TaxJar has put together a handy guide to collecting sales tax on FBA. But before you even get started, make sure you’ve completed these three steps:

Step 1: Upgrade to a Professional Seller Account
Individual Accounts cannot use the Amazon tax service. Follow these directions to upgrade:

  1. Login to your Seller Account
  2. Under the Settings heading, click the “Account Info” link.
  3. On the Seller Account Information page, go to the Selling Plan section and click the “Modify Plan” button.
  4. On the next page, click the “Upgrade” button.
  5. Review the information on the next page and click the “Proceed to Upgrade” button to accept the terms and switch your plan.

After clicking the “Proceed to Upgrade” button, you will be returned to your Seller Account Information page and see a message indicating that the upgrade process has begun. Your subscription to the new selling plan will begin immediately, and additional links to Professional seller tools will appear on your Seller Account page. Some billing features may take up to 30 minutes to become effective. Once the upgrade process is completed you will no longer be charged the $0.99 closing fee on your orders. You will instead be charged a monthly subscription fee of $39.99 for your Professional selling plan

Step 2: Know the States in Which You Have Nexus
Here’s a link to a page explaining which states Amazon FBA sellers have nexus in. Long story short, most states have  – either explicitly or implied – stated that housing inventory gives you sales tax nexus in that state. This means you may have nexus in every state that has an Amazon Fulfillment Center and a sales tax.

Amazon provides a report telling you in which warehouses your inventory is housed. To access it:

1. Go to Seller Central
2. Click the Reports tab
3. Choose Fulfillment from the Dropdown Menu
4. Choose Inventory Event Detail from the sidebar
5. Click the download tab and choose your dates

Step 3: Register for a Sales Tax Permit in Each State Where You Have Nexus
Once you have discovered where you have nexus, you must register for a sales tax permit in that state. Don’t worry, you can register for most sales tax permits online. Remember that most states consider it to be unlawful to collect sales tax without a license. If you need help or have questions about a particular state, ask the experts and your fellow sellers in our extremely helpful Facebook group, Sales Tax for eCommerce Sellers.

And that’s it! Once you’ve completed these three steps, you are ready to set up sales tax collection on FBA. For a step-by-step guide to setting up your Amazon sales tax collection check out TaxJar’s Amazon Sales Tax Quick Reference Guide.

Have questions? Start the conversation in the comments below!

  • Wake Fan

    Can I find out what states my items will be warehoused in without opening a Pro Seller account? I have a regular seller account (that I have never used) and a report could not be generated from Step #2 to show what states my items would be shipped to (so I take it that info isn’t available without the Pro Seller account)…but it seems like if you open a Pro Seller account prematurely, you are wasting a month (the $39.95) by having the account and you aren’t even using it to sell, but to wait until you get all of your tax numbers together. I have my NC Sales tax # already (where I live). Do most sellers just register with all of the states to cover themselves?

    • WhereStock.com may provide this info, but I’m not certain. Unfortunately, a lot more info is available to Pro Sellers. I suggest contacting Amazon and asking them if there’s a way they can pull this info for you.

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