We get a lot of questions here at TaxJar about setting up your Amazon FBA account to collect sales tax. There’s a lot of confusion around “product tax codes” (often called PTC’s) and what they’re for. So we thought we’d answer some of the most common questions here.
Product Tax Codes 101
What are product tax codes?
In order for FBA sellers to use Amazon’s sales tax collection service, Amazon requires that each product be assigned a product tax code. Product tax codes direct Amazon how to charge sales tax to your customers in the states where you tell them to charge sales tax.
Product tax codes don’t cover every item, but they do cover items that are sometimes taxed differently across different states or jurisdictions. For example, the state of New York does not have a sales tax on clothing that is less than $110. But South Carolina considers clothing taxable. So if you have sales tax nexus in both New York (maybe you live there) and South Carolina (perhaps your goods are in one of South Carolina’s Amazon Fulfillment Centers) you would want to make sure you enter a product tax code on any clothing you may sell to ensure that the product is taxed correctly in both states.
(You can find out more about setting up your sales tax collection through Amazon Seller Central here.)
Why should I enter product tax codes? Why can’t I just use A_GEN_TAX?
A_GEN_TAX is the most common product tax code you’ll see. It just means that the item you are selling is an item that is taxable, but doesn’t need any special sales tax considerations.
But if you sell the following types of products, you’ll likely want to choose a PTC:
- Books and Periodicals
- Health & Beauty Products
- Infant & Baby Supplies
- School Supplies
- Sporting Goods
These products may be taxed differently in different states and at different times. For example, in some states, textbooks are non-taxable. Also, many states will have a sales tax holiday in 2017. For a few days, usually a weekend but sometimes longer, things like clothing and school supplies are not taxed or taxed at a reduce rate. When you have your PTC’s set up properly, Amazon knows not to collect sales tax from buyers in those states on those particular items during the sales tax holiday dates.
What if I can’t find a product tax code for my product?
That’s okay. If you can’t find a PTC that seems to work for your product, it’s probably because that product isn’t specially taxed (or not taxed!) in any states. You can use A_GEN_Tax in this case.
What’s the difference between setting my up state tax settings and setting up my product tax codes?
Should I set up my state tax settings, my product tax codes or both?
Short answer: PTCs and state tax settings are two different animals and you should set up both.
Longer answer: Product tax codes are applied to each product you sell, while state sales tax settings tell Amazon in which states you want to collect sales tax. They work best when they work together!
If you’re an FBA seller, you have sales tax nexus in your home state and the states where Amazon stores your inventory. When you use Amazon’s tax collection service, you need to tell them where you want to collect sales tax and some important details, such as whether you want to collect sales tax on shipping and on gift wrapped items.
But don’t worry, it isn’t as hard as it sounds. In fact, we put together a guide to help you set up your Amazon FBA sales tax collection. Download it now and make the process simple!
Is there an easier way to apply product tax codes to my products?
CPA and friend to TaxJar Georgene Harkness has written up a detailed post on how to change many PTCs in Amazon at once. If you have hundreds or thousands of SKU’s, this post just might save your time and sanity!
That’s all well and good, but how do I set up sales tax collection on Amazon anyway?
Here’s a quick video guide to setting up your sales tax collection through Amazon Seller Central:
Do you have questions about Product Tax Codes? Start the conversation in the comments!