Amazon

What Amazon Collecting Illinois Sales Tax Means for FBA Sellers

by Mark Faggiano

Illinois sales tax

Amazon.com will start collecting sales tax from Illinois buyers on the site beginning on February 1. Amazon will be required to collect the Illinois state sales tax rate of 6.25%.

This will be the 24th state where Amazon has to collect sales from users. According to Wall Street Journal reporter Greg Bensinger, who often covers eCommerce issues, this will mean that about 72% of Americans are now subject to sales tax when buying on Amazon.

Amazon has to collect sales tax in states either because the company has sales tax nexus there or due to an agreement with the state. In this case, Amazon has made an agreement with the state of Illinois in advance of the fact that they plan to build facilities (which would give them sales tax nexus) there between this year and 2017.

So if you live in Illinois and buy something from Amazon.com, you’re going to have to pay Illinois sales tax starting February 1, 2015. But what does this means for 3rd party fulfillment sellers who use Amazon as a channel, such as those who sell on Amazon FBA?

1.) Don’t collect sales tax from buyers in Illinois unless you have sales tax nexus – It’s easy to confuse Amazon.com (the company itself) collecting sales tax and you, as a 3rd party seller on Amazon collecting sales tax. Amazon has to charge Illinois sales tax to buyers in Illinois now due to an agreement. Just because you sell online using Amazon as a channel does not mean you now also have to charge sales tax to buyers in Illinois. To repeat, the only reason you, as an FBA seller, would need to charge sales tax to buyers in Illinois is if you have sales tax nexus in Illinois.

2.)  An Amazon Fulfillment center in Illinois could mean FBA sellers have sales tax nexus – As of right now, Amazon has no facilities in the state of Illinois. But they are planning to start opening facilities as early as this year. If one of those facilities is an Amazon Fulfillment Center where FBA sellers’ products are stored, then sellers who have products stored in an FBA warehouse in Illinois will have sales tax nexus in Illinois. Why is this? Check out our post about how and why storing inventory in an Amazon fulfillment center gives you sales tax nexus.

Note: To add a layer of confusion, not all FBA sellers will have products stored in the future Illinois Amazon fulfillment center. Run this report to find out in which states Amazon currently stores your products.

To get prepared, find out more about collecting sales tax in Illinois and how to register for a sales tax permit in Illinois.

3.) You may not pay sales tax on ALL purchases through Amazon if you live in Illinois – This news doesn’t mean to stop shopping on Amazon if you live in Illinois! You may still run into a 3rd party seller, such as an FBA or Merchant Fulfilled seller who doesn’t have sales tax nexus in Illinois and doesn’t have to charge you sales tax. So while you will most likely be charged sales tax if you live in Illinois and buy through Amazon, you might run into situations where you aren’t.

4.) The days of sales tax free buying are fading fast – Amazon makes no secret that they aim to offer same day delivery to as many customers as possible. To achieve that feat, they need Amazon Fulfillment Centers in more and more states. Seventy-two percent of Americans are already subject to sales tax when buying from Amazon. And Amazon has already announced upcoming fulfillment centers in Wisconsin, Maryland, Massachusetts and Illinois. In a nutshell, this means more Americans will be paying sales tax on Amazon purchases and FBA sellers will find that they have sales tax nexus in more states. Stay tuned here to the TaxJar blog or follow us on Twitter as we cover each new Amazon development.

Have questions or something to say about Amazon collecting sales tax in Illinois? Start the conversation in the comments!

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  • Amanda Scattergood

    I am planning to start selling on Amazon FBA within the next couple of weeks and I live in IL. Since I live in IL will I be responsible for collecting sales tax from buyers or will Amazon handle that? Planning to track and how to handle taxes in IL when starting up my own business is becoming a nightmare.

  • Hi Amanda, You will be responsible for setting up sales tax collection within Amazon seller central. This website has a great guide to walk you through it step-by-step: http://www.fbasalestax.com. Good luck in your new venture!

  • Peter Chrus Brah

    i sell fba but my inventory is not in illinois where i reside. This article isnt totally clears as to what the nexus requirement is. Is it if you have a fulfillment center in the state you reside regardless of which warehouse stores inventory. Or is it only if your inventory is stored at a fulfillment center in the state you reside?

  • Scott A.R.

    I am a Merchant Fulfilled seller in Illinois and have filled out the tax

    section for IL tax in Amazon Seller Central. So as I understand it:

    1. I only need to have taxes collected on IL purchases from IL customers.

    2. Amazon will now handle the reporting and collecting of IL sales tax for

    me. Do they send some kind of report to the IL Dept. of Revenue?

    3. I do not need to report my Amazon sales on form ST-1. I would report only

    non-Amazon sales on form ST-1.

    Is this correct?

    • Hi Scott,

      I recommend you read this eGuide: http://www.fbasalestax.com. This will help you get started with Amazon sales tax. (Though it says FBA, most of it also applies to MF sellers). Good luck with your business!

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