Amazon

How Not to Over or Under Collect Sales Tax for Amazon Prime Day

by Jennifer Dunn

Amazon Prime Day 2016

Amazon Prime Day 2017 is coming up on July 11th! If Amazon has anything to do with it, this will be a record breaking day for Amazon and for FBA sellers. According to Amazon, FBA sellers enjoyed unit sales growth of 300% worldwide on the inaugural Prime Day in 2015.

Prime Day promises to be a windfall in what is usually a slow season. But it wouldn’t be fun to discover that you didn’t collect sales tax, or didn’t collect the correct amount of sales tax on this multitude of sales.

Before Prime Day arrives, do a quick sales tax settings checkup to ensure that your sales tax settings in Amazon are correct.

Collecting Sales Tax in Your Nexus States

Your first step is to ensure you’re collecting sales tax in the states where you are registered for a sales tax permit. To check your sales tax settings in Amazon Seller Central:

1.) Login to Seller Central

2.) Click “Settings”

3.) Click “Tax Settings” from the dropdown menu (If you don’t see this option, you may have an individual account rather than a Pro Seller account. You must have a Pro Seller account in order to collect sales tax through Amazon.)

4.) Choose “View/Edit your Tax Collection and Shipping & Handling and Gift Wrap Tax Obligations Settings”

This setting will bring you to a tax table where you can double check that you are collecting sales tax on products, as well as – if necessary – collecting sales tax on shipping and gift wrapping in each of your nexus states.

If you’re not collecting sales tax in a nexus state, this handy Amazon tax settings chart will show you how to set up sales tax collection in each state through Amazon FBA.

For a step-by-step guide to setting up sales tax collection, you can also check out this Amazon tax settings video tutorial:

Applying Product Tax Codes

If you sell items that are subject to different tax rules from state to state, be sure to assign that product a “product tax code.” Product tax codes ensure that Amazon collects the correct amount of sales tax on your behalf.

For example, in some states clothing is fully taxable. In others, it’s totally tax free. In still others, some clothing items under a certain price are tax exempt. In other instances, clothing may be taxable at the local level but not the state level. Ouch! Who wants to keep track of all that?

Fortunately, Amazon’s sales tax collection system will take care of that for you, as long as you do one thing: include the correct product tax code with your item.

As long as Amazon knows your item is clothing (or grocery, or a textbook, etc.) then you will charge your customer the correct amount of sales tax in every state and local area.

Don’t worry if you haven’t set up your product tax codes! Here’s a quick way to change many product tax codes at once in Amazon Seller Central.

And if you have more questions about product tax codes, check out our Amazon Product Tax Codes FAQ.

Are your sales tax settings ready for Amazon Prime Day? Or do you have a question? Let us know in the comments!

Start your 30 day free trial of TaxJar. No credit card required.
Processing...
Thank you! Your subscription has been confirmed. You'll hear from us soon.
Subscribe to the TaxJar Sales Tax Blog
ErrorHere