Problem: Many Amazon FBA sellers still have the false belief that Amazon will handle all of the sellers’ sales tax for them. This is simply not true.
Below are some direct quotes from Amazon.com. Your clients can find this same information by going to their Amazon Seller Central Account (they have to log in to their account to see it — I can’t link to it directly but I can copy and paste with the best of them) and they simply search for help on sales tax.
Then they will see this quote from Amazon:
It is the seller’s responsibility to understand their sales tax calculation and remittance obligations. Including registering with each state, setting up your tax calculation settings, and remitting any tax calculated on your orders to the state.
If the order is destined to a state that has Marketplace Tax Collector (see more about this below) laws in effect at the time of shipment, sales tax will be automatically collected and managed by Amazon. For orders where tax is not automatically collected by Amazon, the sales tax obligation remains your responsibility.from Amazon Seller Central help information
Amazon’s Sales Tax Methodology
The information below is quoted directly from the Amazon Seller Central information that one can only see if they are logged into their seller account. Here’s a screenshot from the Amazon page.
Below is the relevant content from this Methodology Document to show that Amazon Sellers have the obligation to remit the sales taxes collected by Amazon on their behalf (quoted verbatim from Amazon website).
Our services include support for these tax calculations and related functions:
Sales and use tax rates (including monthly updates); Sales and use tax area ID assignment (jurisdiction identification); Sales and use tax jurisdiction determination (sourcing); The ability to select a seller-defined default product tax code; The ability to specify a custom rate for each state; The ability to specify tax calculation obligations for orders at the state, county, city, and district level for each of the 50 states and the District of Columbia; Shipping & handling taxability support; Pre-populated product tax codes, such as for clothing, books, food, computers, that allow sellers to designate the taxability of their offers; Item level tax calculation details; and Information about Taxes in Seller Reports.
For sellers who use our tax calculation services, the seller’s “Sales Tax Report” will include tax calculation information for sellers to use in reporting and remitting taxes to the appropriate taxing authorities…quoting from Amazon Seller Central sales tax information
Important Note: (this is from PJCo– no longer quoting from Amazon’s website): Amazon collects the sales tax using the above-described methodology, but as you can see in the bolded/ italicized text quoted above, it is up to the sellers to report it and remit it to the states. Also remember that except for certain states (more on that next) Amazon only collects tax for 3rd party sellers in states where directed to do so by the seller. If a seller checks the box to collect tax in certain states, Amazon collects the tax and sends the money to the seller each month. Then, as quoted above, the seller then has the burden to report it and remit to the various states as appropriate.
It Gets Confusing
There is a complicating factor that likely creates confusion with your clients because some states have passed what are called Marketplace Facilitator laws forcing Amazon (and others) to collect and remit tax on behalf of sellers. This new development tends to muddy the water and confuse sellers. Many sellers believe (and there is merit to the argument) that Amazon should be collecting the tax everywhere and they believe that would make things much easier on them. Unfortunately, the states do not all agree this is how it should be done, and even the ones that do agree, don’t necessarily let individual sellers just check out of the registration process like many hoped. In fact, in some states (like Washington) with these new laws, it’s now even more complicated to deal with sales tax in their state.
Bottom line: The States really are not bothered if complying with their sales tax laws is difficult for out-of-state sellers. They just want more money however they can get it.
Marketplace Facilitator States
A marketplace facilitator is a business or organization (like Amazon) that contracts with third parties to sell goods and services on its platform and facilitates retail sales of at least $250,000 during a given 12-month period. It enables these sales by listing the products, taking the payments, collecting receipts, and in some cases assisting in shipment. When we refer to marketplace facilitator laws, we’re talking about legislation surrounding the sales tax responsibilities of these facilitators. A number of states have passed laws forcing Amazon (and others) to collect sales tax on behalf of 3rd party sellers and remit it. In these states, a seller would not have to collect tax and remit it on that seller’s own sales. But if the seller makes sales through other channels (such as their own website), they would have to collect and remit it and make adjustments on the state returns for the tax collected by the Facilitator.
What Sellers Need to Know About Facilitator States
For sellers, marketplace facilitator laws mean that Amazon will handle collecting and remitting sales taxes on behalf of their sales in states where Amazon agrees to do so (see the current list below).
Another concern for sellers is whether a seller should keep their sales tax permits current if they are dealing with a state that imposes marketplace facilitator laws. In most cases, sellers should maintain their registrations. Remember, Amazon will only handle the sales tax on transactions sold through its platform.
So, if Amazon is collecting sales tax on your client’s behalf in Washington, but the client is located in Washington or has inventory there (eg. through Amazon FBA program) and they sell items through other channels (like their own website), then they still need to collect, remit, and file in the state on their own. Plus, they still owe the B&O tax in Washington and it goes on the same form as the sales tax. To do that, they must have a current license or permit. Washington is an unusual state in this regard; in most states, if you don’t do any sales outside of those with the facilitator, you may be able to file a simple “zero return” saying so, or register for non-reporting sales tax status.
That’s why it’s imperative that the Amazon seller (and their tax advisors) arm themselves with all of the relevant information about possible marketplace facilitator laws. Below is Amazon’s current list directly from their website regarding the states where they will be collecting and remitting sales tax on behalf of the seller and the effective date of those laws.