Amazon Seller Guide 2022 – Amazon FBA Seller Tax: Ultimate Guide on All You Need to Know
One of the reasons many businesses increase the prices of their items is that they let the customers pay for the taxes instead. However, paying tax is not as easy as it sounds, especially regarding Amazon FBA seller’s tax.
Whether you own a physical shop or you have a business online on any shopping platform, you are not exempted from taxes you have to pay. It is not really up to the market or the platform you sell at, it is mandated by law, so they all are obligated to follow the law.
How Does Amazon FBA Seller’s Tax Work?
It is a common thought of business owners that there is no tax to pay when they do not receive a letter stating they owe tax. It is good not to be charged at your first run, but do not leave the thought that you still need to pay your taxes in time. The tax collectors might not give you a warning, but they do keep tabs on you and your business.
Unpaid taxes will be listed down and hunt you after years of not paying your seller’s tax. There were points where business owners had to pay the tax with their own money because they did not collect the tax from their customers. If you do not pay on time, they will charge you penalties and interest. Amazon sellers tax is not an exemption.
What is the Amazon FBA Seller Tax?
Fulfillment by Amazon, or most known as FBA, is a program by Amazon that helps business owners store the merchant’s products, package goods when an order comes through, and ship them to the buyer. All they have to do now is deliver the goods to the warehouse, find consumers, and market your business.
While you use Amazon FBA to sell your products, you are also inclined to pay the Amazon FBA seller’s tax. Some factors are being considered, making it more complex than the regular sales tax. Read the guidelines below carefully about what you need to know when deciding to sell with Amazon FBA.
What You Need to Know About Amazon FBA Seller’s Tax
Well, you definitely need to know things when deciding whether to pursue something or not, just like in becoming an FBA seller. One of the essential things you should know is how to do your taxes and Amazon FBA seller’s tax.
1. Sales Tax Nexus
There are two criteria for the sales tax collected, and one of them is the Sales Tax Nexus. This criterion refers to your connection with a state, which automatically includes your home state. Sales tax will add a nexus on another state for many different reasons:
- Opened another branch, office, or storage in another state.
- Have employees working for you in another state.
- Someone else from another state advertises your product in exchange for a percentage profit of that item.
- You have customers from a different state.
2. Taxability of a product
The second criterion is the taxability of your product. This criterion is tricky as not all states consider a business taxable. Generally, it is taxable if a product is tangible, leaving service as not taxable.
But this system can confuse sellers sometimes because states in America do not include some tangible items as taxable. For example, in Minnesota, they do not put taxes on grocery items and clothing, but other states have them taxed at 5%. It is best to know what products are taxable and not in your state.
3. Economic nexus
If a business is growing, its tax will also grow as part of the Economic Nexus. A minimum threshold value of a sales activity gives a business tax to pay. Most states set the minimum revenue at $100,000 and 200 transactions in a year.
It might not be alarming at first when you are still building your business because your revenue is still tiny, but this is what hunts business owners when they do not know there is a tax for this and forces them to pay from their pocket. It is best to be prepared for this as early as possible.
4. How to collect Amazon FBA sellers tax
You first need to apply for a tax permit to collect tax. Comply with the tax laws of your state. You may visit their website to know more about the rules and where to register. After that, you may set up the Amazon tax calculation that you may find in your Seller Central account.
To do this step, Log-in to Seller Central, go to the Settings menu, and proceed to the Tax Settings. You must know your state tax registration number of every state that you have nexus, and the detailed steps from Amazon will guide you all the way. You may also see the total sellers’ tax in the Tax report of your Seller Central account.
5. Don’t skip your taxes
Calculating and paying the tax is one of the most unpleasant things to do by business owners. This nightmare never ends once you start your business, so you must think of a plan for the long run. If you do not know how to do taxes, you may hire someone who can do it for you if you have the budget.
To know more details and tips for your Amazon FBA, you can read further here: Your FBA Shipment Checklist: What Is It About and How to Use It?
Frequently Asked Questions
Does every product have sales tax?
Generally, the tangible products you sell online are taxable, but it depends on the state you have nexus with if they require tax. There are some states that have all items taxed, while some don’t.
What is nexus?
Nexus is the same as a connection. Having a state nexus means that you have a connection to that state. May it be because it is where your office is located, or because you have customers there.
What is Amazon FBA?
The Fulfillment by Amazon is a program that helps sellers take the load off of storage, package, and shipment. This program is well used by growing businesses or those who cannot handle all the hard work alone.
Being a business owner can earn you money and stress. You should think about the products and the profits you will make and consider the costs, fees, and taxes when running a business. One good thing about Amazon FBA seller’s tax is that they provide you guidelines of what you have to do.