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Amazon Sales Tax Collection | Is Amazon Collecting Sales Tax for Me?

By September 26, 2019January 19th, 2021Ecommerce Accounting

Amazon Sales Tax Collection

Do you have a business that sells on Amazon? Are you wondering if you need to be collecting sales tax on those sales? The short answer is that Amazon sometimes collects sales tax for you on what is sold through them. I know that’s an annoying answer, and sales tax in general is complicated. If you sell through a website or other marketplaces and channels, Amazon sales tax collection is only a piece of a much larger puzzle. You might think you like puzzles. I’m not a puzzle person myself. But this is one puzzle that we need to put together piece-by-piece. 

Amazon: A Marketplace facilitator

Amazon is a Marketplace facilitator. What is that you might wonder? It’s pretty much just a fancy way of describing a marketplace that contracts with and sells a business’s stuff (physical, digital, services). Marketplace facilitator laws transfer responsibility of collecting and remitting sales taxes from businesses selling on marketplaces, to the actual marketplace they sell on. So, Amazon is responsible to calculate, collect, and remit state sales tax in states with marketplace facilitator lawsIn states that don’t have marketplace facilitator laws, businesses are responsible to collect and remit sales tax for Amazon sales in that state, according to that state’s nexus and sales tax laws. Yeah, it gets a bit complicated. 

Additionally, most states require sales tax collection on the state as well as the local level (counties, cities, special regions, etc.). Very few states have only state-level sales tax. Companies are required to collect all levels of tax that a state administers. The good thing is, Amazon directly calculates all different levels at the point of sale. For example, if I buy a watch from a website, they will charge me Utah state level and county level taxes which total to 7.25%. The customers only see the total, but Amazon breaks it down to various levels. Amazon is not responsible for local taxes in some states, because those states don’t include local taxes in their marketplace facilitator laws. However, that is not the norm. 

Click here, for more info on marketplace facilitator laws in each state.

For states that don’t have marketplace facilitator laws, you may need to collect and remit taxes for your Amazon sellsCheck the state economic nexus laws here. 

What You Should Be Doing

So, is there really anything left that needs to be taken care of in states with marketplace facilitator laws? This depends on your business processes (if you use multiple sales channels in multiple states). Here are some of those moving pieces we talked about: 

Keeping Your Sales Tax Permits

Amazon, as well as all other marketplace facilitators, only handle sales taxes on transactions made through their platforms. If you are selling through Amazon as well as through a business website or non-marketplace facilitator channel, then you need to calculate, collect, remit, and file your own taxes on those other sales. This means you need a current sales tax license or permit in that state. If you are ONLY selling through Amazon (or another marketplace facilitator) in a state, then you still need to register with those states, but when you file you will have a $0 filing

As an Amazon seller, it’s important you stay informed so you can avoid any fines or extra hassle. 

Know Which States Have Amazon Marketplace Facilitator Tax Laws

For Amazon sales tax collection, it’s important to know which states Amazon is required to collect sales tax for you in. It is also important to keep in mind that these laws can change. To stay informed about these changes click here.

States Effective Date Marketplace Facilitator Laws
Alabama1/1/2019Click here for Alabama Amazon Laws
Arkansas7/1/2019Click here for Arkansas Amazon Laws
Connecticut12/1/2018Click here for Connecticut Amazon Laws
District of Columbia4/1/2019Click here for District of Columbia Amazon Laws
Idaho6/1/2019Click here for Idaho Amazon Laws
Indiana7/1/2019Click here for Indiana Amazon Laws
Iowa1/1/2019Click here for Iowa Amazon Laws
Kentucky 7/1/2019Click here for Kentucky Amazon Laws
Minnesota10/1/2019Click here for Minnesota Amazon Laws
Nebraska4/1/2019Click here for Nebraska Amazon Laws
New Jersey11/1/2018Click here for New Jersey Amazon Laws
New Mexico7/1/2019Click here for New Mexico Amazon Laws
New York6/1/2019Click here for New York Amazon Laws
Ohio9/1/2019Click here for Ohio Amazon Laws
Oklahoma7/1/2018Click here for Oklahoma Amazon Laws
Pennsylvania4/1/2018Click here for Pennsylvania Amazon Laws
Rhode Island7/1/2019Click here for Alabama Amazon Laws
South Carolina4/29/2019Click here for South Carolina Amazon Laws
South Dakota3/1/2019Click here for South Dakota Amazon Laws
Vermont6/7/2019Click here for Vermont Amazon Laws
Virginia7/1/2019Click here for Virginia Amazon Laws
Washington1/1/2018Click here for Washington Amazon Laws
West Virginia7/1/2019Click here for West Virginia Amazon Laws
Wyoming7/1/2019Click here for Wyoming Amazon Laws

Amazon Sales Tax Collection; What to Remember

Although Amazon does collect and remit sales tax for thirdparty sellers in many states, there are a few that don’t require it. Even if states do require it, there still may be more that needs to be done on your end. Don’t forget all the most important pieces of this tax puzzle. For instance, you still need to collect and remit sales taxes when selling through other platforms such as through a company website. You also need to be aware that marketplace facilitator laws may change and update to include more states. And if you just don’t feel like you have the time to put this darn puzzle together yourself, then give us a ring. At LedgerGurus we make sales tax puzzles come together, saving you time and money. 

For more info about LedgerGurus sales tax help click here.