How to File a $0 Sales Tax Return in California (Step-by-Step for Amazon Sellers)

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Okay. Here at LedgerGurus, most of our clients are ecommerce businesses and they sell on multi-channels. It's usually a combination of Shopify and a marketplace, and Amazon is definitely one of the most popular choices of our clients. So we do this reporting a lot, and I'm so excited to show you the process, the step by step guide on how to do that.

So in this video, I'm going to use California as an example, but the logics apply to other states as well. So watch this video to the end and apply it to your state. And if you have any questions, definitely leave your questions in the comments, and I will get back to you personally with everything that I know.

1:52 Preparing the data with a pivot table

Before we get to the actual website to file your return, I want to come to the combined tax report provided by Amazon first, to get the data ready. So when you get to the website, you have all the numbers that you need.

This is from Seller Central, from the tax document library, and you download the combined sales tax report. Not the remittance only, or not the marketplace, but the combined sales tax report. So you get that.

There's really only two columns that we need. The first one is on column W, it's tax exclusive selling price. This shows how much you are selling your products into, like on each transaction. And another column you really need is column AG, and it says ship to state. This is where you can allocate all of your revenue from column W to different states.

2:58

And to do that, we are going to use a pivot table. So click on the little arrow right here. It will select everything on your Excel spreadsheet. Then go to insert and click on pivot table. Make sure that it has the whole range and click on okay.

And then on here, remember those two columns we need. So we will put the ship to state as rows, because we want it to summarize the information by state. And the financial information we need is the tax exclusive selling price, and you drop that down into values.

Let's also format this so it's easier to read. So you just go to home and click on the comma. It'll make sure everything is formatted beautifully.

3:47

So in this example, we're going to file for California. So California, Amazon lets you put CA or California, or like Arizona sometimes. Like there's just different ways of spelling the state, abbreviated or not. So sometimes you need to add both columns. So California, there's these two. So if I do equal this number plus this number, then we know the total that goes into California is this number. Well, write it on here. Total sales into California.

And total sales for this period is right here down at the bottom. So then we know if we do the total minus California, we know this is the amount, total sales into other states. And we'll need all these three numbers to file the return in California correctly. So I'm just going to put it in red, because this is what we need.

5:04 Filing the California return

So next we're going to log into your CDTFA account. So this is the first page you'll see. And on here, the taxable total sales is the total amount that we put in here. So total sales, we will put this total number of 19,292.

Usually as ecommerce you don't really have any use tax or any fixtures and equipment, so we usually leave those two spaces zero. Then we click on next.

On this next page it's sales at state designated fairgrounds. If you don't have any sales at fairgrounds, you can leave that as zero as well. And then we'll click on next again.

6:03 Claiming the deductions

Then here is the most important part. This is where you claim all the deductions, so you don't have to pay anything to California. So these are all the exemptions slash deductions you can take.

So sales to other retailers for resale. Usually it doesn't apply for Amazon sellers. Maybe it applies to you. Non-taxable sales of food products, if you are a seller of food products on Amazon, this could be applicable to you.

But in general, we want you to put sales in interstate or foreign commerce. This is sales to other states. So we will put 16,644.39 here, to say this is sales that's going into other parts of the country, delivered outside of California. It's not going to California customers.

7:06

So then after this we still have this amount, that's the sales into California. We need to categorize as non-taxable, and to do that we can do other non-taxable sales and scroll down. There is marketplace facilitated sales, and we will put that as 2,647.72.

So we're telling them, out of all the sales, $19,000 of sales, 16 is going to out of the state, and the remaining one, even though it's in California, it is not my responsibility because it's a marketplace facilitated sales. And on here, I usually tell my client to put Amazon as well, so they know that it's through Amazon.

7:59

So then answer all these questions. Do you have any credits, partial exemptions, adjustments? It's usually no. And then to the next page, it will ask you to allocate anything on districts, but there's nothing to allocate because it's already zero.

So then you can go to next, and if you have any prepaid payment this will show up on there, and it's usually zero, because there's no excess tax that's collected. Everything's done through Amazon.

So then you can review this summary, and usually if you don't have any prepayments that's needed, then this number should be zero as well. And then all of this should show zero. And then you can just come here and finish paying, but usually you don't really need to pay.

8:55 Why this works in any state

I just want to go back and illustrate that the most important part is on this page. You want to put the sales in interstate or foreign commerce on here from your pivot table, that sales into other states, and then the rest of your actual California sales put it on here. So then the total non-taxable sales equals your sales from the first page. And then you will have a $0 sales tax liability.

9:44

That was for California, but the logic of reporting your total sales and then reporting that equals your sales, so then you arrive at a $0 return, is the same for all the states. Maybe they say the description a little differently. Instead of saying marketplace facilitated sales, they would say sales through a marketplace. So just on your returns, actually the deductions part, look at options to record marketplace facilitated sales, or anything in that ballpark that would say, okay, I did make sales, but all of my sales are through a marketplace and they've collected and remitted on my behalf. So I don't owe anything at the end of the day.

One special thing about California is it asks you to report gross sales. So sales into all the country, all the states. And then they want you to report the sales into other states versus sales into California.

10:41 A Utah example

But for some other states, they only want you to report sales into their own state. You don't even need to worry about sales that are going into other states and claim that as a deduction.

For example, if I was an Amazon seller in Utah, then when I do that pivot table, I would only look at how much sale is going into Utah, because Utah doesn't require me to report all of my sales. They only worry about sales into Utah.

So let me share my screen again, so we can look at the Amazon report. Okay, so this one, let's go back. If I was reporting only in Utah, then on here, where is Utah? Okay, so there's two again. Then for Utah, I would add up this one plus this one.

11:39

So I would report 414.22 as my gross sale instead of the 19 number, because they don't ask me to report all sales. And then I would take the same amount as a deduction, whether it says it's sales through marketplace or marketplace facilitated sale. However the wording is, there should be an exemption for marketplace sale. I would take the whole amount.

So this would be my total sales into Utah, and this would also be my deduction. And the reason is marketplace facilitated sales. And then my tax due would be this amount minus this amount, which is $0.

So this should be applicable to all the other states, whether you need to report just the sales into the state, or like California, they want you to report total sales for this period, that you need to bifurcate it into sales into other state as one deduction, and then total sales California as deduction two. So one of these should make sense.

13:02 Questions and next steps

As I mentioned in the beginning of the video, if you have any questions, if you are filing a $0 return in another state that's other than Utah or California, and you're confused, please leave me a comment. And I'm more than happy to look into it for you, to tell you where you should put your exemption amount, so you don't have to pay the state anything because Amazon has already paid on your behalf.

If you have any requests for videos that I should make, leave it in a comment as well. I sincerely value those comments. It gives me ideas and it lets me know how I can help you. As always, if you [unclear], please subscribe, and I'll see you.