{"id":10759,"date":"2019-08-18T09:00:52","date_gmt":"2019-08-18T08:00:52","guid":{"rendered":"http:\/\/www.repricerexpress.com\/?p=10759"},"modified":"2025-02-07T15:47:16","modified_gmt":"2025-02-07T15:47:16","slug":"amazon-sales-tax","status":"publish","type":"post","link":"https:\/\/www.repricerexpress.com\/amazon-sales-tax\/","title":{"rendered":"Amazon Sales Tax: A Guide for US Sellers"},"content":{"rendered":"

When a Certified Public Accountant (CPA) told me that US sales tax is one of the most complicated sales tax systems in the world, I wasn\u2019t surprised. US sales tax<\/a> is complex for a lot of reasons. Rules and laws vary from jurisdiction to jurisdiction, and no two sellers\u2019 sales tax life is the same. This post will attempt to demystify US sales tax by answering the top five US sales tax questions online sellers ask<\/strong>.<\/p>\n

Amazon Sales Tax (Top 5 FAQ)<\/h2>\n

1. Will the IRS audit me if I don\u2019t collect sales tax correctly?<\/h2>\n

We get this question from many new online sellers. They are accustomed to dealing with the Internal Revenue Service (IRS) when paying their own income tax. But the IRS<\/a> \u2013 which is a federal tax authority \u2013 doesn\u2019t have anything to do with US sales tax, because US sales tax is governed at the state level.<\/p>\n

Forty-five US states and Washington D.C. all have a sales tax, and each state makes its own rules and laws when it comes to governing sales tax. This is why sales tax rates are different, why sales tax due dates fall on different days of the month, and why a product (like clothing) may be taxable in one state, but non-taxable in another state.<\/p>\n

2. What products and services are taxable?<\/h2>\n

Traditionally in the US, most products are taxable, and most services are not. However, this is changing as the years pass.<\/p>\n

As an online seller, you likely only have to worry about the taxability of certain products. For example, clothing is completely non-taxable in Pennsylvania, and clothing under $110 is non-taxable in New York. But clothing is completely taxable in states like California, Texas and Washington. You can see a state-by-state map of clothing taxability in the US here<\/a>.<\/p>\n

The same rule is true for groceries. Groceries are taxable in some states, taxed at a lower rate in some states, and not taxable at all in other states. You can see a state-by-state map of grocery taxability in the US here<\/a>.<\/p>\n

Fortunately, if you sell on Amazon, you are in luck. Amazon\u2019s Product Tax Codes are a simple way to ensure that you collect the right amount of sales tax on all your products. Just be sure to enter the correct Product Tax Code in your Amazon sales tax settings and you\u2019ll collect the right amount of sales tax from your customers.<\/p>\n

3. From which customers do I need to collect sales tax?<\/h2>\n

In the US, retailers (and this designation includes online sellers) only have to collect sales tax from buyers I states where they have sales tax nexus. Each state sets their own rules and laws about what is considered nexus, but the following usually creates nexus:<\/p>\n

    \n
  • A location \u2013 including a home office, warehouse, store, or other physical place<\/li>\n
  • Personnel \u2013 including yourself, or an employee, contractor, salesperson, installer, etc.<\/li>\n
  • Inventory in a warehouse \u2013 having inventory for sales in a warehouse (such as an Amazon fulfillment center) creates sales tax nexus<\/li>\n
  • An affiliate \u2013 someone in a state who sends you online sales in exchange for a small percentage of the profits<\/li>\n
  • A dropshipping<\/a> relationship \u2013 a 3rd<\/sup> party vendor who ships products to your customers sometimes creates sales tax nexus<\/li>\n
  • Temporary sales \u2013 making sales at a tradeshow, craft fair, antique show or other temporary stop<\/li>\n<\/ul>\n

    You can find out what every state says creates sales tax nexus here<\/a>. If you do not have nexus in a state, no worries \u2013 you do not have to collect sales tax from buyers in that state. If you do have nexus in a state, your next step is to register for a sales tax permit with the state\u2019s taxing authority.<\/p>\n

    4. How do I collect sales tax?<\/h2>\n

    Once you have registered for your sales tax permit and have a sales tax number, your next step is to collect sales tax from your buyers. Fortunately, most online sales channels like Amazon, eBay and Etsy allow you to collect sales tax.<\/p>\n

    Since every online seller\u2019s sales tax liability is different, it\u2019s up to you to set up your online shopping cart or marketplace to collect sales tax on your behalf. You can find out how to set up sales tax collection on most major shopping carts and marketplaces here.<\/a><\/p>\n

    Here\u2019s a video tutorial on how to set up sales tax collection through Amazon Seller Central:<\/p>\n