Amazon collects sales tax on most of the items sold directly by their company, and now they are starting to collect taxes on items sold by third party sellers. This means you don’t need to remit sales tax in certain states- places like Amazon and eBay are doing it for you!
In this guide we’ll run down the major points, address common questions and help you change your settings, so Amazon collects the sales tax instead of you.
Where Amazon Collects Sales Tax for their products
Currently, here are all of the places Amazon collects sales tax for their own items:
DC- District of Columbia
NJ- New Jersey
NM- New Mexico
NY- New York
NC- North Carolina
ND- North Dakota
PR- Puerto Rico
RI- Rhode Island
SC- South Carolina
SD- South Dakota
WV- West Virginia
You can read more about that on Amazon’s website here. Keep in mind these are the states the marketplace collects their own sales tax for. This doesn’t include third party sellers.
eBay, Amazon, and Marketplace Sellers
In addition to the states listed above, Amazon has started collecting sales tax for third party members of their website.
Amazon and eBay collect tax for 3rd party sellers in Alabama. They began collecting January 1, 2019. You can read more about Alabama’s marketplace seller law here.
Starting December 1, 2018, CT required marketplace sellers to collect and remit taxes for the third party sellers using their platforms. Connecticut also has a PDF guide that breaks down the law and requirements to register in their state.
For added help, check out EcomTax’s YouTube channel. We’ve compiled all of the videos we could find, posted by the states themselves, on registering and sales tax help. Get your answers straight from the source!)
Just like Alabama, Iowa’s marketplace facilitator law became effective January 1, 2019. Iowa is also a member of the Streamlined Sales and Use Tax Agreement. You can register in multiple states all at the same time, or register for the states individually. Keep in mind, you may only have economic nexus in a few of the twenty plus states that are part of the Streamlined Sales and Use Tax Agreement, so be sure you research your particular needs carefully before making any official tax decisions.
On October 1, 2018 Minnesota added themselves to the list of states with economic nexus laws and marketplace facilitator laws. They go over their requirements providers on a single page here, and offer a FAQ page to help sellers navigate their specific tax reporting requirements.
NJ- New Jersey
New Jersey joined the list of states requiring Amazon and similar companies to collect sales tax on November 1, 2018. Their laws go over individual online seller requirements and the requirements for platform providing businesses.
One of the earliest to add themselves to the list, Oklahoma had these tax remittance requirements since July 1, 2018. If you want to know more, Oklahoma Department of Revenue has several links explaining their specific laws more. You can find PDFs on their response to the SD v Wayfair Supreme Court Case, help for marketplace sellers, and their release on requirements for out of state businesses.
The second state to require Amazon and eBay to collect was Pennsylvania. On April 4, 2018. In their law they out line marketplace facilitators must collect or comply with notice and reporting requirements. These notice requirements include sending customers information with their purchases detailing that use tax may be due on the items.
WA- Washington (state)
Also on the list for marketplace requirements is Washington state. They began requiring collection at the marketplace level back in January 1, 2018. Washington’s guide on their economic nexus law includes a chart to explain the specific the marketplace seller rules in their state.
What To Do Next
While it may be a sigh of relief to some sellers that they no longer have to collect and remit taxes in certain states, don’t forget you still have a part to play in all of this too.
Even though, Amazon, eBay, and places like it are required to collect and remit on your behalf there are still steps you need to take.
Step One: Nexus?
Determine if you have nexus. You can do this by adding up your sales in a state. Unfortunately, you can’t just use your Amazon sales. If you sell on multiple platforms, you have to add up your sales from all of your accounts.
We also offer solutions for remote sellers, like Amazon inventory tracking and nexus detection. No more adding up sales from three (or more) different websites and tracking them)
Step Two: Register.
Register in the states that you have nexus in. Amazon collects for you, yes. However, you still have to register and submit the proper documentation to the states. After you complete the registration process, then you can set it up to have Amazon and eBay take over the taxes for you.
Step Three: Set-Up
Amazon collects sales tax
To make it easier on yourself compile all of your information ahead of time, including your sales tax registration numbers.
Then simply log into your seller central account, and go to ‘settings’.
There will be a drop down menu where you click ‘tax settings’.
Select ‘view/edit your tax collection…’
Here you have to choose your product tax codes (this is very important, ensure you have correct tax codes for all of the merchandise that you sell)
Next, pick the states you need to collect in and provide your tax ID numbers for every state you wish to collect in.
After you’re done with that you can go through and select your rates, shipping, and gift wrap tax options.
Now, you’re all done, and Amazon will collect without worry. Remember, this collects only on Amazon so any other means of sales (personal websites and other marketplaces are not effected)
eBay collects sales tax
Sign into eBay and go to my eBay page. Then go to site preferences, this will be under the account tab.
Find the payment section and go to sales tax.
Once you click edit you will be able to chose your rate for sales tax collection.
Determine if you are going to charge taxes on shipping and handling as well.
Important factor to keep in mind about setting up eBay collections:
eBay will limit your to one sales tax rate per state.
You can look up local and state sales tax rates right on our website with our state sales tax calculator.
We’re also making our way through the states with our State Spotlight Series, providing a state by state guide to economic nexus laws and tax rates for every state.
Sales taxes still have you troubled? Sign up for EcomTax today and let us sort it out for you!
Please note: this blog is for informational purposes and should not to be considered, or used in place of, professional advice for your specific situation.