Sales tax is added to any taxable product. FBA Sales tax is no different, you collect it, you’re responsible and you have to pay it out to the government.
Alex Oxford founder of TaxValet – eliminates the hassle and stress of US sales tax for domestic and international companies.
A complicated mess!
It’s very different to other countries eg UK. Many sellers are used to a VAT system.
Sales tax is added to any taxable product.
You have to remit it in a specific state if you have sales tax nexus.
This is very different from VAT – you calculate it at the point it is due.
You collect it, you’re responsible and you have to pay it out to the government.
It gets particularly tricky if you have your own website.
An online company could still have sales tax implications for FBA Sales Tax.
It used to be based on physical presence in the USA but it’s no longer the case.
Just making sales in the USA could take responsibility for FBA Sales Tax.
If it goes wrong, you will have no money from the customers but you’ll owe the tax plus fines.
Wayfair vs. South Dakota 2018 Supreme Court Ruling.
South Dakota wanted to tax Wayfair (big retail company)
Wayfair claimed was unconstitutional. It worked up to Supreme Court and they made it legal.
Every state in the USA has since implemented economic nexus.
It’s usually based on threshold numbers, typically:
Practical answer – not really such an issue.
Technically – it depends on specifics!
New – coming into effect over last year or so.
If you’re selling exclusively on the marketplace, the mp is responding for collecting and remitting sales tax
It’s hard to get a straight answer from the State.
In theory in many states, you can just use marketplace facilitator laws
If you’re in the states where they have Marketplace Facilitator Laws, you COULD end up with issues.
Washington is a Marketplace Facilitator Laws has business and occupation tax (B&O tax)
About half of Marketplace Facilitator Laws states say don’t worry; half want something more.
If you reach out to the states and read statutes, they have not said that they have let sellers off.
Alex has hounded each state 20-30 times!
They wanted an officially signed letter or put it on the website.
This matters because if you’re only selling on a marketplace BUT if Amazon is giving the data to the state, the state COULD determine you had nexus in the state. And then penalise you for not submitting returns and not having a sales tax licence.
There are over 12,000 potential business taxes in the USA.
There are different definitions of what is taxable state to state.
Eg: one state might define diapers as only for kids; geriatric ones might be taxable.
Read this – you’re on the hook if something goes wrong.
CA, FL, TX, WA, IL
CA is a Marketplace Facilitator Laws state.
FL is NOT;
WA is – BUT they have ancillary tax
IL is not a Marketplace Facilitator Laws state yet but will be in early 2020
The single one you should worry most about is Washington State.
Figure out your exposure and liability.
If you’re just getting started, say you have FBA inventory in a state, let’s also say it’s not a Marketplace Facilitator Laws state, if it’s just $100/month, it would be such a burden, you might decide to
In the states where you have nexus, or own site, you need to get a sales tax permit for FBA Sales Tax.
That technically gives you the right to transact and also the responsibility to collect tax from customers and to remit that to the states
It DOESN’T happen automatically.
Amazon calculates and collects it and remits it in all Marketplace Facilitator Laws states.
If Amazon collects $100 in tax on your behalf; they will pay it the state.
But you’ll be paying $2 more to the state – Amazon is taking a percentage (around 2%) as their fee.
2-3 practical wins
To learn more about Tax from Alex Oxford, here are the other two episodes: