How to Calculate Amazon Sales Tax
If you are a seller on Amazon, it is vital to understand the calculation of Amazon sales tax with all deductions included in it.
The only difference lies in the process. However, Amazon's FBA tax calculation for sellers is found to be more complicated than other retailers.
Here are the details to understand the sales tax levied by Amazon in a better way:
Amazon FBA Sales Tax: Definition, How to Register for a Sales Tax Permit & Important Factors
Amazon can only collect sales tax from customers in the United States, which has a sales tax nexus.
Sales tax nexus forms a vital nexus for every state. Instead of differing laws for every state, key factors include “nexus” in each state. Here is the list:
- Location
- Home state
- Inventory
- Personnel
- Third-party affiliate
- Generating sales temporarily
As an Amazon FBA seller, you have a sales tax nexus in every state where your items are stocked for resale. However, Virginia is an exception.
How to Register for a Sales Tax Permit
The first and foremost step is to register for a sales tax permit with the respective state.
One must not avoid this step as it can be considered an unlawful activity by the state. So, it’s significant to have your registered name.
Apart from this, you must also be a registered candidate for a sales tax permit before collecting sales on Amazon. You can efficiently complete it with the help of Seller Central.
After getting your sales tax permit, you get the due date for sales tax and filing frequency schedule in the next step.
As per the sales volume, taxes can be filed by you monthly or quarterly, or yearly.
The vital point to remember is that you will have to file your taxes more frequently if you generate higher sales in a specific state.
To collect your sales tax, first, you need to be registered with the state. The necessary steps required are:
- Collect necessary information like EIN (Employer Identification Number) and other business details.
- Check for a section called “Sales & Use Tax.” On State’s Revenue Department website
- Register business using the proper link.
Important Points to Consider
If your product is in low quantities, collection of sales tax is not compulsory for you.
- Sales tax increases with time.
- If your state isn’t a part of the FBA Amnesty, you can receive a bill with a clear history of tax payments after you register.
- If you have high amounts of tax that are unpaid, you might be accountable to penalties. At times, it can be very severe and troublesome.
- Suppose you haven’t registered yourself and unexpectedly experience some high sales for your product. In that case, it might be good to fill a VDA (Voluntary Disclosure Agreement) before registering, as this will prevent you from paying heavy back tax, interests, and penalties.
Here are the steps to download a detailed report from Amazon to know the amount of sales tax.
1. Log in to your Amazon Seller Central account.
2. Select the option “Seller Central” and click “Reports.”
3. Select “Payments” under ‘Reports’
4. Click “Generate Date Range Report.”
5. After that, choose your filing period.
Following the above steps, you can calculate manually the tax amount accumulated by you in a specific region.
Apart from this, it can also use Amazon seller tax software to execute all the work for you in minutes.
Learn More: Amazon FBA Fees-a Complete Guide
