The Amazon FBA SellerrsquosGuide to Sales Tax

reg

Spend Time On Your Business Not Sales Tax

Compiled by Jennifer Dunn of TaxJar 2018

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Copyright copy 2018 TaxJar wwwtaxjarcom2

Every filing period online sellers waste hours dealing with sales tax compliance

Getting sales tax right is necessary but it its far from fun And worse hellip

Sales tax is not profitable

You have better ways to spend your limited time and money than on an unprofitable hassle And since sales tax is governed by 46 different sets of state-level laws theres also no handbook to help Amazon FBA sellers figure out how to properly collect report and file sales tax mdash until now

In this Amazon FBA Sellerrsquos Guide to eCommerce Sales Tax youll find

1 A Sales Tax Overview 3

2 6 Steps to Sales Tax Compliance 5

3 Amazon Sales Tax Quick Start Guide 24

4 How to Automate Sales Tax with TaxJar 32

This eBook and our quick videos about sales tax will show you how to collect report and file sales tax on your online sales

Better yet wersquoll then show you how to never worry about sales tax Ever

Letrsquos get started

reg

Copyright copy 2018 TaxJar wwwtaxjarcom2

Every filing period online sellers waste hours dealing with sales tax compliance

Getting sales tax right is necessary but it its far from fun And worse hellip

Sales tax is not profitable

You have better ways to spend your limited time and money than on an unprofitable hassle And since sales tax is governed by 46 different sets of state-level laws theres also no handbook to help Amazon FBA sellers figure out how to properly collect report and file sales tax mdash until now

In this Amazon FBA Sellerrsquos Guide to eCommerce Sales Tax youll find

1 A Sales Tax Overview 3

2 6 Steps to Sales Tax Compliance 5

3 Amazon Sales Tax Quick Start Guide 24

4 How to Automate Sales Tax with TaxJar 32

This eBook and our quick videos about sales tax will show you how to collect report and file sales tax on your online sales

Better yet wersquoll then show you how to never worry about sales tax Ever

Letrsquos get started

reg

Copyright copy 2018 TaxJar wwwtaxjarcom3

What is sales tax

And why do Amazon FBA sellers need to deal with it anyway

The 45 US states plus Washington DC that have a sales tax

Forty-five US states and Washington DC all have a sales tax States and localities use sales tax to pay for budget items like schools roads and public safety Sales tax is a ldquoconsumption taxrdquo because itrsquos only charged when a buyer buys goods or services

And itrsquos a ldquopass-through taxrdquo because even though a merchant charges sales tax to her buyer she doesnrsquot get to keep it It ldquopasses throughrdquo because she remits it to the state government

Sales tax is governed at the state level which means each state gets to make its own rules and laws mdash within the framework of the US Constitution mdash when it comes to administering sales tax

What is sales tax

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Copyright copy 2018 TaxJar wwwtaxjarcom4

Some aspects of sales tax that can vary from state to state include

bull Which products and services are taxable

bull How much sales tax is charged

bull When and how often online sellers are required to file sales tax returns

bull Dates sales tax returns are due

The US states that have a local sales tax

Many states allow local areas to require a sales tax too

State-by-State Sales Tax Guides

Click the map below for detailed sales tax information about every US state

Key points to remember

① Sales tax is governed at the state level

② 45 states and Washington DC have a sales tax

③ Every statersquos sales tax laws and rules are different

SALES TAX FACT

You can easily remember the five states with no sales tax by their acronym NOMAD New Hampshire Oregon Montana Alaska and Delaware

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Copyright copy 2018 TaxJar wwwtaxjarcom5

6 steps to sales tax compliance

To get the full picture of sales tax for online sellers work through these steps or jump ahead if you have a specific question

❶ Determine where you have sales tax nexus and need to collect sales tax

❷ Verify if your products are subject to sales tax

❸ Get legal by registering for a sales tax permit

❹ Set up sales tax collection on Amazon FBA and your other online shopping carts and marketplaces

❺ Report how much sales tax you collected

❻ File your sales tax returns

Is your plate already full Yoursquoll also learn how to automate sales tax compliance with TaxJar

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Copyright copy 2018 TaxJar wwwtaxjarcom6

1 Determine where you have sales tax nexus

Find out from which customers you are required to collect

How to determine where you have sales tax nexus

In the US retailers are required to collect sales tax from buyers in states where they have ldquosales tax nexusrdquo The following business activities may create sales tax nexus

bull A location This includes an office warehouse store or other physical place of business

bull Personnel An individual who is an employee contractor salesperson installer or other person doing work for your business falls under personnel

bull Inventory Most states consider storing inventory in the state to cause nexus even if you have no other place of business or personnel

bull Affiliates Someone who advertises your products in exchange for a cut of the profits creates nexus in many states

bull Selling products at a tradeshow or other event Some states consider you to have nexus even if you only sell there temporarily

What is sales tax nexus

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Copyright copy 2018 TaxJar wwwtaxjarcom7

To determine if you have nexus ask yourself these questions

1 Do I have a location warehouse or other physical presence in a state

2 Do I have an employee contractor sales person installer or other person working for me in a state

3 Do I have products stored in a state (This is especially relevant to Amazon FBA sellers because Amazon stores your inventory in multiple states)

4 Do I have an affiliate program with affiliates in various states

5 Do I cross state lines to sell my products at a trade show craft fair or other event

If you answered yes to any of these questions explore whether you have nexus by doing one or all of the following

1 Find out about nexus by reading the states sales tax nexus laws

2 Contact the states taxing authority and ask for a nexus determination in writing

3 Contact a vetted sales tax expert

Q

If Yes

Nexus originates from a Latin word meaning to bind or to tie If you have sales tax nexus think of your business as having a tie to the state

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Copyright copy 2018 TaxJar wwwtaxjarcom8

An important note on Amazon FBA and nexus

Most state sales tax laws state that storing inventory in a warehouse in the state creates sales tax nexus For Amazon sellers this means that your Amazon inventory stored in various fulfillment centers around the country can create sales tax nexus for your business For more on sales tax nexus laws you can read what creates sales tax nexus in every state

Find out where selling on FBA potentially gives you sales tax nexus by simply logging into your TaxJar account All you need to do is be sure yoursquove connected your Amazon Seller Central account to TaxJar (Learn how to do that in our Amazon FBA Quick Start Guide below)

From there go to Account gt State Settings Yoursquoll see a brown Amazon badge next to the Amazon warehouse states from where your inventory has shipped

If yoursquore not a current TaxJar customer itrsquos easy to set up a 30-day free trial (no credit card required)

Once yoursquove authenticated your Amazon account wersquoll show you from where yoursquore Amazon inventory is shipping

Also keep in mind that because sales tax laws vary from state to state there are exceptions to the rule For example

bull New York does not consider fulfillment services like those provided by Amazon to create sales tax nexus

bull South Carolina has interpreted their sales tax laws to state that Amazon and not Amazon 3rd party sellers is responsible for sales tax collection in the state

bull Washington considers inventory in an Amazon fulfillment center to create nexus for Amazon FBA and Merchant Fulfilled (MF) sellers but has passed a law stating that Amazon is required to collect sales tax on your behalf (Read more about this in ldquoReport how much sales tax you collectedrdquo section below)

Key points to remember

① Collect sales tax from ALL buyers in states where you have sales tax nexus

② Nexus is slightly different in every state so check with the state or a sales tax expert if you are not sure whether you have nexus

Herersquos an example ldquoinventory nexusrdquo law language from the state of Maryland ldquopermanently or temporarily maintaining occupying or using any office sales or sample room or distribution storage warehouse or other place for the sale of tangible personal property or a taxable service directly or indirectly through an agent or subsidiaryrdquo (Source)

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Copyright copy 2018 TaxJar wwwtaxjarcom9

2 Verify if your products are taxable

What products are taxable

In the US most ldquotangible personal propertyrdquo is taxable In other words most items like furniture jewelry toothbrushes coffee mugs etc will be subject to sales tax

However some items considered to be ldquonecessitiesrdquo may not be taxable in all states Here are a few examples

1 Grocery items are not taxable in many states though prepared food bought at a restaurant generally is

2 Clothing is not taxable in some states though luxury clothing is often taxable even in states where most clothing is considered non-taxable

Herersquos a list of common item types that may not be taxable in some states

1 Grocery food

2 Clothing

3 Certain books (textbooks religious books etc)

4 Prescription and nonprescription medicine

5 Supplements

6 Magazines and subscriptions

7 Digital products (books music movies etc)

What Products are Taxable

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Copyright copy 2018 TaxJar wwwtaxjarcom10

PRODUCT TAXABILITY IS NOT ALWAYS ldquoALL OR NOTHINGrdquo

For instance in New York only clothing priced at $110 or under is exempt from state sales tax However clothing may not be exempt from local sales tax In Illinois grocery items are taxable but they are only taxable at a reduced rate of 1 You can read more about product taxability here

Map of states where groceries are taxable and non-taxable

This is not a complete list so keep in mind that some states may exempt other types of items If you sell any of these items check with your state to determine if you should collect sales tax on your products

If the items you are selling are not taxable then you are not required to collect sales tax on those items

How to tax your products correctly with Amazon Product Tax Codes

Fortunately for Amazon FBA sellers an Amazon Pro Seller Account comes with a robust sales tax collection engine

Amazon has ldquoproduct tax codesrdquo (PTCs) that you can assign to your inventory to classify how sales tax should be collected Here are some example PTCs

For example if you are selling a religious book you can tag it with the product tax code ldquoA_BOOKS_RELIGrdquo and Amazon will know to refrain from charging sales tax in states where religious books are non-taxable

It is important to set product tax codes Failing to set product tax codes can mean that you end up charging sales tax on non-taxable products And if you do not set any tax codes Amazon will not charge sales tax on your behalf

meaning that you will be on the hook to pay uncollected sales tax out of your profits

You can read more about setting Amazon product tax codes here and see a step-by-step guide to setting them up in your Amazon account in our Amazon Sales Tax Quick Start Guide below

Example Amazon Product Tax Codes

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Copyright copy 2018 TaxJar wwwtaxjarcom11

Key points to remember

① An identical product may be taxable in one state and non-taxable in another state

② A product may not be taxable at the state level but may still be taxable at the local level

③ Be sure to set up your online shopping cart or marketplace to avoid collecting sales tax on non-taxable items How to do this varies by sales channel and you can find sales tax guides for the most common sales channels here

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Copyright copy 2018 TaxJar wwwtaxjarcom12

3 Register for a sales tax permit How to register for a sales tax permit

Now that you have determined you have sales tax nexus in a state and that the products you sell are taxable in that state your next step is to legally collect sales tax by registering for a state sales tax permit

Each statersquos taxing authority mdash usually called the [State] Department of Revenue mdash handles sales tax registration You can register for a sales tax permit yourself or hire a professional to register for your state sales tax permits for you

When filing online you will sometimes receive your sales tax permit number instantly or at least within 10 business days If you register on paper it may take 2-4 weeks to receive your sales tax permit

Donrsquot skip this step It is unlawful to collect sales tax from buyers without a valid sales tax permit While collecting sales tax without a valid permit may be an honest mistake on a sellerrsquos part some states view this as tax fraud and take it very seriously

How to Register for a Sales Tax Permit

This is where you begin the sales tax registration process for the state of California

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Copyright copy 2018 TaxJar wwwtaxjarcom13

Sales tax due dates

When are sales tax due dates

When Should I File My Sales Tax Return

When they send your sales tax permit the state will also assign you a sales tax filing frequency and due date

These filing frequencies are generally monthly quarterly or annually Be aware that some states have other filing frequencies like semi-annually or even twice-monthly for very large retailers You can see each statersquos general sales tax filing frequency here (States reserve the right to change this so always file and pay based on the due date the state assigns you)

Due dates will fall on a different day of the month depending on the state In most states sales tax is due by the 20th day of the month following the taxable period

However states reserve the right to set their own due dates Sometimes sales tax is due on the 15th of the month the last day of the month the 25th of the month or even on some other date High volume sellers may also be assigned a different sales tax filing due date

HAVE THIS INFORMATION HANDY WHEN REGISTERING FOR A SALES TAX PERMIT

bull Your personal contact info

bull Your business contact info

bull Social security number (SSN) or Federal Employer Identification Number (FEIN) also known as Employer Identification Number (EIN)

bull Business entity (sole-proprietor LLC S-Corp etc)

bull Your NAICS Code (Hint The NAICS code for online stores is 454110)

Individual states may ask for additional info

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Copyright copy 2018 TaxJar wwwtaxjarcom14

Heres an example of a sales tax filing scenario for an online seller

Jo has sales tax nexus in 3 states Georgia California and Maine

bull Her Georgia sales tax returns are due every month by the 20th

bull Her California sales tax returns are due every quarter on the final day of the month

bull Her Maine sales tax returns are due annually on the 15th day of the month

As you can see its tough to get into a rhythm when filing sales tax when the due dates and filing frequencies vary If its challenging to keep track of sales tax due dates TaxJar AutoFile will automatically file for you on time every time

Resale certificates

In most states your sales tax permit also serves as a resale certificate If you hold a valid sales tax permit with the state you can often buy items tax-free at retail as long as you intend to resell the items Each state is a little different when it comes to how you can use and accept a resale certificate as a retailer

bull Read our Resale Certificate FAQ

bull See resale certificate rules for each state

bull Has one of your buyers presented you with a resale certificate You can verify the authenticity of their resale certificate here

REMEMBER

In general the more sales tax a seller collects in a state the more often the state wants the seller to file a sales tax return Remember they use this money to pay for budget items like schools and roads Thus they want to pocket the sales tax sellers have collected as soon as they can EXAMPLE The monthly taxable period in Colorado is January 1-January 31st Your Colorado monthly sales tax return for January would be due by February 20th

PRO TIP

Some sellers have had success asking the state to allow them to file sales tax less often You can try this yourself by calling the statersquos taxing authority Find the best phone number to contact each statersquos sales tax department To avoid long hold times we recommend calling in non-quarterly months

Key points to remember

① Always register for a sales tax permit before you begin collecting sales tax

② States dont have the same sales tax filing frequency and due dates In fact some may have multiple filing frequency and due dates based on sales volume

③ Keep track of your sales tax filing frequency and due dates These will be assigned to you by the state

④ Your sales tax permit often also serves as a resale certificate that you can use to buy items tax-free if you intend to resell them Always follow each states individual rules for using a resale certificate

Get DIY instructions to register yourself Hire a sales tax pro to register for you

Ready to register for a state sales tax permit

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Copyright copy 2018 TaxJar wwwtaxjarcom15

4 Set up sales tax collection on your online shopping carts and marketplaces

Once you have your valid sales tax permit your next step is to begin collecting sales tax from your buyers

Each online shopping cart and marketplace allows you to set up sales tax collection We detail step-by-step instructions for setting up sales tax collection in our Amazon Sales Tax Quick Start Guide below If you sell on other online channels click here to view guides on how to set up sales tax collection on the other major shopping carts and marketplaces

Origin-based and destination-based sales tax collection

States generally require online sellers to collect sales tax in one of two ways

bull Origin-based sales tax collection

bull Destination-based sales tax collection

This concept is also commonly referred to as ldquosales tax sourcingrdquo

IMPORTANT TO NOTE

If your business has sales tax nexus in a state then you are required to collect sales tax from ALL buyers in that state on ALL your sales channels

Origin and Destination-Based Sales Tax Collection Explained

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Copyright copy 2018 TaxJar wwwtaxjarcom16

Origin-based sale tax collection Online sellers who are based in states with origin-based sales tax sourcing are required to collect sales tax at the sellerrsquos business location

If your business is based in an origin-based state like Texas you would determine the sales tax rate at your home warehouse store or other headquarters Then charge all your buyers in Texas that single sales tax rate

This type of sales tax collection is simple Yoursquore only required to know and charge a single sales tax rate to all buyers in the state

Destination-based sales tax collection Online sellers who are based in states with destination-based sales tax sourcing are required to charge the sales tax rate at the buyerrsquos ldquoship tordquo address

As a seller you are required to calculate and charge the state county city and other local sales tax rates where your buyer is located Most states have destination-based sales tax collection

Important note The above examples only apply when selling to buyers in a state where your business is based If you have nexus in a state for another reason mdash such as having employees there inventory stored there or attending a tradeshow there mdash then charging sales tax is different

In most cases mdash with the exception of California Arizona and New Mexico mdash if you are selling to a buyer outside the state where your business is based you would charge that buyer the sales tax rate at their ldquoship tordquo location

Read more about origin and destination-based sales tax collection

An example of how to collect origin-based sales tax

reg

Origin Sale in Texas

OPEN

IRVING

TX

ARCHER CITY

TOTAL RATE COLLECTED

Irving County100

State625 825Dallas MTA

100

The Irving sales tax rate should be applied

to this transaction

825

+ + =

An example of how to collect destination-based sales tax

reg

OPEN

STAMFORD

Destination Sale in New York

NY

BUFFALO

TOTAL RATE COLLECTED

Erie County475

State400

The Buffalo sales tax rate should be applied

to this transaction

875

875

+ =

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Copyright copy 2018 TaxJar wwwtaxjarcom17

Herersquos a map of the origin and destination-based sales tax states

Origin and destination based sales tax states

Shipping taxability

When do I charge sales tax on shipping

NOTE

In eCommerce the point of sale is generally your buyerrsquos ldquoship tordquo address ALWAYS follow sales tax rules and laws in the state where your buyer is located NEVER charge a customer another statersquos sales tax Example A seller has nexus in Florida and Texas That seller would never charge a Texas sales tax rate to a Florida customer

When do I charge sales tax on shipping

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Copyright copy 2018 TaxJar wwwtaxjarcom18

Do you charge your customers for shipping In some states shipping is considered a necessary part of an eCommerce transaction and the state requires that you charge sales tax on the amount you charged for shipping In other states shipping is considered a separate charge and is not considered taxable Every statersquos rules on shipping tax are slightly different

Shipping taxability example

Jo sells a coffee mug for $10 and charges $5 for shipping The total of the product price and shipping is $15 Since shipping is taxable in the state where Jo is shipping the product she charges 5 sales tax on that $15 total This equals 75 sales tax So the total price the customer pays would be $1575

But now Jo is selling the same items for the same price but she is not required to collect sales tax on the shipping charges She only charges the 5 sales tax on the $10 price of the mug So the total price of the mug is $1050 ($10 + 5 sales tax) She then adds the $5 shipping charge The total amount the customer pays is $1550

Fortunately when setting up sales tax collection on your sales channels most channels allow you to indicate whether you want to charge sales tax on shipping charges

$1000 + $500 = $1500 x 5 sales tax = $1575

$1000 x 5 sales tax = $1050 + $500 = $1550

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Copyright copy 2018 TaxJar wwwtaxjarcom19

Herersquos a list of states where shipping is considered taxable and non-taxable

Is shipping taxable in your state Find out here

Collecting sales tax when drop shipping

Drop shipping and sales taxDrop shipping mdash where you have your vendor ship an item directly to your customer mdash can be a lucrative business model However it can create complications when it comes to collection sales tax

Drop shipping exampleYou sell phone cases through your Amazon FBA store but use a third-party printing company to print your design on the cases and ship them to your customer

In this example three things are happening

1 Your customer buys the item from you through Amazon

2 You buy the item from your vendor

3 Your vendor ships the item to your customer

In this case if your vendor has nexus in your state theyrsquoll be required to charge you sales tax on that purchase Unless you present them with a resale certificate stating that the item you bought from them is for resale And if your customer is in a state where you have nexus then yoursquoll be required to charge sales tax to your customer

Drop shipping can get complicated It depends on where the three parties mdash you your vendor and your customer mdash are located and have sales tax nexus You may be required to charge sales tax to your customer and your vendor may charge sales tax to you

You can read more about drop shipping and sales tax This post walks you through several scenarios to help you determine who charges sales tax It will also explain how to use a resale certificate to buy items for resale without paying sales tax to your vendor

DO YOU OFFER GIFT WRAPPING

In some states gift wrapping is also considered taxable Platforms like Amazon FBA allow you to choose whether to tax gift wrapping You can see a list of states where gift wrapping is taxable here

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Copyright copy 2018 TaxJar wwwtaxjarcom20

Other sales tax collection solutions

As an Amazon seller chances are you donrsquot limit yourself to selling solely on Amazon If you have built your own shopping cart or marketplace you will need a sales tax collection solution at checkout The TaxJar SmartCalcs sales tax API allows you to collect sales tax at the correct rate from buyers in your nexus states set shipping and product taxability and automate sales tax reporting and filing

Itrsquos easy to use and developer-friendly You can be up and running with TaxJar SmartCalcs in minutes

Key points to remember

① Set up sales tax collection on Amazon and all your other online shopping carts and marketplaces

② Though some states have ldquoorigin-basedrdquo sales tax collection you will mdash for the most part mdash collect the sales tax at the rate at your buyerrsquos ldquoship tordquo address

③ Shipping charges are taxable in some states Be sure to indicate whether you want to charge sales tax on shipping when you set up sales tax collection

④ Drop shipping relationships are some of the most complicated in sales tax Yoursquoll need to work with your drop shipping vendor to determine who is responsible for collecting sales tax

⑤ You can look up sales tax rates using TaxJarrsquos Sales Tax Rate Calculator

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Copyright copy 2018 TaxJar wwwtaxjarcom21

5 Report how much sales tax you collected

Soon enough a sales tax filing due date will roll around When preparing to file a state sales tax return you need to determine how much sales tax you collected from buyers in not only the entire state but in each county city and other special taxing district

Why States rely on sales tax dollars to pay for infrastructure public safety and other budget items But they wonrsquot know to which city or other local area to allocate those funds unless you break down your transactions for them

In a small number of states like origin-based states or states that only have a single statewide sales tax rate filing sales tax isnrsquot very difficult But in most cases breaking all your transactions down manually is a time-consuming chore especially if you are a high-volume seller or you sell on multiple channels

Thatrsquos why we created TaxJar TaxJar connects with all the shopping carts and marketplaces where you sell slices and dices your data and then creates a return-ready sales tax report just the way the state wants to see it Learn more by trying a 30-day free trial at TaxJarcom

From here you can choose to file your sales tax returns manually or automate the process with TaxJar AutoFile

Find out more about simplifying your Amazon sales tax with TaxJar below in our Amazon Sales Tax Quick Start Guide

Key points to remember

① A handful of states like origin-based and single-rate states have an easy sales tax filing process

② Most states require that you break down sales tax by county city and other special taxing district

③ Sales tax can be automated

If yoursquore spending too much time filing sales tax returns use TaxJar to automate the process

This is just a small portion of California Schedule B And Schedule B is just one part of the multi-part California sales tax return

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Copyright copy 2018 TaxJar wwwtaxjarcom22

6 File your sales tax returns

Your next step is to file your sales tax returns with the state

Most states allow you to file sales tax online and some require it If you wish to file manually login at your statersquos taxing authority website to file

At TaxJar we recommend filing at least a few days early to avoid any problems with your filing and to deal with any state idiosyncrasies

For example while the sales tax due date in Florida is technically the 20th of the month after the taxable period Florida requires that a seller pays via electronic funds transfer (EFT) and that his payment hits their bank account by that date So to file ldquoon timerdquo in Florida the seller needs to know how much he owes and transmit his funds to the Florida Department of Revenue several days before the stated due date

Failing to file on time in Florida will result in a $50 fine plus interest on the outstanding amount of sales tax owed Other states have similar fines and require sellers to pay interest when filing late

When should I file my sales tax return

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Copyright copy 2018 TaxJar wwwtaxjarcom23

If a seller is accidentally late filing and receives a penalty then the seller can often contact the statersquos taxing authority and ask for a penalty waiver This generally only works the first time a seller is late However it may even depend on the mood of the customer service agent that day You can find here the list of phone numbers for every statersquos taxing authority (Even though we live and work in the digital age many states prefer that you call rather than ask for help online)

Here are two key things to remember when filing a sales tax return

bull File ldquozero returnsrdquo Do file a sales tax return every time you have a filing due even if you didnrsquot collect any sales tax over the taxable period States consider your sales tax filings to be a ldquocheck inrdquo If a seller fails to file the state could charge a penalty or even revoke the sellerrsquos sales tax license Be prepared to file sales tax returns by the due date every time

bull Donrsquot discount sales tax discounts About half the states with a sales tax allow on-time sales tax filers to keep a very small amount (usually 1-2) of the sales tax collected While this amount may be small itrsquos free money Here is a list of states with sales tax discounts

Key points to remember

① Always file zero returns ndash failing to do so will result in fines or even losing the sales tax permit

② Check and see if your state offers sales tax discounts Itrsquos free money

③ If yoursquod rather never look at a sales tax filing again automate sales tax filing with TaxJar AutoFile

Keep reading to find out how you can make your sales tax headache go away

LATE FILING

If you know you are going to need to file late some states allow you to request a last-minute filing extension But keep in mind that most donrsquot extend your time to pay sales tax A seller may still end up with fines and penalties even when granted a filing extension

States with sales tax discounts

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Copyright copy 2018 TaxJar wwwtaxjarcom24

Amazon Sales Tax Quick Start GuideThis guide will walk Amazon FBA sellers through everything you need to know to set up sales tax collection on Amazon and automate your sales tax reporting and filing with TaxJar Including

bull How to connect TaxJar to your Amazon account

bull How to set up sales tax collection in Amazon

bull Tax settings for FBA states [Chart]

How to connect TaxJar to your Amazon account

1 First Login to TaxJar If you donrsquot have a TaxJar account yet start here for a 30-day free TaxJar trial (No credit card required)

How to Connect TaxJar to your Amazon Account

2 When you login yoursquoll be asked to link a cart Click ldquoConnect with Amazonrdquo

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Copyright copy 2018 TaxJar wwwtaxjarcom25

3 Visit the Amazon ldquoUser Permissionsrdquo page (opens in a new window) Be sure to login to your Seller Central account if you arenrsquot already logged in From here it may be helpful to view both pages ndash your TaxJar page and the Amazon User Permissions page side by side

Yoursquoll arrive at a page titled ldquoConnect with Amazonrdquo that looks like this

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Copyright copy 2018 TaxJar wwwtaxjarcom26

5 Enter TaxJarrsquos developer credentials on this screen Yoursquoll find TaxJarrsquos developer credentials on the ldquoConnect with Amazonrdquo page in your TaxJar account Or just copy and paste them from here Developerrsquos Name TaxJar Developer Account Number 0019-7913-7366

6 Next read over and confirm the Amazon license agreement by selecting the box to the left noting that you understand the agreement then clicking ldquoNextrdquo

4 Once yoursquove logged into Amazon you will see one of two screens

a If you have never signed up for Amazon MWS yoursquoll see the sign up for MWS button Select that button and sign up for Amazon MWS then select ldquoI want to authorize a developer to access my Amazon Seller account with Amazon MWSrdquo

b If you are already signed up for Amazon MWS select the ldquoAuthorize a Developerrdquo button that appears at the bottom of the page when you scroll down your screen From here yoursquoll arrive at the ldquoAmazon Marketplace Web Service (Amazon MWS) authorization screen

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Copyright copy 2018 TaxJar wwwtaxjarcom27

7 To complete the connection enter your Seller ID and MWS Auth Token into TaxJar on the ldquoConnect with Amazonrdquo screen

Double check that you have not copied and pasted any additional spaces before and after the characters If there is an issue the field in TaxJar will turn red indicating that you should try again to copy and paste the characters Once you have copied and pasted your information in correctly the field will turn green indicating that everything is correct

8 Select ldquoSave amp Continuerdquo on the TaxJar instructions

9 On the next page fill out some additional information about your business including your business address filing frequency and contact information

Now your Amazon account is connected to TaxJar and yoursquore on your way to simple sales tax reporting and filing

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Copyright copy 2018 TaxJar wwwtaxjarcom28

How to set up sales tax collection in Amazon

Before you get started make sure you have all of the following

bull An Amazon Professional Seller account ndash Individual Accounts cannot use the Amazon tax service This guide includes information from Amazon on how to upgrade from an Individual Account to a Pro Account

bull The states in which you have nexus ndash You can find where Amazon stores your inventory by pulling your Inventory Event Detail report in Amazon or simply by checking Account gt States in your TaxJar account (Donrsquot have a TaxJar account Try a 30-day free TaxJar trial)

bull State registration numbers in each state you want to collect sales tax ndash This assumes you have registered your business in each state Remember that most states consider it to be unlawful to collect sales tax without a license If you still need to register find guidance here

HOW TO UPGRADE TO AN AMAZON PROFESSIONAL SELLER ACCOUNT

1 Go to your Amazon Seller Account

2 Under the Settings heading click the ldquoAccount Infordquo link

3 On the Seller Account Information page go to the Selling Plan section and click the ldquoModify Planrdquo button

4 On the next page click the ldquoUpgraderdquo button

5 Review the information on the next page and click the ldquoProceed to Upgraderdquo button to accept the terms and switch your plan

After clicking the ldquoProceed to Upgraderdquo button you will be returned to your Seller Account Information page and see a message indicating that the upgrade process has begun Your subscription to the new selling plan will begin immediately and additional links to Professional seller tools will appear on your Seller Account page Some billing features may take up to 30 minutes to become effective Once the upgrade process is completed you will no longer be charged the $099 closing fee on your orders You will instead be charged a monthly subscription fee of $3999 for your Professional selling plan

How to Set Up Amazon Sales Tax Collection

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Copyright copy 2018 TaxJar wwwtaxjarcom29

To set up sales tax collection first go to Seller Central and login to your account

Then click on ldquoSettingsrdquo and then click ldquoTax Settingsrdquo form the dropdown menu

reg

Copyright copy 2018 TaxJar wwwtaxjarcom30

You will notice three clickable options Below is a simple review of each option

Option 1 View Tax Calculation Methodology

This is recommended reading It explains how Amazonrsquos tax service actually works You canrsquot find this info anywhere else

Option 2 View Master Product Tax Codes and Rules

This is really helpful if you have questions about the taxability of the items in your inventory Amazon provides product tax codes (PTCs) that you can assign to your inventory that helps classify how sales tax should be collected (or not collected if the item is not taxable) Herersquos a screenshot of just the top of the list of PTCs

Letrsquos look at an example of how to use PTCs

As an example letrsquos take A_BOOKS_GEN

Herersquos what Amazon says about A_BOOKS_GEN

bull What is this code used for This code is intended to be used for books

bull What kinds of products are typically included Items typically included within this product tax code include books A book is defined as a set of printed sheets bound together

bull What kinds of products are typically excluded Items typically excluded from this tax product code are as follows Religious Books Newspapers Electronic Books

Note If you canrsquot see ldquoTax Settingsrdquo as an option to click then your Amazon Seller account is an individual account not a Professional Account

The first screen yoursquoll see in lsquoTax Settingsrsquo should look like the screenshot below

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Copyright copy 2018 TaxJar wwwtaxjarcom31

Using the same example if you sell newspapers on Amazon the most important thing to get out of the above you shouldnrsquot be using the A_BOOKS_GEN PTC Yoursquoll notice there are a bunch of options to help you better classify newspapers

The other really helpful thing to notice below the description of the tax code is the Product Taxability Rules This tells you if that PTC is taxable If it is yoursquoll see a ldquoTrdquo If itrsquos not taxable or exempt from sales tax yoursquoll see an ldquoErdquo for ldquoexemptrdquo Some tax codes may be exempt or taxable up until a certain price Thatrsquos also represented in the table

Yoursquoll notice the Product Taxability Rules give you taxability not only for the state but also for local jurisdictions (County City and District) Remember in certain states the sales tax rate may be a sum of several different taxes Even though you only see one sales tax rate being charged that rate could be the state the county the city and even a special district tax all added up into one

For the most part if the state considers something to be taxable then the local jurisdictions follow suit Rarely are there discrepancies between the state and a local tax jurisdiction on the taxability of an item though this does occur

Option 3 ViewEdit your Tax Collection and Shipping amp Handling and Gift Wrap Tax Obligations Settings

This is where all of the magic happens For you as an FBA seller this is the most important section of Tax Settings because this is where yoursquore telling Amazon when to collect sales tax

Before getting to the actual decision-making part of the process letrsquos go through numbers 1 through 4 at the top of the page in plain English

1 Choose your Product Tax Codes

Here you can either choose a default PTC (Amazon calls this ldquoseller definedrdquo) for all of your items by checking the box that says Use Default Product Tax Code or assign a PTC at what Amazon calls the ldquooffer levelrdquo (which means assigning PTCs for individual items) Amazon says ldquoyou can make an offer level PTC assignment through your listings feed or the Add a Product feature in Seller Centralrdquo

Note Amazon says items that donrsquot have either a default PTC or an offer level PTC will result in no sales tax collected

2 Specify your Tax Collection Obligations (States Counties Cities Districts)

Amazon gives you the option to collect sales tax at the state level all the way down to the local level You can collect no sales tax collect for both the state and all of the local jurisdictions or collect only part of the sales tax required Thatrsquos all up to you the seller to decide

One important thing that Amazon points out is that in order to use this option yoursquoll need a valid state registration number Without that number this option wonrsquot work

The biggest question FBA sellers ask is ldquoWhat should I collectrdquo Wersquoll cover that shortly

3 Specify a Custom Rate per State (Optional)

As you can probably tell from the title this means that you can choose to collect sales tax at a flat tax rate for a state instead of using usingrsquos Amazonrsquos tax settings for a state If you use a custom rate you are choosing not to use Amazonrsquos predetermined rates for state and local jurisdictions Your rate overrides everything

You should know that using the custom rate means that rate will apply to any item you sell thatrsquos taxable PTCrsquos that are by default exempt will still remain exempt

reg

Copyright copy 2018 TaxJar wwwtaxjarcom32

4 Choose Shipping amp Handling and Gift Wrap Tax Settings

Unfortunately for FBA sellers the states donrsquot agree if shipping handling or gift wrap charges that are separately stated on an invoice are taxable or not Some states say they are taxable some say theyrsquore not

Amazon allows you to decide if you want to tax shipping handling and gift wrap charges The gift wrap portion of this is related to the actual service of gift-wrapping not the paper that you wrap in item in

Herersquos the way it works if you choose to tax shipping handling or gift wrap then Amazon will charge sales tax at the same rate the item thatrsquos being shipped or handles is being taxed For example if the sales tax rate for the item yoursquore selling is 825 then the sales tax rate for shipping on that item will also be 825 If the item is not taxable then the shipping handling or gift wrap will not be taxed

Wersquove put together a handy chart to help you determine if you how to collect sales tax in each state Find each of your nexus states on the chart then choose the options based on whether you are an in-state seller (ie you are based in that state) or an out-of-state seller (ie you are not based in that state but have nexus due to factors such as having inventory stored in an Amazon fulfillment center) The chart will also provide guidance on whether to collect sales tax on shipping and gift wrapping in a given state

Tax Collection Tax Jurisdictions Custom Rate Shipping amp Handling Taxability Gift Wrap Taxability

Obligations

reg

Information provided by TaxJarPrepared by Mark Faggiano

State County City District State Registration Number Custom Rate () Taxable (if item is taxable) Nontaxable Taxable

(if item is taxable) Nontaxable

Ala

bam

a FBA living in state Enter your number

FBA living out-of-state Enter your number

Ari

zona

FBA living in state Enter your numberv

FBA living out-of-state Enter your number

Ark

ansa

s FBA living in state Enter your number

FBA living out-of-state Enter your number

State County City District State Registration Number Custom Rate () Taxable (if item is taxable) Nontaxable Taxable

(if item is taxable) Nontaxable

Calif

orni

a FBA living in state Enter your number

FBA living out-of-state Enter your number

Colo

rado FBA living in state Enter your number

FBA living out-of-state Enter your number

Conn

ecti

cut

FBA living in state Enter your number

FBA living out-of-state Enter your number

State County City District State Registration Number Custom Rate () Taxable (if item is taxable) Nontaxable Taxable

(if item is taxable) Nontaxable

DC

FBA living in state Enter your number

FBA living out-of-state Enter your number

Flor

ida FBA living in state Enter your number

FBA living out-of-state Enter your number

Geo

rgia FBA living in state Enter your number

FBA living out-of-state Enter your number

State County City District State Registration Number Custom Rate () Taxable (if item is taxable) Nontaxable Taxable

(if item is taxable) Nontaxable

Haw

aii FBA living in state Enter your number

FBA living out-of-state Enter your number

Idah

o FBA living in state Enter your number

FBA living out-of-state Enter your number

Illin

ois FBA living in state Enter your number

FBA living out-of-state Enter your number

State County City District State Registration Number Custom Rate () Taxable (if item is taxable) Nontaxable Taxable

(if item is taxable) Nontaxable

Indi

ana FBA living in state Enter your number

FBA living out-of-state Enter your number

Iow

a

FBA living in state Enter your number

FBA living out-of-state Enter your number

Kans

as

FBA living in state Enter your number

FBA living out-of-state Enter your number

State County City District State Registration Number Custom Rate () Taxable (if item is taxable) Nontaxable Taxable

(if item is taxable) Nontaxable

Kent

ucky FBA living in state Enter your number

FBA living out-of-state Enter your number

Loui

sian

a FBA living in state Enter your number

FBA living out-of-state Enter your number

Mai

ne

FBA living in state Enter your number

FBA living out-of-state Enter your number

State County City District State Registration Number Custom Rate () Taxable (if item is taxable) Nontaxable Taxable

(if item is taxable) Nontaxable

Mar

ylan

d FBA living in state Enter your number

FBA living out-of-state Enter your number

Mas

s FBA living in state Enter your number

FBA living out-of-state Enter your number

Mic

higa

n FBA living in state Enter your number

FBA living out-of-state Enter your number

State County City District State Registration Number Custom Rate () Taxable (if item is taxable) Nontaxable Taxable

(if item is taxable) Nontaxable

Min

neso

ta FBA living in state Enter your number

FBA living out-of-state Enter your number

Mis

siss

ippi FBA living in state Enter your number

FBA living out-of-state Enter your number

Mis

sour

i FBA living in state Enter your number

FBA living out-of-state Enter your number

State County City District State Registration Number Custom Rate () Taxable (if item is taxable) Nontaxable Taxable

(if item is taxable) Nontaxable

Neb

rask

a FBA living in state Enter your number

FBA living out-of-state Enter your number

Nev

ada FBA living in state Enter your number

FBA living out-of-state Enter your number

New

Jers

ey FBA living in state Enter your number

FBA living out-of-state Enter your number

State County City District State Registration Number Custom Rate () Taxable (if item is taxable) Nontaxable Taxable

(if item is taxable) Nontaxable

New

Mex

ico

FBA living in state Enter your number

FBA living out-of-state Enter your number

New

Yor

k FBA living in state Enter your number

FBA living out-of-state Enter your number

N C

arol

ina FBA living in state Enter your number

FBA living out-of-state Enter your number

State County City District State Registration Number Custom Rate () Taxable (if item is taxable) Nontaxable Taxable

(if item is taxable) Nontaxable

N D

akot

a FBA living in state Enter your number

FBA living out-of-state Enter your number

Ohi

o

FBA living in state Enter your number

FBA living out-of-state Enter your number

Okl

ahom

a FBA living in state Enter your number

FBA living out-of-state Enter your number

State County City District State Registration Number Custom Rate () Taxable (if item is taxable) Nontaxable Taxable

(if item is taxable) Nontaxable

Penn

FBA living in state Enter your number

FBA living out-of-state Enter your number

R Is

land FBA living in state Enter your number

FBA living out-of-state Enter your number

S C

arol

ina FBA living in state Enter your number

FBA living out-of-state Enter your number

State County City District State Registration Number Custom Rate () Taxable (if item is taxable) Nontaxable Taxable

(if item is taxable) Nontaxable

S D

akot

a FBA living in state Enter your number

FBA living out-of-state Enter your number

Ten

ness

ee FBA living in state Enter your number

FBA living out-of-state Enter your number

Texa

s FBA living in state Enter your number

FBA living out-of-state Enter your number

State County City District State Registration Number Custom Rate () Taxable (if item is taxable) Nontaxable Taxable

(if item is taxable) Nontaxable

Uta

h

FBA living in state Enter your number

FBA living out-of-state Enter your number

Verm

ont FBA living in state Enter your number

FBA living out-of-state Enter your number

Vir

gini

a FBA living in state Enter your number

FBA living out-of-state Enter your number

State County City District State Registration Number Custom Rate () Taxable (if item is taxable) Nontaxable Taxable

(if item is taxable) Nontaxable

Was

hing

ton FBA living in state Enter your number

FBA living out-of-state Enter your number

W V

irgi

nia FBA living in state Enter your number

FBA living out-of-state Enter your number

Wis

cons

in FBA living in state Enter your number

FBA living out-of-state Enter your number

Wyo

min

g FBA living in state Enter your number

FBA living out-of-state Enter your number

The state of Tennessee gives online sellers based outside of the state the option to either collect a 925 flat rate or collect sales tax at the rate of the buyerrsquos ship to address For our purposes TaxJar assumes that you collect sales tax at the rate of the buyerrsquos destination

Virginia and Maryland state that shipping is not taxable in many cases but shipping and handling when combined is taxable After consulting with sales tax experts we have decided to treat shipping charges for FBA sellers as non-taxable in these two states

How to Set Up Your Sales Tax Setting in Amazon Seller Central

Your comprehensive guide to Amazon sales tax settings Just choose the settings based on whether your business is based in-state or out-of-state

reg

Copyright copy 2018 TaxJar wwwtaxjarcom34

AUTOMATE SALES TAX WITH TAXJAR

We created TaxJar because sales tax is a time-consuming unprofitable hassle for online businesses

To join more than 10000 online businesses who are automating sales tax compliance with TaxJar just sign up for a 30-

day no-risk free trial at TaxJarcom

Once you sign up herersquos what you can expect

TaxJar Reports will create return-ready sales tax reports that you can file manually Itrsquos the ideal solution for hands-on business owners who want to file sales tax returns without spending hours crunching numbers

TaxJar AutoFile will take sales tax automation a step farther and automatically file your sales tax returns for you AutoFile fully automates sales tax returns so you can spend more time on the profitable aspects of your business and no time on sales tax

TaxJar Reports starts at just $19 per month for up to 1000 transactions TaxJar AutoFile is an additional fee per state sales tax filing

More InformationGet specific information about sales tax in your state

Need professional adviceChoose from our list of vetted sales tax experts who specialize in eCommerce businesses

reg

Copyright copy 2018 TaxJar wwwtaxjarcom34

AUTOMATE SALES TAX WITH TAXJAR

We created TaxJar because sales tax is a time-consuming unprofitable hassle for online businesses

To join more than 10000 online businesses who are automating sales tax compliance with TaxJar just sign up for a 30-

day no-risk free trial at TaxJarcom

Once you sign up herersquos what you can expect

TaxJar Reports will create return-ready sales tax reports that you can file manually Itrsquos the ideal solution for hands-on business owners who want to file sales tax returns without spending hours crunching numbers

TaxJar AutoFile will take sales tax automation a step farther and automatically file your sales tax returns for you AutoFile fully automates sales tax returns so you can spend more time on the profitable aspects of your business and no time on sales tax

TaxJar Reports starts at just $19 per month for up to 1000 transactions TaxJar AutoFile is an additional fee per state sales tax filing

More InformationGet specific information about sales tax in your state

Need professional adviceChoose from our list of vetted sales tax experts who specialize in eCommerce businesses

35

TRY TAXJARStart your 30-day free trial

Copyright copy 2018 TaxJar wwwtaxjarcom

Ready to take sales tax off your plate

About TaxJar

TaxJar was founded with a simple mission helping online sellers simplify the hassles of tracking and filing sales tax so they can focus on growing their businesses rather than dealing with compliance issues TaxJar is trusted

by more than 10000 online retailers to simplify the hassles of collecting reporting and filing sales tax

(No Credit Card Required)