Hello dear FBA sellers,
If you are reading this blog, it means that you have already read the first part of it (we hope!), where we talked about the main aspects that you have to figure out in order to collect sales tax from a certain state where you run your FBA business. Today, we are going to continue our talk about FBA sales tax, and tell you the entire process of complying with sales tax regulation in states where Amazon keeps your inventory.
Well, let’s say you have determined that you have a nexus in a specific state, and your product is subjected for sales tax. In this case, you can confidently start working on the registration process in order to begin collecting sales tax from your sales.
Keep in mind that without getting a registration, you will not be able to collect sales taxes from your customers, since the IRS will consider it as an illegal act. Now, when you have implemented all the requirements and are ready to start collecting sales tax, you have to keep in mind that the frequency of filing sales tax directly depends on the volume of sold products.
How to Collect Sales Tax on Amazon
We have already mentioned that recently, Amazon has started to collect sales taxes on behalf of the sellers. All you need to do is to tell Amazon what you want to collect and Amazon will handle the entire process, including taxes for packaging and shipping. Bear in mind that Amazon will charge 2.9% from each transaction to collect sales tax.
How to Start Collecting Sales Tax on Amazon FBA
- First of all, go to your Seller Central backend
- Log into your Seller Account
- Go to the Tax Settings section
- Edit your tax collection settings
Here, you are provided with the option to choose the state in which you are going to collect sales tax. Keep in mind that you have to obtain your state sale tax registration number and only then you can start collecting sales taxes from your customers.
How to Set Up Product Tax Codes on Amazon FBA
- Again, go to your Tax Settings section on Seller Central
- Then, choose the option “View Product Tax Codes and Rules”
- Here, you should choose the product tax code which suits you more
- And that’s it!
How to Report and File Amazon FBA Sales Tax
From now on, you have to report the exact amount of sales tax that you have collected from the buyers in each state by filing your sales tax return.
Generally, most states want you to provide not only the exact amount of sales tax that you have collected in their states, but also how much sales tax you have collected from your customers in each county or city.
After reporting the exact amount of sales tax collected by you in a certain state, you can confidently start working on filing your tax returns. As a rule, there are two main ways of filing tax returns:
Keep in mind that you have to file your sales tax in those states where you have an active sales tax permit. Additionally, you have to file a sales tax return in spite of the fact that you have not charged sales tax during the taxable period. So, try to make sure that you file your tax return in due time, otherwise you risk getting fees for delays.
The process of collecting FBA sales tax is quite simple: all you need to do is to ensure that you are doing everything in accordance with both Amazon and the IRS requirements.
Running a business under the FBA business model may turn to become a profitable business which will drastically improve your financial status. Want to know how to launch an FBA business model and succeed in it? Then contact Jerome Basilio’s team and we will do nothing but our best in order to help you build the business of your dreams!