The challenge of tracking sales tax for online purchases is highly controversial and ridiculously complicated. New legislation requires online sellers on Amazon, eBay, Etsy and other similar platforms for remote sales to collect sales tax at the time of each transaction.
Are you an online seller who finds state sales tax issues and Nexus Laws to be a nightmare? Amazon now has at least 80 Amazon warehouses among the 50 states in the US. Every state is different. Some states don’t have sales tax at all and those who do have different rates. Yet third party sellers are expected to track related sales tax data for each transaction to all of these states?
For Amazon sellers, this article was recently updated at the Tax Jar Blog to sort out the tax issue for sellers. In particular, the question “Now that Amazon collects taxes from buyers in my state, is there no longer a need for a seller to collect?” Tax Jar says NO.
CPAs tend to avoid online sales because of the lack of consistent laws across the board. The government has yet to pass legislation that creates uniform laws regarding online sales. Makes it pretty tricky, even for CPAs and licensed tax consultants.
Apparently this law would standardize the whole sales tax/nexus issue rather than have the differing laws and rates in each state like we have now. The Act passed the Senate in May, 2013 and is still being battled in the House. If passed, the Marketplace Fairness Act will require all remote sellers (online and catalog retailers) to collect sales tax at the time of each transaction – the same way local retailers are already required by law to do.
Online sellers disagree as to whether they should be required to remit sales tax and even about what the definition of “nexus” means. Some sellers adamantly insist that they will not pay this sales tax unless/until the “Marketplace Fairness Act” is passed into federal law.
However some states have existing laws on the books already that they are using to cover this online sales tax issue. If new sellers become swayed by the controversy and refuse to comply, it is possible they could find themselves owing years worth of sales tax later.
Risky. No one knows exactly how sales tax compliance issues might fall out in the end with 100% certainty. While heated discussion among sellers is plentiful on forums and on social media, those sellers who put faith in having an ‘out’ could get caught up short.
Facing the challenge of arranging tax settings with Amazon can be overwhelming. Finding a CPA who understands this requirement is not easy, nor inexpensive. Still it is recommended that sellers discuss whether or not they need to collect/remit sales tax with a tax professional.
Signing up with Amazon to collect sales tax.
Not sure Amazon is the best route since many experienced sellers say that Seller Central will not help you with sales tax at all. I repeatedly hear they don’t know what they’re doing and do not want the liability. Amazon does offer seller resources such as: ‘How Amazon Tax Collection Resources Work’ and ‘Product Tax Codes’.
Sellers can also enroll in the Amazon Tax Exempt Program (ATEP) where “In order to comply with state and local tax laws, we require that you submit the specific tax exemption document(s) for each applicable state, when claiming sales tax exemption.”
EACH state? What? And ‘each applicable state’ meaning each state where a seller’s products might be housed in an Amazon warehouse. That involves movement of products among some 80 warehouses all over the US, a process 100% under Amazon’s control.
Most sellers will protect businesses from risk by using a paid service and/or getting consultation from a licensed CPA or tax attorney. We all prefer keeping business overhead low, however avoidance of legal and financial expectations run the risk of ruining a small business.
Jessica Larrew is my favorite ‘go to person’ for learning about FBA sales. I follow her advice on many topics and she has been a reliable ‘safety net’ for many tough issues. She agrees this is not her favorite topic, but offers good resources for the FBA sales tax dilemma.
Are you complying with these laws already or do you intend to do so? Or do you refuse to deal with it unless it becomes federally mandated?
See another related article about Amazon and Nexus laws and why Amazon dumped many thousands of their own affiliates rather than deal with the sales tax issue. There’s also a more in depth discussion there about ‘Nexus’ and the origins of these sales tax issues for online sales.
How will these new requirements for sales tax effect your business? Got any new grey hairs over it yet?
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