Business Transformation

Do You Have to Pay Taxes on Amazon Sales?

Amazon is the largest online trading platform in the world. Dealing with it, a seller must get familiar with the law policy in the United States and the scope of taxes to pay. This article is about the charges that sellers should pay for selling their goods on the Amazon platform.

Organizational Authority of Amazon

Constitutionally, Amazon cannot impose taxes upon bargains. Only governmental institutions can do it. Amazon’s terms of reference include proceeding with the mechanism through which online transactions come through a passel of state tax jurisdiction. A seller should get the tax information for Amazon seller, which is arduous for Internet trades.

Online sales laws are different depending on the location. For instance, Colorado withdraws 2,9 percent sales tax, while the rate of charges in Illinois is 6.25 percent, not inclining the governmental city charges.

Terms of policies have been in a constantly updating process. In 2011, only five administrative areas paid taxes from Amazon sales. Within two years, the number of states that must pay taxes has increased to 23. Three years later, 28 states already paid Amazon taxes.

By 2017, four states enjoyed tax-free shopping on Amazon. For example, Hawaii and Alaska had city sales taxes excluding statewide taxes.

Hence, to get genuine information about the taxes on Amazon sales, a seller must consider the location and relevant laws in that state.

General Order of Amazon Taxes

Amazon sellers must provide the following types of information:

  • Geographical location of the enterprise
  • Tax collector and payment method
  • The method of money transfer

Sellers who have departments in several states must be aware of discrepant tax regulations for each jurisdiction. Collecting this information is time-devouring yet necessary. Some states have already implemented laws that relate to Amazon specifically. They include tax rates for sellers even without a physical presence in the current state.

Each Amazon seller must pay taxes on income. Except for the location, the tax rate also depends on legal business structure, whether the seller is sole or a company representative, etc. The frequency of taxes depends on the state and sales tax permit. Merchants prepare them every month, quarter, or once a year.

A seller can get tax information from Amazon or by contacting governmental institutions personally.

Detailed Order of Amazon Tax Collecting

Today, Amazon collects taxes from an overwhelming number of states via the Amazon fulfillment center (FBA). However, a few are free from sales tax collection.

Amazon has a precise tax collecting scheme. After placing an order to collect taxes, the system will withdraw the rate that matches origin-based and destination-based details. Also, it allows adding product tax codes for charging the needed rate of the tax on particular items, offering a choice to cover the tax on shipment and gift wrapping.

For each transaction, a seller must pay an additional 2.9 percent for sales tax collection. A merchant has a choice to cover taxes from Amazon customers or profits.

Sorting out tax issues from sales on Amazon is a complicating mechanism. A mistake will lead to a chain of problems. Therefore, many merchants use the services of third parties, so-called tax advisors, who control the order and timeliness of tax payments.

Summing Up

Regular tax payments and strict control under them reduces the chance to go the wrong path and receive additional penalties from the Internal Revenue Service. Possessing relevant information and covering taxes timely leads to the stability and growth of an enterprise.

In nearly all cases, Amazon provides tax information for your business personally. Also, you can order tax collection in the Seller Central with an intuitively understandable interface, choosing the needed options among the proposed ones and filling up the required form.

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Anna Papadopoulos
Vice President & Executive Editor. Anna Papadopoulos is the Vice President and Executive Editor of the CEOWORLD magazine. In that role she resumes responsibility for the CEOWORLD magazine newsroom, setting daily news priorities, and directing all of CEOWORLD magazine's news-gathering teams. Previously, Anna was the senior supervising editor of CEOWORLD magazine's International Desk. Follow her on Twitter, Facebook, Instagram, or connect on LinkedIn. Email her at AP@ceoworld.biz