This was originally written as a response to a client but I figured it might prove useful to others. The topic of online sales state in the US, particularly when it comes to selling on marketplaces such as Amazon.com, is a rather murky topic. But believe it or not, its actually much clear today than it was when I first started selling on Amazon circa 2015.
Note: The following was written by a marketing agency to our client. We are neither attorneys nor accountants. This is not legal or financial advice. Please consult with an attorney and accountant about your specific circumstance. Hopefully the below discussion though will help you ask the right questions of your professional advisors.
Hi <<CLIENT NAME>>
Amazon is currently managing the sales and use tax for <<BUSINESS NAME>> (and all sellers) in almost every state, as it falls under the “Marketplace Facilitator Tax Collection” policy that came out of a Supreme Court ruling a couple of years ago. Basically that resulted in each state passing laws that require the marketplace (i.e. Amazon, Etsy, eBay) to collect and remit the sales tax instead of the seller on that marketplace. Prior to that, this whole thing was a real mess and a nightmare administratively.
So right now you should not actually owe anything to any states. Except that your account is set up to collect tax only on “service” for New York. I’m not sure why that is the case. The “services” potentially might be any shipping fees or gift wrap fees. In practice, that is not likely to be material for your account.
So what I am saying is that I don’t think you have any monetary liability here.
It is a bit of an unclear question though as to whether or not you need to file $0 returns. Basically some states say if your only liability
Its also unclear to the extent that having your inventory in an Amazon FBA center creates nexus for your business overall and thus a duty to collect/remit sales tax on your other non-Amazon orders in that state. I think most states say that it does not create physical nexus. However, most states have recently passed “economic nexus” as part of their marketplace facilitator laws saying that if you do more than 200 transactions or $100k in the state then you have nexus. Its unclear if that includes Amazon orders though or only non-Amazon – again, this can depend on the state.
So the whole thing is still a bit unclear legally. But generally speaking at least for the Amazon orders I don’t think you’ll have any actual monetary liability b/c Amazon collects and remits that for you. You might technically have to file $0 returns in some states just for the record keeping then I know there are many sellers who don’t bother with that and it seems there isn’t much of a penalty or issue with not filing $0 returns in this case. However if you have other sales tax from direct/website orders that you need to pay to that state then you would need to file and potentially might include your Amazon sales and then back out the taxes Amazon paid on your behalf.
Probably this didn’t clear much up and maybe only made it more murky but I hope it at least helped a bit! Here’s a nice guide with more info about sales tax and selling on Amazon if you want to read more on the topic.