If there’s one thing that’s needless complex when selling on the Amazon US marketplace, it’s having to manage sales tax from up to 45 states plus the District of Columbia. Now that we’re comfortably post-Supreme-Court/Wayfair, we’re starting to see states take a more proactive and sane stance on how sales tax should be collected for online sales.
In the case of Amazon, the number of states that require the marketplace facilitator (we’ll use MP for short) to collect and remit is growing. As of the day I write this, 15 states actively put the burden on the MP, and eight more are about to join the ranks. As of July 1st, that number will climb to 23.
What does this even mean? Requiring the MP to collect and remit sales tax means we as sellers are no longer directly required to collect taxes ourselves (through disbursements from Amazon) and remit the taxes to the states from our own bank accounts. We’re still responsible for filing tax returns, though it’ll be a trivial process.
Previously (and this is still true for all the other states), we mark our listings with the proper tax code and Amazon collects the sales tax. The tax is transfered to us and we hold onto it until it’s time to file and pay.
For states where the MP is doing all the work, we “simply” have to report our gross sales, gross taxable sales, and sales where tax was collected and remitted by an MP. If everything went according to plan (and not considering any other sources of income, late fees, etc.), the return to end up zeroing out and the tax due from the seller will be zero.
While the number of returns we have to file hasn’t changed, how much we’re financially responsible for is lower.
The states that are changing over to the MP format (and links to their relevant information about sales tax) are:
- Arkansas: https://www.dfa.arkansas.gov/excise-tax/sales-and-use-tax/arkansas-remote-seller-frequently-asked-questions-faqs
- Indiana: https://www.in.gov/dor/3325.htm
- Kentucky: https://revenue.ky.gov/News/Publications/Sales%20Tax%20Newsletters/Sales%20Tax%20Facts-June%202019%20(8pt).pdf
- New Mexico: http://realfile.tax.newmexico.gov/FYI-105%20-%20Gross%20Receipts%20&%20Compensating%20Taxes%20-%20An%20Overview.pdf
- Rhode Island: http://www.tax.ri.gov/Advisory/ADV_2019_11.pdf
- Virginia: https://www.tax.virginia.gov/remote-sellers-marketplace-facilitators-economic-nexus
- West Virginia: https://tax.wv.gov/Business/SalesAndUseTax/Ecommerce/MarketplaceFacilitators/Pages/MarketplaceFacilitators.aspx
- Wyoming: https://www.wyoleg.gov/Legislation/2019/HB0069
The rest of our sales tax obligation is still in play. Services like TaxCloud (my favorite), TaxJar (good if you want to do literally zero work), and Avalara (they’re working on something killer to blend the two), are all great options.
Other states are on tap to change over, as well:
- Arizona: October 1, 2019
- California: October 1, 2019
- Colorado: October 1, 2019
- Georgia: January 1, 2020
- Hawaii: January 1, 2020
- Kansas: July 1, 2020
- Maine: October 1, 2019
- Massachusetts: TBD – they have something in play, but nothing final. (see SD 1701 and SD 2030)
- Missouri: January 1, 2020
- North Carolina: September 1, 2019
- Texas: October 1, 2019
As more states come on board, the number of states where we as sellers have to pay taxes ourselves will decrease. I envision a world where all 45 states + D.C. will be on board with this by the end of 2022. There only thing we’ll have to do is submit returns with numbrs on them and be done with it. Combining that with SST, sales tax handling is getting easier and that’s certainly welcome.Last Updated: February, 7th, 2021 at 07:19 pm UTC