tax season made me realize i have no idea what im supposed to be doing with sales tax as an amazon seller. do i need to register in every state?? i keep seeing “marketplace facilitator” thrown around. someone untangle this for a non-accountant please
Big disclaimer up top: I’m a seller, not a CPA, talk to a real tax pro for YOUR situation. That said, the general lay of the land that surprises new sellers:
- Marketplace Facilitator laws: in essentially all US states with sales tax, Amazon (the “marketplace facilitator”) is required to CALCULATE, COLLECT and REMIT sales tax on your marketplace sales for you. So you largely are NOT hand-remitting sales tax on your Amazon orders state by state. This is the part that relieves a lot of the panic.
- Nexus / registration: you may still have registration or filing obligations in your home state, or where you hold inventory, even if Amazon collects. FBA stashing your stock in multiple states is the classic nexus complication.
- Income tax: separate thing entirely. Your profit is income. The 1099-K you get from Amazon reports gross sales - that’s not your taxable profit, it’s the top-line number, and you deduct costs against it.
Net: Amazon handling the sales-tax collection removed the worst headache, but it did NOT remove your need to file income taxes properly and possibly register in a state or two. Get a CPA who knows ecommerce - cheapest money you’ll spend.
the 1099-K freakout is so common. people see a big gross number and think they owe tax on all of it. no - thats revenue, not profit. your COGS, fees, ads, shipping all come off before you get to taxable income. keep clean books all year and it’s a non event. dont keep books and april is a nightmare.
And get a resale certificate / sales tax permit in your home state if you’re buying wholesale - you generally need it to buy for resale without paying sales tax to YOUR suppliers, and suppliers will ask for it. That’s a separate reason to be registered beyond the remittance question.
Worth flagging for anyone going international off the back of this: the US marketplace-facilitator convenience does NOT carry over abroad. The EU/UK VAT world is a different animal where you really can end up registering and filing yourself. So don’t assume “Amazon handles my tax” once you cross a border. Domestic US, mostly handled; international, do your homework.
ok this is a huge relief and also a good kick to actually get a bookkeeper. amazon collecting the sales tax is one less thing. profit vs gross finally makes sense too. thank you all