When selling through an Amazon FBA business model, it’s essential to stay up-to-date with the various rules and regulations of all US states to remain compliant.
To be compliant for selling on Amazon, you typically need a sales tax account in the state where your business is registered and any other states where you have a physical nexus.
Several factors can determine physical nexus:
- Business/Location Address
- Warehouse Location
- Employees residing in the state
- Participating in a trade show
In the blog below, we are focusing on the physical nexus created by having a warehouse location. It can be a grey area whether a business engaging in Amazon FBA needs to register for a sales tax account with a state where products are stored in an Amazon-owned warehouse, if they have no other physical presence in the state.
For example, does an LLC registered in South Carolina that sells through Amazon FBA need to register with Georgia if its products or inventory are stored in that state?
For most states, the answer is no. They would determine that your business does not have a physical nexus if your products are only stored in an Amazon warehouse, which your company doesn’t own or lease, so you would therefore not need to register for a sales tax account.
Things can be even more confusing in other states where the rules are unclear. RJM Tax Exemption has contacted all of these ‘grey area’ states where the rules are unclear to clarify them, so you don’t have to!
It is essential to remember that when applying for a sales tax account, filing returns is required regardless of sales volume or business activity. Although, as a marketplace facilitator, Amazon collects and remits sales tax on behalf of sellers using their platform, a sales tax return is still required if an account is open.
Some states simply request a zero filing if all sales are made through Amazon. Other states require the sales to be included as a gross figure, but with non-taxable deductions or as an exempt entry, as the tax has already been collected and remitted by Amazon. Notes on which type of filing each ‘grey area’ state requires are included below.
Connecticut, Louisiana, District of Columbia, Maine, Oklahoma, West Virginia
The above states require a sales tax account if your business stores products in an Amazon warehouse within the state.
They’ve said it should be a gross filing return with non-taxable deductions.
For Oklahoma, they’ve said you should register as a ‘remote seller.’ Helpfully, Connecticut allows you to indicate when applying that all sales are through a marketplace facilitator. This way, the filing frequency will be set to annual, so you don’t need to worry about frequent sales tax returns.
Georgia, Kentucky & New Jersey
Like the states previously mentioned, Georgia, Kentucky, and New Jersey require a sales tax account if your business stores products in an Amazon warehouse within the state.
However, they’ve all said the sales tax filing should just be a ‘zero’ filing, in other words, you can leave the sales figures as zero or tick a box to say no sales have taken place.
Pennsylvania, New Mexico & South Dakota
Interestingly, Pennsylvania, New Mexico, and South Dakota have stated that a business should wait until it reaches the state’s economic nexus threshold before registering.
All three states have stated that when the economic nexus is reached and a sales tax account has been opened, filing should be on a gross basis with non-taxable deductions.
Indiana
Indiana said no; a business wouldn’t need to register for a sales tax account if it stores goods in an Amazon warehouse in the state and has no other physical presence.
They said a remote seller is required to register with Indiana if it has sales that exceed $100,000 in the current or preceding year. However, this is only for sales transactions not made through a marketplace facilitator.
Texas & California
Like Indiana, Texas, and California, a business would not need to register for a sales tax account if it is storing goods in an Amazon-owned warehouse in the state and has no other physical presence.
However, both states would require a business to register for a franchise tax account. In California, this only applies if $58,000 worth of products is stored in the state. For Texas, there is no minimum threshold.
According to the Texas website, “You have franchise tax responsibility as a remote seller if you are a taxable entity and have temporarily stored inventory in a marketplace provider’s facility in Texas.”
Washington
For Washington, you’d be required to open a Business and Occupancy tax account. This is a gross receipts tax, measured on the value of products, gross proceeds of sale, or gross income of the business.
The B&O tax is reported and paid on the excise tax return or by electronic filing.
Contact RJM Tax Exemption
Here at RJM Tax Exemption, we offer a worry-free, hands-off service that applies to the sales tax accounts you need for your Amazon FBA business. We also provide a follow-up service to handle all sales tax returns.
If you have any questions or would like further information, please don’t hesitate to contact us.
