How to collect sales tax on Amazon? In most states, Amazon now collects sales tax on behalf of sellers through Fulfillment by Amazon (FBA).
The following information applies to states that do not require Amazon to collect sales tax on behalf of sellers.
Now that you are registered to collect taxes, the next step is to make sure you are collecting taxes from Amazon FBA customers. Fortunately, Amazon has a very powerful sales tax collection engine.
After telling you what tax to collect, it collects the correct tax rate and even keeps up with complex sales tax concepts, like whether the state is “source-based” or “destination-based,” or whether the sales tax Have the tax rates changed?
It also allows you to add a “Product Tax Code” to charge the appropriate sales tax on items such as groceries and clothing, and allows you to choose whether to charge sales tax on shipping and gift wrapping.
Remember, Amazon charges 2.9% of each transaction for sales tax.
For example, if the price is $100, the customer needs to be charged 10% sales tax, which is $10. Amazon will charge an additional fee of $0.29. You can view transaction details to verify.
However, the alternative is not to charge sales tax to your Amazon customers, but to use your profits to pay sales tax.
For example, if the selling price is set at $110, no sales tax is charged, and the sales tax rate is 10%, you must pay $11 in sales tax out of the $110 you receive.
01. Set up sales tax collection on Amazon FBA
Let’s take a look at how to set up sales tax in Seller Sales Center:
Log in to Seller Center.
Click Settings from the drop-down menu and then click Tax Settings
Select the option: “View/edit your tax collection, shipping and processing, and Giftwrap tax obligation settings”
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Here you can choose which states to collect sales tax and whether to collect sales tax in other places such as counties. You can even enter a custom sales tax rate. We don’t recommend you do this because sales tax rates change frequently.
Please note that before Amazon allows you to set up sales tax collection, you will need a state sales tax registration number.
This is a protective measure to prevent sellers from unknowingly (and illegally) charging sales tax without state registration.
02. Set product tax codes on Amazon FBA
After entering the sales tax settings, return to the sales center tax settings page (Sales Center > Settings > Tax), and then select “View main product tax codes and rules ” option.
From here, you can choose the product tax code that best suits your product.