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Selling Made Easier With the Amazon Tax Exemption Program (ATEP)

Michael Pignatelli
Last Updated on August 31, 2023

One of a business owner's top priorities is filing taxes. Since almost every sale or purchase comes with taxes (particularly sales tax), accounting for every single one can be a headache. Fortunately, if you're an Amazon seller, the ecommerce platform has got you covered.

Here's how Amazon made selling a lot easier with the Amazon Tax Exemption Program (ATEP).

What Is Sales Tax?

For most purchases you make, you'll notice there are additional costs included in the receipt. One of them is the sales tax, which is a percentage-based value-added tax attached to the purchase of goods and services. According to law, every sale must be taxed, which is why you must account for each item’s sales tax.

The buyer, specifically the end consumer, shoulders the sales tax. If you are a reseller purchasing the product, you'll have to charge your customer the sales tax levied by the government to pay your product's sales tax.

Since the end consumer should cover the sales tax, resellers usually have to ask for tax refunds since they have to pay it initially. However, if the seller has tax exemptions, they can forgo paying the sales tax until they sell the product.

Do You Have To Pay Tax on Amazon?

Yes, you do. Even if your purchases are made online, every sale must still be taxed according to law. The tax rate applicable for a given order is the combined state or local rate for the location to which the order was sent or fulfilled. In some states, the tax on sales is lower than in others.

Does Amazon Charge Sales Tax?

No, Amazon cannot charge sales tax; only the government is allowed to levy taxes on the sale of goods and services. However, Amazon can collect taxes for you through the Amazon Tax Exemption Program (ATEP).

What Does It Mean To Have Tax Exempt Status?

While all business owners are legally obliged to pay taxes, there are some individuals or organizations whom tax exemption applies to are the following:

  • Churches and religious bodies
  • Charitable or non-profit organizations
  • Political entities
  • Private foundations
  • Resellers
  • Veterans

Individuals or organizations who are granted tax exemptions are allowed to waive taxes for purchases, therefore saving them money. On the other hand, resellers are still required to pay the sales tax, but they can ask for refunds after selling their products.

If you're a reseller on Amazon, you can get sales tax exemptions through the ATEP.

What Is the Amazon Tax Exemption Program?

The Amazon Tax Exemption Program is Amazon's way of handling your sales taxes for you. Instead of having to pay and refund sales taxes individually, you can instead apply for tax exemptions, buy your products tax-free, and have the end consumer pay the sales tax directly to Amazon as part of the ATEP.

How Do You Enroll In ATEP?

Amazon sellers with an Amazon business account qualify for ATEP by default. By saving your tax settings through Amazon's Tax Exemption Wizard, you automatically enroll yourself in ATEP.

If you want to enroll as a buyer, however, you'll have to go through the whole process of getting your Amazon Tax Exemption Certificate. The Tax Exemption Wizard will walk you through the process.

Can I Opt Out of ATEP?

If for some reason, you feel like ATEP isn't for you, you can always choose to leave the program and organize your sales taxes on your own. The Amazon Tax Exemption Program is not mandatory, so you shouldn't feel pressured to leave the program if it doesn't work for you.

However, we do recommend you use ATEP since it comes with many benefits.

How Do Sellers Benefit From ATEP?

Collecting taxes can be tricky, not to mention crucial for every business. But with the creation of ATEP, Amazon and its business have had an easier time selling to their customers. Here are two ways Amazon sellers benefit from ATEP.

As a Buyer

In general, Amazon resellers get their products from another business, and when they make purchases, they have to pay sales taxes initially and then collect the sales tax from customers when the sale has been made.

By having tax exempt status through ATEP, you can make tax exempt purchases for your business. This means you don't not only save money by not paying the sales tax for your purchases for resale, but you can also save time by allowing Amazon to waive your sales taxes and collect it directly from the end consumer.

As a Seller

You can get a lot of headaches as a reseller since part of a reseller's job is to collect sales taxes from each sale. That's why, as a seller, ATEP saves you a lot of time and money by collecting these taxes for you. Now you can worry less about your taxes and focus more on selling your product.

If your customer also has tax exempt status, Amazon's tax exemption program will also handle the process for you, lessening the burden on your accounting.

What If Amazon Sellers Don't Follow Tax Policies?

As stressed, taxes are every business owner's legal obligation. If you don't pay your taxes— or if you pay them incorrectly—you could be looking at the suspension of your business or, worse, legal implications like going to jail.

In 2020 alone, around 593 people were sent to jail for tax-related crimes, like tax fraud or tax evasion. The same goes for Amazon sellers. Even if ecommerce sellers don’t have brick-and-mortar businesses, the same tax laws apply depending on your location. So as a business owner, you should be wary of such violations since they could mean the end of your business.

Manage Your Taxes With Unloop

Having trouble with your taxes? You're not the only one. Organizing and filing taxes can be a nightmare, especially for ecommerce businesses. If you're thinking of outsourcing help for your taxes, then it's time you give Unloop a chance.
We offer bookkeeping, accounts payable, payroll, forecasting, and tax services. Book a call, and let's work out how Unloop can help you!

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228 Park Ave S #82849
New York, NY 10003
United States
7676 Woodbine Ave #2
Markham, ON L3R 2N2
About unloop

Unloop is the first and only accounting firm exclusively servicing ecommerce and inventory businesses in the US and Canada. With the power of people and technology, our team dives deep into COGS and inventory accounting. You are paired with a dedicated bookkeeping team that prepares accurate financial statements, financial forecasts, and can also pay bills or run payroll for you. Come tax time, everything is organized and ready to go, so you don't need to worry. Book a call with an ecommerce accountant today to learn more.