Disclaimer: Please note this article is not financial advice. The purpose of our blog is purely educational, so please consult a professional accountant or financial advisor before making any financial decision.
Amazon has made it easier than ever for business owners to sell their products. Selling your goods on Amazon is a great way to increase revenue and reach new customers.
However, with this convenience comes tax responsibilities. Thus, it is best to remain compliant with state sales tax laws or else risk steep penalties.
As an Amazon seller, you know that tax compliance can be tricky. With so many different state laws on the matter, it is easy to make a mistake.
Let us help you ensure your business stays compliant with Amazon-specific requirements. In this blog post, we will discuss seven important reminders on Amazon seller sales tax collection.
- Familiarize yourself with Canadian sales tax rates.
- US tax rates should also be on your radar.
- Understand the Marketplace Facilitator legislation.
- Tax exemption also works on Amazon.
- Utilize Amazon’s Tax Collection Service.
There are no shortcuts to taxation. You need to learn the basics of Canadian sales tax rates and even know how to compute them.
Canada has General Sales Tax (GST), Provincial Sales Tax (PST), Harmonized Sales Tax (HST), and Quebec Sales Tax (QST). Different provinces may charge GST only, GST plus PST, HST only, or GST plus QST.
In computing, make sure to use the sales tax rate of the province you are delivering orders to. For instance, multiply the order cost by 5%, Alberta’s GST, when delivering to the province.
After knowing the ins and outs of Canadian sales tax, you should also know US tax laws.
The USA has no federal tax; instead, the country follows a per-state sales tax rate. States may charge sales taxes based on the destination, the source, or a combination of the two.
When selling on Amazon, you need to charge sales tax whether you drop-ship or use Fulfillment By Amazon. Warehousing and using state roads when using different shipping methods constitute having a sales tax nexus.
The Marketplace Facilitator (MPF) legislation delegates sales tax collection and remittance to a “marketplace facilitator” like Amazon. If you sell on the ecommerce platform, they are responsible for collecting and remitting sales tax as long as a state or province is under their jurisdiction.
In Canada, all provinces except British Columbia are under MPF jurisdiction. For British Columbia, you need to collect and remit taxes on your own.
In the USA, meanwhile, Amazon does not collect sales tax from orders bound for Delaware, Missouri, Montana, New Hampshire, and Oregon. These states do not charge sales taxes. For the other states, Amazon has your sales tax collection and remittance covered.
You can apply for a sales tax exemption through the Amazon Tax Exemption Program (ATEP) if you are not the product's end user. You must provide a tax exemption certificate, an exemption number, or an exemption form (whichever applies).
Applications are made on Amazon’s website. If you have supplied the necessary documents, Amazon can confirm your tax exemption application within 24 hours. If you apply for this exemption, you can skip the hassle of tax refunds for your purchases.
MPF is already convenient. But you can still get another service to make sales tax collection, remittance, and monitoring more efficient—the Amazon Tax Collection Service (TCS). This service is available to individuals with a professional Amazon account, although it is optional.
TCS stores all your sales tax data and configurations. Amazon already has default tax settings, but you can still optimize, review, or update the following:
- Business address and sales tax registration per province/state
- Tax rates per state/province
- Product tax codes, category, and description
- ATEP eligibility
Amazon seller sales tax report data like sales tax collected, withheld tax, and order reports are available on TCS. You can link these to your books for accounting.
- Do not forget the big picture.
Amazon vendor sales tax collection is only a part of the tasks you need to accomplish when selling on Amazon. You still need to file for your corporate income tax and your employees' income tax if you run a company.
With this, you need to track all the income and expenses from sales, inventories, supplies, investments, and taxes. Only when you monitor all these can you get a complete picture of your business's financial health. Utilize the reports you get from Amazon TCS to know how much you’ve remitted and paid in taxes and get an idea of your after-tax income.
You can delegate accounting and tax preparation to experts. Doing this allows you to focus on other essential parts of your business, like maintaining product quality, getting to know your target customers, or planning your business expansion.
Here are some of the assistance you can get.
- Accounting software setup and assistance
- Integrating your accounting software to different marketplaces
- Full bookkeeping service
- Sales tax advisory services
- Income tax and sales tax calculation
- Amazon accounting services
Although some of these tasks look like something you can handle, it is still best to get assistance from experts and individuals who are experienced in doing the job.
Get Amazon Seller Sales Tax Assistance from Unloop
As an Amazon seller, you want to ensure that you don’t get penalized for not paying taxes or charging too much for your products.
Thus, your business needs to be compliant with both US and Canadian sales tax laws. You should know about the tax rates in both countries and where MPF applies. It will also be of great help to utilize TCS and get help from experts.
Unloop has got your back in tracking all your income and expenses to prepare for tax season. We also track your sales taxes and Amazon financial statements to provide you with a complete view of your business's financial health before and after taxation.
We have a team of expert bookkeepers who use reliable software like Quickbooks, A2X, and Hubdoc for data accuracy and safety. If you’re interested, give us a call at 877-421-7270. We’d love to discuss our offers with you!