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.
As an entrepreneur, you know that a part of the business is paying taxes. If you're still starting out, you may have applied for a couple of tax exemptions to get you off the hook of calculating sales taxes. But as your business gains traction, the concern of remitting state sales tax becomes more pressing. Until eventually, you'll have to pay what is due.
Taxes are an obligation that we must pay sooner or later. But, if you've been putting off calculating your sales tax on the back burner for some time, it's time to put it front and center. So, here's a quick article that will help you sit down and think about your sales taxes and how to properly calculate and pay them before you actually have to. Because when it comes to taxes, it's better to be prepared.
Sales tax is an amount levied by the government for each product bought and consumed by the end-user. In the context of you being an Amazon seller, you should take into account your product pricing sales taxes. This is so your customer pays it as part of the price.
Including the Amazon sales tax is an integral part of your Amazon pricing structure. If you don't allocate a percentage to a sales tax rate, it will eat your profit margin once Amazon collects it on your behalf.
So, what exactly is the Amazon sales tax rate? It depends on a lot of factors. But Amazon does have its own system that identifies the right sales tax rates to charge the end consumer. This depends on the product or location. Once you have an economic nexus in a State you sell your goods from, you are eligible to register for a permit to collect tax. Then you can let Amazon collect it for you. Amazon's sales tax collection charges 2.9% per each transaction it collects sales tax from.
It is your obligation to remit taxes. It’s also your obligation to learn how to calculate sales tax on the Amazon marketplace so you can be compliant and remit taxes accurately.
The problem is you're a busy person, and if your e-commerce business sells to multiple locations within the United States and outside, it can be challenging to calculate how much sales tax on Amazon is supposed to be charged. In addition, learning the ropes of calculating sales tax is a process that needs a lot of expertise. The awesome thing is that you have options.
The Amazon Tax Calculation Service Teams
As mentioned above, there’s an Amazon sales tax calculator team composed of a well-oiled system of processes and teams that will do the computing and charging for you. You can get this service for a fee of 2.9% per transaction. This ensures that you charge the appropriate sales tax percentage on each product you sell online.
On the other hand, availing of this service from Amazon doesn't absolve you of all sales tax responsibilities. For instance, before you can enrol yourself in this program, you'll have to provide them with state jurisdictions where you have to calculate and pay sales taxes.
Amazon will also not pay your sales taxes on your behalf. They only put systems and teams in place to help you in the collection process. Then, they will remit the amount to you based on their schedule so you can then remit it to the government.
Bear in mind, however, that documentation, tax-refund requests from customers, and tax obligations in states not covered by Amazon and countries out of U.S. soil will not be covered by the Tax Calculation Service.
No service can give you everything you want. Even Amazon, despite its extensive sales tax service, has limitations. To fill the service gap, you can choose to outsource a trustworthy bookkeeping company that will handle your small business e-commerce sales tax, particularly for some areas where Amazon cannot assist.Sellers in Canada who have to remit taxes but do business in the United States through Amazon will need a different type of service. Consult with Unloop today and know about their bookkeeping and accounting services that are specific for Amazon sellers. Unloop provides sales tax support for Canadian and United States eCommerce businesses to ensure you are registered and eligible to collect and remit sales taxes.
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.