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.
Sales taxes are probably one of the most complicated tasks you’ll face as a business owner and Amazon seller. The regulations for this tax type vary per state and province and can change anytime. However, if you sell on Amazon, you can conveniently delegate the task to the eCommerce giant.
If you ask, “Does Amazon charge tax?” or “Does Amazon charge sales tax?” the answer is “No,” as technically, it is only the state or the province that charges tax. Nevertheless, because of the Marketplace Facilitator Law, Amazon must calculate, collect, remit, and refund sales taxes.
In this article, we’ll detail the sales tax amount Amazon collects and how it helps you by handling this complicated task.
Amazon bases the sales tax they collect on state and local laws. For instance, these are the sales tax rates in the US.
|State||State Sales Tax Rate|
Alaska, Delaware, Montana, New Hampshire, and Oregon do not charge any sales tax. These are just the basic rate but can still increase depending on the specific sales taxes charged on items like groceries, prescription and non-prescription drugs, clothing, ready-made food, and even feminine hygiene products.
Sales taxes in the US may be based on the package source or destination, and states can also enact local sales tax changes. Amazon stores and updates all these details and modifications to ensure they collect accurate sales taxes from buyers.
Meanwhile, if you are selling in Canada, note that there are four sales taxes in play: General Sales Tax (GST), Harmonized Sales Tax (HST), Quebec Sales Tax (QST), and Provincial Sales Tax (PST).
These provinces charge 5% GST:
Meanwhile, these provinces charge 15% HST:
A combination of GST and PST are charged for every sale in these provinces:
In Quebec, a 9.98% QST is added to the 5% GST, totaling a 14.98% sales tax rate for the province.
Canada also has unique sales tax laws per province. For example, provinces base the tax rate on the destination and some on the origin. These details are again stored in the Amazon system for accurate sales tax charging, computation, refunds, and remittance. If there are any changes, Amazon will keep an eye on them too.
It pays to know sales taxes in detail and be in the know with the latest updates, but with Amazon’s Marketplace Tax Collection, you can relax a bit and enjoy these benefits.
If you were the one collecting sales tax, you’ll need the discipline to separate it from your actual sales, as you will remit what you collect later. This practice also gives you an idea of how much after-tax income you have for your company expenses or plans to expand your business.
If you want to check how much sales tax Amazon collected or you want to integrate the data in your books, they are all available on Amazon Seller Central. First, log in to your account and find “Tax Document Library” in the “Reports” category. Then, click “Sales tax Report.” You can also customize the date of the report you want to get.
When you have all the data you need, report generation is easier. The financial insights you get are even better if you integrate the data from Amazon into your accounting and bookkeeping systems. In this way, the information you have is complete.
All in all, Amazon's sales tax collection services make it easier for sellers to manage their taxes and help keep track of the ever-changing landscape of sales tax laws. As a result, sellers like you are unburdened by the tedious task. You can also benefit from the data Amazon acquires and make sense of them through reports.
Reap these benefits with the help of Unloop, as we have a team of bookkeepers and accountants who are well-versed in including the data you get from Amazon into your books. So, you are sure that all your numbers are complete and accurate.
If you’re interested, we are just a call away! We’d love to discuss how our services can help remote sellers like you.
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.