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.
It's only a matter of time before you start thinking about expanding your business. If you're wondering how to scale your enterprise on Amazon, you must understand sales tax details. They will come into play when selling products on the eCommerce platform. Many of us are aware that Amazon is technically a marketplace, but if you are a business owner, it is essential to understand the latest changes in Amazon sales tax.
It's not uncommon for business owners to have questions about the different taxes they are responsible for. Let us help enlighten you through this article—Amazon sales tax explained! We will discuss the sales tax details you need to know in Canada and when you expand in the US.
Opening Your Store Within Canada
From selling in a small boutique or your neighborhood, you are now ready to sell all over Canada. As you do so, make sure to familiarize yourself with Amazon sales tax for sellers to ensure you are abiding by the law. Tax rules familiarization will also save you from any tax trouble.
GST, PST, HST, and QST Basics
In Canada, there are at least four taxes you must remember as they are the rates you will apply to the orders you get.
- General Sales Tax (GST): Applies to almost all goods in Canada except those classified as zero-rate.
- Provincial Sales Tax (PST): Some provinces have additional sales tax on top of GST.
- Harmonized Sales Tax (HST): Sales tax followed by some Canadian provinces which combine GST and PST for convenience.
- Quebec Sales Tax (QST): This is Quebec’s own sales tax provisions.
The sales tax per province are as follows:
Provinces solely charging PST:
| Provinces | GST/Sales Tax To Charge |
| Alberta | 5% |
| Northwest Territories | 5% |
| Nunavut | 5% |
| Yukon | 5% |
Provinces charging HST:
| Provinces | HST/Sales Tax To Charge |
| New Brunswick | 15% |
| Newfoundland and Labrador | 15% |
| Nova Scotia | 15% |
| Ontario | 13% |
| Prince Edward Island | 15% |
Provinces charging GST and PST:
| Provinces | GST | PST | Sales Tax To Charge |
| British Columbia | 7% | 5% | 12% |
| Manitoba | 7% | 5% | 12% |
| Saskatchewan | 6% | 5% | 11% |
| Quebec | 5% | ***QST: 9.975% | 14.975% |
Amazon’s Marketplace Tax Collection (MTC) in Canada
If you sell on Amazon, you can maximize the eCommerce giant’s solutions on sales tax calculation—the Marketplace Tax Collection/MTC. It is cited in the Marketplace Facilitator Law that Amazon will be responsible for charging, collecting, and remitting your sales taxes. MTC applies to all provinces except British Columbia, where you need to charge, collect, and remit sales tax on your own.
To enjoy the MTC service, provide the following on the Amazon site for registration:
- Business information
- Business address
- GST/HST registration number
Make sure to optimize sales tax rates per province based on the table above and check the accuracy of product category and description in the sales tax calculator.
Once everything is set, you can have sales tax assistance from Amazon. There are specific local tax regulations, especially in provinces following a GST and PST tax rate. But remember the general rule: use the sales tax rate of the order's province destination.
Expanding To America
After familiarizing yourself with the workings of sales tax in Canada, it’s time to get to know US sales tax. If you are using Fulfillment by Amazon (FBA), you are automatically obliged to collect sales tax from your customers as warehousing is considered a tax nexus in the US.
Sales Tax In America
In Canada, the basic rule is applying the tax rate for the order destination, but the US has a different take on this. Some states apply the same rule, while others base their tax rate on the origin of the product or both destination and origin(mixed sourcing). The sales tax rates and application are cited in detail in the table below:
*origin-based
**destination-based
***mixed sourcing/unique jurisdiction rules
| State | Sales Tax | Additional Local Sales Tax | Total Sales Tax Charged |
| Delaware** | 0% | 0% | 0% |
| Montana** | 0% | 0% | 0% |
| New Hampshire** | 0% | 0% | 0% |
| Oregon** | 0% | 0% | 0% |
| Alaska** | 0% | 7% | 7% |
| Guam | 4% | 4% | 8% |
| Hawaii** | 4.17% | 4.71% | 8.88% |
| South Dakota** | 4% | 6% | 10% |
| Wyoming** | 4% | 6% | 10% |
| Maine** | 5.50% | 5.50% | 11.00% |
| Virginia* | 5.30% | 6% | 11.30% |
| District of Columbia | 6% | 6% | 12% |
| Georgia** | 4% | 8% | 12% |
| Kentucky** | 6% | 6% | 12% |
| Maryland** | 6% | 6% | 12% |
| Michigan** | 6% | 6% | 12% |
| Wisconsin** | 5% | 6.75% | 12% |
| North Carolina** | 4.75% | 7.50% | 12.25% |
| Massachusetts** | 6.25% | 6.25% | 12.50% |
| Connecticut** | 6.35% | 6.35% | 12.70% |
| Colorado** | 2.90% | 10% | 12.90% |
| Iowa** | 6% | 7% | 13% |
| Nebraska** | 5.50% | 7.50% | 13.00% |
| New York** | 4% | 8.88% | 13% |
| North Dakota** | 5% | 8% | 13% |
| Vermont** | 6% | 7% | 13% |
| West Virginia** | 6% | 7% | 13% |
| Ohio*** | 5.75% | 8% | 13.75% |
| New Mexico* | 5.13% | 8.69% | 13.81% |
| Florida** | 6% | 7.50% | 14% |
| Indiana** | 7% | 7% | 14% |
| Mississippi* | 7% | 7.25% | 14% |
| Pennsylvania*** | 6% | 8% | 14% |
| Rhode Island** | 7% | 7% | 14% |
| Utah* | 5.95% | 8.35% | 14.30% |
| Texas*** | 6.25% | 8.25% | 14.50% |
| Minnesota** | 6.88% | 7.88% | 14.75% |
| Idaho** | 6% | 8.50% | 15% |
| South Carolina** | 6% | 9% | 15% |
| Missouri* | 4.23% | 10.85% | 15.08% |
| Nevada** | 6.85% | 8.25% | 15.10% |
| Oklahoma** | 4.50% | 11% | 15.50% |
| Louisiana** | 4.45% | 11.45% | 15.90% |
| Arizona* | 5.60% | 10.73% | 16.33% |
| Illinois* | 6.25% | 10.25% | 16.50% |
| Washington** | 6.50% | 10.40% | 16.90% |
| Tennessee* | 7% | 9.75% | 17% |
| California*** | 7.25% | 10.50% | 17.75% |
| Alabama** | 4% | 13.50% | 18% |
| Kansas** | 6.50% | 11.50% | 18.00% |
| Arkansas** | 6.50% | 11.63% | 18.13% |
| New Jersey** | 6.63% | 12.63% | 19.25% |
| Puerto Rico | 10.50% | 11.50% | 22.00% |
Amazon MTC In The US
As a Marketplace Facilitator, Amazon’s responsibility is to charge, collect, and remit taxes from all the sales you make in America—if you are using FBA and qualify for other tax nexus cited in the law. This is good news for you, especially because you live a thousand miles away!
To utilize Amazon’s sales tax assistance, you must register for sales tax collection first. Registration needs to be in every state you are delivering orders to. Then, you can optimize Amazon’s sales tax collection feature according to the Amazon sales tax law and rates of different states. Also, ensure the accuracy of the product tax codes you type in and whether to charge based on the origin or the package's destination.
Get Assistance From Unloop!
We hope you found the specifics of Canadian and American sales tax enlightening and the assistance you’ll get from Amazon encouraging. Taxation is not easy to understand, but as you do it again and again, it’ll get easier. Just make sure to optimize your Amazon tax calculator with the specific sales tax rates mentioned above and product codes for accurate computation. As you educate yourself with the details and processes, let Amazon do its job through MCF and Market Facilitator.
If you want to get into the details of your sales tax and see a breakdown, Unloop can be your partner! We are an expert bookkeeping company specializing in tracking all the money coming in and out of your business and categorizing them for reporting purposes. We’d love to assist you in preparing the data you need during tax season, so feel free to give us a call at 877-421-7270. We’d explain our services in detail.
We are hoping to hear from you soon!