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.
Did you know that if your business meets certain requirements, it can be exempted from having to pay state and local sales tax? It means more money for your business! Tax exemption is really beneficial to Amazon sellers, and you can definitely amass more profits.
If you are an Amazon seller who has been paying taxes on all the products you sell, this article is perfect for you! This article will discuss how you get Amazon tax exempt and the easy peasy process to achieve it.
Amazon Dropshipping and Step-By-Step Guide to Being Amazon Tax Exempt
Amazon dropshipping is one of the easiest and popular approaches on how to earn. It works when you create your own list of products on Amazon. This listing can be a composition of products from different suppliers. When customers buy on your listing, then you need to contact the suppliers of the selected items, and they will send it out directly to your customers on your behalf. That is how dropshipping works.
In addition, dropshipping doesn't actually conduct any inventory, and you're not branding anything at all. You can make your own inventory for tracking purposes, which you can also submit to Amazon. Remember that you are more likely the middle person between your customers and suppliers in Amazon. One of the best traits of dropshipping is its low-risk business approach that lets you sell goods to consumers without spending large amounts of money on running costs like a wholesaler would have.
How Do I Get Tax Exempt on Amazon as a Reseller?
The Amazon Tax-Exemption Program (ATEP) helps Amazon resellers be exempted from sales tax collection. With the help of tax-exempt certificates under ATEP, sales tax applies to purchases made by customers only and not to the reseller. Resellers often receive a sales tax exemption when they purchase products for resale. Tax authorities know that sales tax is applicable on the final sale, which exempts the initial purchase.
The tax exemption certificates are essential, so here is the complete guide for you to become tax-exempt.
If you are reselling in the USA:
- Secure a sales tax permit from the state where your business is registered. This permit is required when you can apply for an Amazon tax exemption.
NOTE: If you don't have a business registered in the state you conduct it, you won't be able to acquire a sales tax permit. You can use TaxJar, which is a great tool that can guide you on how to register for a permit in any state.
- Now, let's get started with the Amazon site or application. Go to the Amazon Tax Exemption Program link placed at the bottom right of the page.
- Select No thanks. Set up tax exemptions with my current account. Please remember you don't need an Amazon business account for tax exempt status.
- You will be transferred to a page that shows a list of 48 states/territories. You can select the states that don't require forms to be uploaded or specific state permit numbers.
NOTE: Alaska, Delaware, Montana, New Hampshire, and Oregon are the five states that don't levy a sales tax. As you can observe, they are not listed except for Alaska since it has several municipal governments that do collect sales tax. The states that require supporting documents to be uploaded are Alaska, District of Columbia, Florida, Louisiana, Maine, New Mexico, and Puerto Rico. California, Hawaii, Illinois, Maryland, Massachusetts, Mississippi, and South Carolina need additional information.
If your business is based in one of the states that needs supporting documentation or extra information, select that state and you should have the additional requirements for tax exemption.
- If Colorado does not apply to your application, you may click Save and Continue.
- Then select Resale and Save and Continue.
- You will be transferred to You will be adding or modifying the following certificates page and click Continue.
- Fill out all the fields under the Please tell us about your organization page where all the information about your company is needed. Once done, click Save and Continue.
- The Please provide your additional information required to generate the exemption forms page has questions that are mostly answerable by Yes or No. Accomplish it before hitting the Save and Continue.
- Review all the information you provided and click Continue if satisfied.
- Sign Your Exemption Certificate and Save and Continue.
- Check the Terms and Conditions on the final page and then click Activate Certificates.
- And you're done! You will have your tax exemption within 15 minutes.
NOTE: With tax exemption, you can effectively save 7% on your orders since the average sales tax rate in the US is around 7%. It’s a potential increase of your profit of up to 7%.
If you are reselling in Canada:
- Ensure that you have the required information upon enrolment for Amazon tax exemption. Such documents may include:
- The tax jurisdiction wherein you want to enroll. It can be:
- Goods and service tax (GST)/harmonized sales tax (HST)
- Québec sales tax (QST)
- Retail sales tax (RST) in Manitoba
- Provincial sales tax (PST) in British Columbia (BC) and Saskatchewan
- Entity type of your business and you can select from reseller, federal government, provincial government, manufacturer, etc.
- If applicable, exemption form or numbers.
- Other supporting information may be needed depending on the exemption type.
- The tax jurisdiction wherein you want to enroll. It can be:
- Once you provide all the information required, sign and accept the Terms and Conditions. It means all the data you provided are valid, and the group you represent for tax exemption qualifies to make exempt purchases in the jurisdiction.
- The said exemption should be available and active within 15 minutes to 24 hours upon completion of the enrolment process.
If you also want to know more about bookkeeping services and how they can help you with taxes, read Facts About Bookkeeping Services Calgary Businesses and Startups Should Know, written by one of our CPAs here in Unloop.
Enroll for Tax Exemption Now!
Amazon is a great site where you can sell, and it has ways on how you can earn more! Becoming Amazon tax-exempt will help you maximize your profit, and you can use the money for expansion and marketing purposes. Upon enrolling for tax exemption, do not forget to get all the documents required for a smooth application. American and Canadian online retailers have different enrollment approaches, so you have to follow the right instructions depending on which country and territory you do your business in.
If you feel like it is too much and you need help, contact Unloop and allow us to extend our helping hands with your business accounting and Amazon tax exemption.