Sales Tax refers to the consumption tax enforced by the government on the sale of goods and services. The retailer collects such taxes in the point of sale then passes it to the government afterwards. Since Amazon sellers sell goods and products online, they are liable to sales taxes only if it has a nexus there.

What does nexus mean?

Nexus is the connection between the state and your business. It is required before the state can force you to collect and remit their sales and use tax. Without this link within your business, a state doesn’t have the right to tax you. To put it simply, when your business has a physical presence in the state, the connection is established. However, there are some instances where you may have to collect and remit sales tax in more than just one state.

Registering for a Sales Tax Permit

Before you collect taxes coming from your sales, you must first register for a tax permit with your state. This is because states find it unlawful to collect sales tax without any permit. The registration includes the following steps:

  • Gather your Employer Identification Number (EIN) and other business identifying information.
  • Visit your State’s Department of Revenue website
  • Click on the “Sales and Use Tax” section of the website
  • Click the link to register your business.

You’ll also receive your filing frequency as you receive your tax permit. This refers to how often (monthly, quarterly or annually) the state wants you to file a sales tax return and remit the tax you’ve collected.

Collecting Sales Tax