What Amazon Sellers Should Know About Sales Tax?
Sales Tax refers to the consumption tax enforced by the government on the sale of goods and services. The retailer collects the sales tax in the point of sale then passes it to the government afterward. 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 your sales tax, you must first register for a sales 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 sales tax permit. This refers to how often (monthly, quarterly or annually) the state wants you to file a sales tax return and remit the sales tax you’ve collected.
Collecting Sales Tax
After discovering where your nexus is and you already have your sales tax permit, you are now ready to collect your customer’s sales tax. When collecting sales tax, you must collect it from buyers in the state where your nexus is. To clear things up, if you have nexus in five states, then you are likely required to collect sales tax from buyers in those five states.
Sales Tax Report
Check out first how much sales tax you’ve already collected. Some states are too specific that they require you to report your tax collection in each country, city, and special taxing district. Earlier, tax reports include pulling a report from every channel that you sell then figuring out which city and country your buyers lived in. These are all compiled in a spreadsheet and usually take five hours to finish.
Filing a Sales Tax Return
Once your due date is up and you have finished making a report on all the sales tax you have reported, it’s time to file your sales tax return. Fill out your sales tax returns, remit payment to the state, and now you’re all done.
Sales Tax is an important part of your Amazon business. It shows the connection your business has with the government. Knowing a thing or two about it is vital because not meeting your tax obligations can lead to a penalty from the government.