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Sales Tax Issues for Amazon Sellers, 2017

The eBay & Amazon Seller's News ~ June 2017 ~ Volume 18, Issue No. 9

Tips, Tools, News and Resources for eBay, Amazon and Independent Online Sellers
by: Skip McGrath

In This Issue:

Musings from and about eBay, Amazon and The World Wide Web

  1. Sales Tax Issues for Amazon Sellers, 2017
  2. The Amazon Two-Step Verification Mess and How to Get Out of it
  3. Weighing Scales & Systems for E-commerce Shipping Business
  4. Does Retail Arbitrage and Online Arbitrage Have a Future?
  5. New Wholesale Sources for eBay & Amazon Sellers

"I'm a success today because I had a friend who believed in me, and I didn't have the heart to let him down." ~ Abraham Lincoln


Musings

We are in the regular summer slowdown -not only on eBay and Amazon, but with my book sales as well. So let's have a sale!

Starting today, and running through the last day of June 2017, All of my books and training courses sold on SkipMcGrath.com are 25% off.

Just use the code JUNE25 at checkout. Note: Paste this code into the coupon box on the last page of checkout - Do not forget to hit the APPLY button or the discount will not take.

Important - If you want to buy more than one book, my shopping cart cannot handle coupons on multiple purchases. So if you want to buy more than one product - you need to buy them one at a time. If you put multiple items in your cart, the coupon will only apply to the last item entered.

Please Note: This offer cannot be combined with any other coupon offers.


Be Careful Sourcing Name Brand Products.

I was going over my email today when I got an email from a liquidation company I work with. Part of the email said: "Brand-New, Brand-Name Products with Great Margins to Sell on Amazon, eBay, and More!"

Sounds pretty appealing, right? Don't forget the Restricted Brands list on Amazon. The problem dealing with liquidators is, you cannot always see the list of brands in a lot. What if you spend $500 on a lot and when you get it, the lot contains mostly shoes by Michael Kors and clothing items by Burberry (Both of those are on the Restricted list).

If you are thinking, "That is OK, I can sell them on eBay," think again. Most companies on Amazon's Restricted list, will also file VeRO (Intellectual property) Complaints if you list on eBay (See the 4th article in this issue for more on this subject).


Terapeak Research has introduced 3 new features.

  • Top 10 Sellers Market Share: In the Sellers tab, users can now see how much of the overall market for a product is controlled by its top ten sellers.

  • Inventory Ideas [Beta]: Inventory Ideas, a way to do a quick competitor research on a lot of competitors and their products all at once, and all in the same sortable list.

  • Saved Searches 2.0: Our Saved Searches and Value Track tools have been merged into an updated Saved Searches 2.0 tool that offers new features and an improved workflow.

Although Terapeak does have some Amazon features, it is mostly eBay centric. But it is easily the best research tool on the market.


Amazon now requires all Amazon-registered brands to be trademarked and registered with the USPTO (US Patent Trademark Office). If you recall, a while ago I wrote an article on Branding your private label products. At the time, I explained there were two types of brands; Formal and Informal.

A formal brand is one where you trademark™ your brand, and once you receive a trademark, you register the brand with the US Patent and Trademark office (USPTO.gov) and you can now us the ® symbol.

An informal brand is where you make up a brand name and apply it to your product. It might surprise you that this is entirely legal -it is done by hundreds of sellers on eBay and Amazon.

What is the difference? The main difference is intellectual property protection. If your brand name is trademarked and registered, you can sue someone for using it. If you take the next step and register your brand with the USPTO, anyone who abuses or infringes, could also be exposed to Criminal penalties.

In the past, Amazon would allow you to register either a formal or an informal brand as the brand holder on Amazon. However, that has changed.

One of my readers alerted me to this last week which was a good thing, as the new policy change was done with almost no publicity on Amazon.

The new policy states that a brand must be trademarked -and registered in order to become a registered brand on Amazon. Here is what the new policy says:

"At this time, in order for any brand to be considered eligible for our new Brand Registry program, the Trademark for that brand must be registered. Any Trademark that is still listed as Pending will not be eligible for enrollment. We currently accept Principal trademarks which are listed as LIVE/REGISTRATION/Issued and Active on the USPTO, with mark drawing types of STANDARD CHARACTER MARK or TYPESET WORD(S)/LETTER(S)/NUMBER(S)."

So if you want the seller protection that comes with registering your brand on Amazon, then you will need to invest about $1000 in fees to trademark and register the brand. You can still sell on eBay and Amazon using informal brands, but you can no longer register as the brand holder on Amazon.


Amazon has recently restricted the services of many refund companies (these are companies who monitor your Amazon account and make refund requests on your behalf that Amazon should have given you).

Amazon now prohibits FBA sellers from using third-party services to submit reimbursement requests on their behalf. The key words in that sentence are "on their behalf." One of the largest refund companies, Refunds Manager (the one I use), had this to say about the new policy.

This is from Nathan, their founder and owner:

We want to assure you that our service is fully in line with Amazon's TOS. Because we manually review all errors and manually submit all cases. Refunds Manager is not an automated service, but a business service that utilizes software in the initial stages of its process.

Here are all the key ways that Refunds Manager stays compliant with Amazon's TOS:

  • Manual review
  • Manual case submittal
  • Wait period for Amazon to reimburse

We comply with all TOS. This was a mass email from Amazon. None of our cases have been closed. Business has been going as usual. You can ignore this.

Apparently, Nate is correct because they just opened two cases for me earlier this week. They both went through and I received refunds.


Last Week Amazonís stock price hit $1,000 for the first time, closing the week at $1,006.00. Amazon has also announced a few new areas it will be selling in. Here is an article from Forbes Magazine that summarizes the changes and their impact on the platform.


Last month I updated my book about selling used items online. Yes, I said used items. Did you know that you can make more money selling used goods than selling new items? The Virtual Peddler shows you how to make a living buying, selling and trading used items online. If you've already bought this book, go to the download page and get the newest version.


Lets get started with this monthís articles:

[top]

1. Sales Tax Issues for Amazon Sellers, 2017

I am sorry this article is so long and complex, but unfortunately, this is a complex subject -And, very important to your selling future, so I suggest you plow through it.

Starting last April (April 1, 2017), Amazon started collecting sales taxes from all 45 States that charge sales tax. Note - Amazon is adding sales tax to all sales in those 45 states, but is not filing and paying the sales tax to the states, except on their own sales of merchandise.

Amazon will only send the taxes it collects to you -it will not file them with the states for you. And, Amazon will only do this if you set up sales tax collection in Seller Central, agree to payment and tell them in which states, and what percentage to collect.

The key points to take away from this are:

  • Amazon will collect the tax on your behalf and send it to you, if you tell them to, but they will not file and pay the taxes for you.

  • If you want Amazon to collect the taxes and send them to you, they will charge you 2.9% of the taxes they collect

Until recently, you only needed to collect and pay sales tax on sales made, and shipped to, someone in your own state. Over the past few years, almost every state that has a sales tax, has instituted a Nexus policy on online sales that are shipped to their state, no matter where the seller (you) lives.

Although Nexus rules have been around for years, it's only recently that States have been enforcing them on individual online sellers.

So, what is a Nexus?

For the purpose of sales tax, a nexus exists if a seller has a substantial presence in a state. This used to be enforced on companies that had a store, office or warehouse in a state.

But now, States have taken the position that Amazon FBA sellers have a substantial presence in their state (Nexus), if they send inventory to an Amazon Fulfillment Center (warehouse) in a state that claims this, which is virtually every state.

To make it even worse, some states take the position that you owe sales tax on all sales made from that state to anywhere in the country. A few states (Sorry - I do not have a breakdown on this but will give you a resource later) only demand that you collect and pay tax on sales made, and product shipped, in the state where you have goods in an Amazon warehouse.

The first question this brings up is; "How do I know where Amazon stores my goods?"

First log into Seller Central and then go to this link . This will give you a good overview of Amazon's current tax policy. Next, go to Reports>Fulfillment and select Daily Inventory History. When you get to that page, select Last 30 days and then hit Generate Report. That will look like this:

When you generate the report Ė you will see your SKU number and Product Descriptions. To the right of that (far right), you will see some columns that look like this:

The column marked "FC" is the Amazon code for the Fulfillment Center (warehouse) where that product is located. I suggest you copy these into an Excel Spread sheet so you can organize and sort.

I know those codes will not make sense to you, so I have provided a list of the various fulfillment centers and the states they are located in (copy/paste these into a document file, and then save and print out. Here is the list of states and FC's:

List of fulfillment centers by state. The first three digits of a fulfillment center's identification code are from the IATA airport code of the closest large airport:

Arizona
PHX3, PHX5, PHX6, PHX7, PHX8, and PHX9

California
OAK3, OAK4, OAK5, OAK6, OAK7, ONT2, ONT3, ONT4, ONT5, ONT6, ONT8, ONT9, and XUSD

Connecticut
BDL1

Delaware
PHL1, PHL7, and PHL9

Florida
MCO5, MIA5, TPA1, TPA2, and XUSF

Georgia
ATL6

Indiana
IND1, IND2, IND3, IND4, IND5, SDF8, and XUSE

Kansas
MCI5

Kentucky
CVG1, CVG2, CVG3, CVG5, CVG7, CVG8, LEX1, LEX2, SDF1, SDF2, SDF4, SDF6, SDF7, and SDF9

Massachusetts
BOS5

Maryland
BWI2, and BWI5

Minnesota
MSP5

North Carolina
CLT5

New Hampshire
BOS1

New Jersey
ACY5, EWR4, EWR5, EWR6, EWR7, and EWR8

Nevada
LAS2, and RNO4

New York
JFK7

Pennsylvania
ABE2, ABE3, DPH1, MDT1, PHL4, PHL5, PHL6, PIT5, XUSC, XUSG, and AVP1

South Carolina
CAE1, and GSP1

Tennessee
BNA1, BNA2, BNA3, BNA5, CHA1, and CHA2

Texas
DFW6, DFW7, DFW8, DFW9, HOU1, SAT1, and XUSB

Virginia
BWI1, RIC1, and RIC2

Washington
BFI1, BFI3, BFI5, BFIX, SEA6, and SEA8

Wisconsin
MKE1, MKE5, and MKE7

For reference, please log into Seller Central and see the Help Page for Amazon Fulfillment Centers in the United States.

Not every state has made filing, collecting and payment necessary - but many have. Here is a booklet from the sales tax service company Avalara. If you need help with your sales taxes, you can check with them - or TaxJar (my preferred resource).

[top]

2. The Amazon Two-Step Verification Mess and How to Get Out of it

In case you haven't been paying attention, beginning June 30th, all Amazon sellers will be required to set up two-step verification whereby, when you log into Amazon, you will have to ask Amazon to send you a code via Text Message that you have to enter before you can log in to your account.. That's right - text message!

What happens is, when you first log in with your email address, within a minute or so, Amazon will text you a code that you must enter to complete the sign-on. Those are the "two-steps," Amazon is referring to

The adverse PR this move has cost Amazon appears to be of no consequence, because it only involves sellers, whom they don't seem to care that much about. If buyers were going crazy, they might do something. (Note: Buyers have been given the opportunity to set up two step verification, but so far, Amazon has not made it mandatory.

This means you must have a smart phone that is capable of receiving text messages. If you don't have one of these - Amazon doesn't care. In my correspondence with Amazon they told me I could disable 2-step verification after June 30th, but I would need a smart phone both to set it up and to disable it.

Amazon's suggestion for using 2-step verification was to "borrow" a smart phone from a friend. I have visions of friends of Amazon sellers getting phone calls at Two O'clock in the morning asking them to look at their phone and tell them the code. Also, what happens if you are in an area like I am. I have high-speed internet over cable, but cell phone service in our location is weak and spotty.

So, bottom line, unless Amazon changes their policy at the last minute (which I doubt), all sellers will have to buy or borrow a smart-phone before June 30th.

Of course we all know this new system will work flawlessly with no glitches - right? I have visions of hundreds of sellers not being able to access 2-step verification during the first week of the new system going into place.

Don't get me wrong -I do support Amazon's goal of increased security -and wished more online companies were more interested in keeping our information protected. But, this is one of those times where the doctor cured the disease, but the patient died anyway.

If you want information about two-step verification for sellers, first log into Seller Central and use this link.

If you want instructions on how to disable 2-step verification, then use this link.

Remember, you must wait until after June 30th to disable it.

About the only other suggestion I can give you if you don't like this policy, is open a support ticket with Seller Support Asking for clarification -and stating your concerns. If they get enough sellers complaining -there is always a slight chance they will listen -and try to come up with a better method.

[top]

3. Weighing Scales & Systems for E-commerce Shipping Business

eCommerce business venues such as eBay, Amazon, Etsy and others require sellers to weigh products for shipment to customers -and in the case of Amazon, for shipment to Amazon's Fulfillment Centers. Let's look at the requirements and important features you want to look for in a scale:

  • Cost - Good Digital Scales can vary in price from as low as $12 to over $100. At about $25 to $50, the features and quality seems to be good enough for your needs

  • Weight range - If you are going to use just one scale for postage and UPS or FedEx shipping, then the range of weights it can measure should vary from a low of 1/10th of an ounce up to the 30 to 40-pound range.

    If you also ship light bulk freight, then you will also want a separate scale that goes from about 25-pounds up to as high as 400 pounds. For larger weights than that, you will want to find a local drive-on - drive-off scale you can use or rent from time to time.

  • Tare adjustment - Tare is a term that means an adjustment made for the weight of the packaging in order to determine the net weight of the goods. For example, if you have items that are shipped in a container, and you only want to know the weight of the items without the container, then you would place the empty container on the scale, and hit the Tare button. That tells the scale how much the box or container weighs. Now, place the box or container on the scale with the products in it, and the scale will give you the weight of the contents only.

    If you want to know the shipping weight, just put the shipping box with the contents plus any packing material on the scale and it will give you the total weight for shipping.

  • Important Features

    • Extended cord with Large Backlit energy saving display (see photo below)
    • Accuracy: to 0.1oz
    • Fold up mailer holder
    • Can Be powered by batteries, USB cable or AC adapter
    • Hold and Tare function
    • Varity of Reading Modes: Pounds/ounces, ounces, kilograms/grams, grams
    • Ease of calibrating
    • Ease of maintenance

The extended cord with display on the end is important for when you place large boxes on the scale, you can pull the cord out so you can see the display.

How to get a free scale?

For a long time, I have been recommending the services of Stamps.com. If you click on this link, my readers can get a free 4-week trial. However, after giving the service a free trial, if you decide to sigh up for the monthly service, Stamps.com will give you a $100 worth of the following goodies:

  • $5 Free Postage ~ Your Stamps.com account will automatically be credited with $5 free postage to use during your trial.

  • Digital USB Scale ($50 value) ~ As a new Stamps.com customer you will receive a FREE 5 lb. Digital Scale. The scale is a $50 value and is yours to keep with no additional obligation. Just pay for shipping and handling (typically $9.99 or less).

  • More free postage ($40 worth) ~ You will receive four coupons each good for $10 free postage, which are redeemable after the trial period ($10 free postage per month for four months).

  • Free Supplies Kit ($5 value) ~ Each new Stamps.com customer receives a free Stamps.com Supplies Kit ($5 value) with address and postage labels and a user manual.

Last piece of advice: A good scale will cost anywhere from $20 to $50. This is not a huge investment, but one that you will use for a long time -so take your time, look at all the features and shop carefully

[top]

4. Does Retail Arbitrage and Online Arbitrage Have a Future?

Before we get started, let's define arbitrage for anyone who is unfamiliar with that term and the ensuing business practice on eBay and Amazon.

The formal definition of Arbitrage is "the practice of taking advantage of a price difference between two or more markets and capitalizing on the imbalance, the profit being the difference between the market prices."

Retail and Online arbitrage are essentially the same thing. You buy low in one market to sell higher in another market.

For our purposes, there are two kinds of Arbitrage used by eBay and Amazon sellers - Retail and Online. Let's look at both:

  • Retail Arbitrage is when an eBay or Amazon seller finds an item on clearance at a store (Target, Toys-R-Us, Wal-Mart, Home Depot or even small local stores) at a substantially lower price than the same product is selling for on eBay and/or Amazon. The seller buys the item in the store and sells it on eBay or Amazon at a higher price.

  • Online Arbitrage is the same thing, except the seller is finding and buying the items from various online sites (Toys-R-Us.com, etc.). This includes finding items selling on eBay lower than they are selling on Amazon and vice versa.

If you look at my article on Restricted Brands at Amazon, you will see many familiar brand names. This brings us to a few problems with Arbitrage:

  • Sellers may buy products and when they go to list them, they find out the brands are restricted and they are now stuck with the products.

  • The same companies that restrict their brands on Amazon, participate in eBay's VeRO (Verified Rights Owner) program. VeRO allows the owners of intellectual property rights and their authorized representatives to report listings that may infringe on those rights.

  • Prices can change pretty quickly. Remember, the practice of retail and online arbitrage is being done by a large number of sellers. If a lot of sellers buy the same products you are buying, it will start a competition and prices could fall quite rapidly.

If we go back to the original question: "Does Retail Arbitrage and Online Arbitrage Have a Future?" sadly, the answer may be no. eBay and Amazon are customer-driven companies, and customers have proven they want name brand products. This gives the brands the ultimate power. Essentially, eBay and Amazon will go along with anything the brands want as long as it's legal.

It's a fact that major name brand products control the distribution of their products very tightly. When you buy a product from a store for resale, you are not buying from an authorized distributor.

This means the brand owner has no control over how, and at what price, their products are being sold. So they register their brand with Amazon as a restricted brand and with eBay's VeRO program. Then when someone like you lists one of their brand name products online, they file a complaint if you are not one of their authorized resellers.

A lot of sellers think they can rely on the First Sale Doctrine. The First Sale Doctrine says that once you buy something, you have the rights to resell it in the secondary market

The problem is, Amazon and the brands are taking actions to block you from re-selling their goods as new on online selling sites. You could probably win a lawsuit if you fought the issue, but it would cost you upwards of $20,000 in legal and court fees just to file the suit -and then another $100,000 to $250,000 to pursue it.

Note: You can sell these brand name goods as used without any problems -in fact that is what a lot of sellers do.

Given all these issues it is my opinion that the future of retail and online arbitrage is limited. So, those of you who are practicing it may want to give some thought to finding a new business strategy.

[top]

5. New Wholesale Sources for eBay & Amazon Sellers

Remember - not all of these companies have a wholesale website. When you run into that, just email them through the Contact Us form and request wholesale information.

Seven Wholesale carries a complete line of Hip Hop clothing, t-shirts and hats for men and women

Wholesale Clothing based in Los Angeles carries a complete line of lower cost women's fashions.

Sakaad, is a Fair Trade Importer of wholesale apparel, accessories, bed and bath, handbags and footwear

Master Cutlery carries a broad line of all type of knives from hunting knives, fighting knives to Kitchen Knives and sets including the Top Chef Brand..

Cosmetix Club has been selling wholesale brand name cosmetics for over 12 years. They are a wholesale supplier who is always seeking new customers

Annie International Inc . offers a full line of Personal and Beauty Care products. The company has been around since 1993 and carries a wide range of products for the beauty supply market.

C2F is a retailer's complete source for wholesale art supplies. They carry a large and growing selection of art materials, craft supplies and drafting implements.

Sock Wholesalers Inc. offers a full line of MADE IN THE USA socks including crew, tube, quarter, low-cut, dress, diabetic, designer and more! www.sockwholesalers.com

Lifeforce Glass sells Inexpensive Gifts with social and environmental meaning. All Made in the USA. They manufacturer imprinted glass stones, granite blocks, and seabeans. Custom work available.

Couver Corporation sells wholesale sports headbands, athletic wristbands (terry sweatbands) and socks.

Cheng's Enterprises , Inc. is an importer, exporter and wholesaler of Shoes and Oriental Gifts

New Wholesale DVDs is a DVD liquidator that specializes in selling below normal wholesale to resellers. Low Minimum quantity. Credit cards and PayPal accepted. Large selection of exercise and workout DVDs and videos. New items arriving weekly.

Kings Kids sells wholesale Christian items including: bible study cards, Christian gifts, school supplies, artwork, postcards, greeting cards, bible trivia - old and new testament, stickers, bookmarks, bibles and baby and maternity clothing

The Jerusalem Export House has been selling Holy Land Christian products since 1969. They will drop ship certain products direct from the Holy Land.

Thatís it for now - see you in about two weeks.

Skip McGrath
The eBay & Amazon Seller's News

P.S. If you missed the last issue, click here to read it.






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