AMAZON to Start Collecting Sales Tax on Their Selling Fees

Amazon Seller

This is from a recent “corrected” letter from Amazon to sellers.  The original message lacked complete information

We are not increasing our fees. However, some states consider Selling on Amazon fees, such as per item, order, and referral fees taxable services. Similarly, Fulfillment by Amazon (FBA) inventory prep fees, such as bubble wrap, polybag, taping, and labels are considered taxable in some states. To comply with state tax laws, Amazon.com must begin collecting and remitting sales tax on some of these fees. Though we recognize that these taxes will increase costs for some of our selling partners, we expect that the vast majority of fees paid on Amazon.com will be unaffected by these changes in tax-ability.

Below, we have included a breakdown of the states where we will begin collecting sales tax on certain fees starting June 1, 2019. The location of your business determines whether tax is applicable on the Selling on Amazon fees. The location of the fulfillment center performing the service determines whether tax is applicable on the FBA inventory prep fees. U.S. tax rates typically range between 4% and 10%. State tax rules can change frequently and the information below may become outdated if states make changes to their laws.

• Amazon is required to collect taxes on Selling on Amazon fees in Connecticut, the District of Columbia, Hawaii, South Dakota or West Virginia, based on each state’s tax rates.

Selling on Amazon Fees include the Referral Fee, Subscription Fee, Variable Closing Fee, Per-item Fee, Promotion & Merchandising Fee, Refund Commission Fee, Checkout by Amazon, and Sales Tax Collection Fee. For example, if your business is located in West Virginia, and your sales tax rate is 6.39%, and you sell an item with a total price of $20, which is subject to a 15% referral fee, we will collect and remit a sales tax of $0.19 to comply with state laws (calculated as 6.39% of the referral fee amount of $3.00). If your business is located outside Connecticut, the District of Columbia, Hawaii, South Dakota or West Virginia, we will not collect sales tax on the Selling on Amazon fee you pay.

• Amazon is required to collect taxes on FBA Prep Services in Arizona, Connecticut, Illinois or West Virginia, based on each state’s tax rates. FBA inventory prep fees include the Labeling Fee, Poly bagging Fee, Bubble wrap Fee, Taping Fee, and Opaque Bagging Fee.

For example, if you decide to use FBA Prep Service to bubble wrap your products, and the service is performed at a fulfillment center in Arizona, and the sales tax rate at that location is 8.37%, and the bubble wrap fee is $0.80/unit, we will collect and remit a sales tax of $0.07 to comply with state laws (calculated as 8.37% of the bubble wrap fee amount of $0.80/unit). If the service is performed at a fulfillment center outside Arizona, Connecticut, Illinois or West Virginia, we will not collect sales tax on the FBA Inventory Prep fees you pay.

For a list of Frequently Asked Questions on this topic, refer to the following

7 Comments

  1. And my reason for wanting to sell on Amazon again is what?

    1. Author

      Greater sales – largest online eCommerce site

  2. It’s interesting how Amazon is getting more expensive across the board, new taxes and fees left and right.
    Fact: Amazon paid $0 in U.S. federal income tax on more than $11 billion in profits before taxes. It also received a $129 million tax rebate from the federal government.
    Gordon Gekko would be very proud of Amazon…

    1. Author

      The reason Amazon paid near zero in taxes is that they made no profits because they invested in new distribution centers. However, Jeff Bezos reportedly personalty paid over $11 Million in personal Taxes

      1. And those distribution centers belong to who?

        1. Author

          They are Amazon centers and Amazon does not have a choice in this –it is State tax law. Some states charge tax on seller fees while others do not

    2. Author

      The reason for that is Amazon had very little profits due to large investments in opening new distribution centers – plus they have large tax loss carry forwards which used to be allowed for individuals but are now available to corporations only thanks to George Bush. FYI _ Jeff Bezos paid just over $11 million in personal taxes.

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