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 State tax rules can change frequently and the information below may become outdated if states make changes to their laws.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

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