Question on Amazon FBA and Nexus (Sales Tax)

[Rerun]

I know a lot of people are selling on Amazon, and hoping someone can shed some light on how sales tax works...

I'm setting up my Amazon Sellers account and there's nothing in the Amazon help docs that explains how sellers should charge sales tax except for some pretty vague language. The Sellers discussion forum is also full of confusion.

My limited understanding of the tax law is that, depending on the state, if you're items are warehoused and shipped to an individual in that state, your business has nexus in that state - and therefore are subject to paying sales tax. There are also states like California that have the Amazon Tax.

So that means I need a state registration number, pertinent retailer licenses and pay sales taxes in the state my business is located, plus:

• Arizona
• California
• Kansas
• Kentucky
• New York
• North Dakota
• Pennsylvania
• Texas
• Washington
• Indiana
• Delaware
• Nevada
• New Hampshire
• South Carolina
• Tennessee
• Virginia

Now because I am warehousing and shipping my wares in these states, the state may determine that I am considered as doing business in these states. This depends on the various laws for each state, but could require that I am incorporated in that state, have all the appropriate businesses licenses, and pay corporate business tax as a foreign entity.

So now all the tax prep and bookkeeping complications has made Amazon FBA not looks so attractive.

I just sent my stuff to the Amazon warehouses, but starting to think I don't want to sell a single item through their fulfillment centers.

Do I have this all wrong?

Edit: Also need to consider county, city taxes and/or regulations that may be imposed.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[1step]

Id love to hear someone with more experience than me chime in.

For me I have primarily sent inventory to 3 fullfilment centers in 3 states. So I would need to file in those 3 states plus my own. I can very much control where I send my inventory, if amazon pulls up a facility I dont want to send to I simply cancel the shipment location. This hasnt been an issue yet.

 

[Rerun]

I can very much control where I send my inventory, if amazon pulls up a facility I dont want to send to I simply cancel the shipment location.

That's good thinking... just limit the shipments to the warehouse that has the cheapest shipping rates and favorable laws. Limit your tax liability to just one state.

I did some more googling and it seems that in most cases having your inventory in those warehouses does create a tax nexus. This is not just the case with Amazon, but fulfillment houses in general.

What I'm unclear about is if having Amazon fulfill your product requires you to also pay sales tax in the states that have the Amazon law. I would assume so since affiliates could be promoting your product.

 

[1step]

That's good thinking... just limit the shipments to the warehouse that has the cheapest shipping rates and favorable laws. Limit your tax liability to just one state.

I know amazons main goal is to get product close to its customers to allow for faster shipping. So it may be important or necessary to choose states that are spread through out the US. For me my products are sent to PA, TN, and AZ.

What I'm unclear about is if having Amazon fulfill your product requires you to also pay sales tax in the states that have the Amazon law. I would assume so since affiliates could be promoting your product.

It seems as though amazon should handle this.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Eskil]

Subscribing to this thread. Rerun; thanks for bringing this up for debate here. I would love to hear the input from more of the guys who have been selling on Amazon for a few years now.

 

[mikey3times]

Hate to bump an old thread, but I fear I am stuck and want to confirm.

Is anyone out there using one of Amazon's California warehouses? Are you an out of state LLC? Did you have to file for a Cali Foreign LLC ($850 per year) so you can register to pay CA sales tax?

Or should I just have Amazon send back my Cali goods?

 

[Unknown]

Hate to bump an old thread, but I fear I am stuck and want to confirm.

Is anyone out there using one of Amazon's California warehouses? Are you an out of state LLC? Did you have to file for a Cali Foreign LLC ($850 per year) so you can register to pay CA sales tax?

Or should I just have Amazon send back my Cali goods?

Did anyone ever get an answer to this. I tried to sign up to pay sales tax, but they want me to file for an LLC in California. If I have to file for an LLC in California in order to pay sales tax, then logically that would mean that Amazon FBA must not be creating enough nexus for me to pay sales tax as it is.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[TKDTyler]

Did anyone ever get an answer to this. I tried to sign up to pay sales tax, but they want me to file for an LLC in California. If I have to file for an LLC in California in order to pay sales tax, then logically that would mean that Amazon FBA must not be creating enough nexus for me to pay sales tax as it is.

FYI LLC's in California will be an extra $800/year.


I just went through the process for sales tax (I live in Cali).

*Anybody feel free to correct me if I am wrong or misinformed as I am still learning*

The term you are looking for is "Use Tax." Every state has different policies assigned to use tax, but you need to have a sales tax permit/ID for each state that you have a nexus in unless specified to legally collect sales tax at the time of purchase.

"DEFINITION of 'Use Tax' A sales tax on purchases made outside one's state of residence on taxable items that will be used, stored or consumed in one's state of residence and on which no tax was collected in the state of purchase."

• Some states have a minimum sales value that you must exceed before needing to apply and pay for use tax.
• Other states require you to register your business as a corp/LLC through their Secretary of State before allowing you to have a use tax permit/ID.
• Some states will allow you to obtain a use tax permit/ID for their state without registering your business through their Secretary of State.
• Arizona has you pay for registration in each county as a taxable seller and is required to sell in each individual county. There is a fee associated with each as well.

So it all depends on each state. TaxJar has pages dedicated to state sales tax registration. You just need to go through the process of applying through each states appropriate channel.

Be conscious of your permit start dates as some will register you the date of the submission and others will be at the beginning of the year. Keep track of your renewal dates.

Also be conscious of your payment dates. Depending on your sales volume, it will dictate whether you are annual/quarterly/monthly for your tax payments.

 

[TKDTyler]

Subscribing to this thread. Rerun; thanks for bringing this up for debate here. I would love to hear the input from more of the guys who have been selling on Amazon for a few years now.

How's the whole tax situation been with you/Stabyl Cam?

 

[Unknown]

FYI LLC's in California will be an extra $800/year.

Yea, that's the part I take issue with. I'm not in California, so I don't see how they can require me to pay for an LLC because of Amazon Nexus. I've signed up for other states in the past, but never California because it's a pain.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[TKDTyler]

Yea, that's the part I take issue with. I'm not in California, so I don't see how they can require me to pay for an LLC because of Amazon Nexus. I've signed up for other states in the past, but never California because it's a pain.

From what I gather, you are still responsible for paying the $800 even if you are not incorperated within the state.

From: http://www.corporatesecuritieslawbl...ut-of-state-llc-doing-business-in-california/

"The law:
Under California law, all LLCs are required to annually file a California tax return and pay at least an $800 California franchise tax if they:

• Engage in any transaction in California for the purpose of financial gain or profit.
• Are incorporated or organized in California.
• Have qualified or registered to do business in California.
• Are “doing business” in California, whether or not they incorporated, organized, qualified or registered under California law."

I would just give up the $800 and avoid tax penalties.

There is 2 organizations in the USA that you don't F*ck with. The NSA and the IRS.

 

[TKDTyler]

Lesson I learned from one of my mentors:

How would you run your business if it was a $10,000,000 business vs how you are running your business right now?

Would you cut corners to avoid small fees and hopefully not get caught? Always think scale and run your business as if you are getting to that $10,000,000 mark. It is more work up front, and more capital, but once your system is in place, it is a lot less work down the road.

If you set your system up for success at scale, then when you reach your goals, you won't have issues.

Conversely, if you set your system up for failure, you are going to be running into issues you forgot to address in the past. It's the small things that end up biting you in the a$$.

What if not paying that $800 is grounds for a full audit. Your bookkeeper missed some numbers. Someone is siphoning money. And because that that small issue, you are in a whole new world of stress and litigation.

 

[DrkSide]

I'm going to go against the grain of most sellers. You have people that file and pay sales tax in all the states and you have people that don't.

My View: I do not have nexus and do not need to pay sales tax in any state besides the one that my operations are in. Since the relationship between sellers and Amazon is a consignment relationship according the the tax code they are responsible for collecting applicable sales tax and not the properties owner. The consignment relationship is supported by the Amazon TOS that customers are property of Amazon and not the "seller".

Note: Until there is precedent otherwise this will be the way I operate. I am not a lawyer/CPA/etc and this is not professional advice.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[TTG SS]

https://blog.taxjar.com/california-state-sales-tax-2017/

I do not think you need to setup an LLC in California if you are not based in California even if inventory stored there in a warehouse (e.g FBA).

P.S a lot of sellers use Taxjar which makes the tax process relatively painless.