Some states have targeted online sellers for marketplace service fees, and today, Amazon followed up with more details after sending an email to sellers last week.
Here’s a link to our initial coverage in the April 12th EcommerceBytes Blog about Amazon’s first notification to sellers. The text of today’s follow-up email from Amazon follows below:
On April 11, 2019, we sent you an email informing you of upcoming changes to the collection of sales tax on some of the fees you pay on Amazon.com. Based on the feedback we received, we realize that we did not include sufficient details in that email, and we would like to apologize. The purpose of this email is to provide greater clarity on the upcoming changes.
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 taxability.
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 State tax rules can change frequently and the information below may become outdated if states make changes to their laws.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 Labelling Fee, Polybagging Fee, Bubblewrap 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 page: (link).
You will be able to view the sales tax collected on your fees in the transaction details page of your Payments reports.
You can find more information and leave a comment on today’s EcommerceBytes Blog.