Ina Steiner EcommerceBytes Blog
News and insight focusing on ecommerce.
by Ina Steiner, Editor of EcommerceBytes.com
Fri Apr 12 2019 01:32:48

Amazon to Collect Tax on Seller Fees

By: Ina Steiner

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To the horror of many sellers, Amazon sent a notice on Thursday that it would begin collecting sales tax on seller fees and services, but sellers were left with many questions, and the company did not respond to our request for more information. 

Many readers forwarded the letter with questions and comments. "I just got this notice from AMZ and I swear I'm ready to stop selling online," wrote one seller. "This is too much. We are small, little sellers and we can't comprehend all this tax stuff. Taxes on Referral fees; subscription fees????"

The taxes affect sellers based on the state in which they are located, though Amazon did not provide such a list, and it impacts FBA *and* non-FBA sellers.

Here's the letter from Amazon to sellers:

Dear Seller,
We are reaching out regarding the possible tax implications on some seller fees beginning June 1, 2019. 

Some states consider specific Selling on Amazon fees such as per item, order, and refund fees as a taxable electronic service. Similarly, some states consider FBA inventory prep fees such as bubble wrap, polybag, taping and labels as taxable. Seller fees is not increasing however; you might see tax applied to some seller fees.

For more information regarding this change, refer to the FAQ below:

- What fees are taxable?

Selling on Amazon fees (based on your business location):
Referral Fee
Subscription Fee
Variable Closing Fee
Per-item Fee
Promotion & Merchandising Fee
Refund commission Fee
Checkout by Amazon
Sales Tax Collection Fee

FBA service fees (based on order fulfillment center):
Labeling Fee
Polybagging Fee
Bubble wrap Fee
Taping Fee
Opaque Bagging Fee
Repackaging Fee

The above list is some common seller fees. For a complete list of seller fees, refer to the following Help pages:
Selling on Amazon Fee Schedule: https://sellercentral.amazon.com/gp/help/200336920 
FBA features, services, and fees: https://sellercentral.amazon.com/gp/help/G201074400

- How will tax be calculated on my seller fees?
For Fulfillment services, the fulfillment center performing the taxable service will determine the tax rate. 
For Selling on Amazon fees, the location of your business in a taxable state will determine the tax rate calculated.  

- When does this begin and where can I see any tax collected on my seller fees?
Beginning June 1, 2019, Amazon will start collecting sales tax on taxable seller fees. Tax collected will reflect with the order fee on the transaction details of your Payments Reports. Date range payment reports will continue to reflect the sum of fees per order. 

- Can I opt out of using FBA fulfillment services that may be taxable?
FBA services are performed on your items when you elect to purchase these services from Amazon or when the packaging and prep requirements are not met. To manage your FBA settings and minimize FBA service fees by prepping your items before sending to an Amazon fulfillment center, visit Fulfillment by Amazon settings at (link).
To learn more about packaging and prep requirements, refer to the Help page available at https://sellercentral.amazon.com/gp/help/200141500.

For more information on Amazon fees, please visit the Selling on Amazon Fee Schedule at https://sellercentral.amazon.com/gp/help/200336920.
Regards,
Amazon Seller Services

Etsy already collects tax in certain states on applicable seller fees where required by law, but the only information we could find is on this page where it states, "Where applicable, state sales tax will be applied to the Pattern subscription fee and the Etsy Plus subscription fee charged by Etsy."

eBay has a help page about taxes where it mentions taxes on seller fees, but only VAT and GST: "Depending on tax legislation where you live, local Value Added Tax (VAT), Goods and Services Tax (GST), or similar consumption tax might apply to your eBay seller fees."

A seller on Reddit said, "It's worth mentioning that many of the electronic services we use such as accounting, sales tax, payroll etc.. have started charging sales tax within the last 6 months."

Paul Rafelson of the Online Merchants Guild compared the taxes described in Amazon's letter to sellers to VAT tax systems (Value Added Tax).

"If this is allowed, then states will have essentially created a VAT system, where they are going to tax direct input costs along the supply chain. But unlike VAT, there is no refund mechanism, so the sellers' price would have to reflect the double charge, so that the cost could be pushed down to the consumer."

He said that while businesses pay sales tax too, items that are taxed at the business level are typically overhead (not including Cost of Goods Sold), such as office computers - and are not direct / per unit costs.

"Sales tax law and policy is written to avoid a scenario like this where there is a direct double tax on per unit inputs that would directly be pushed down to the consumer," he said.

One concept we find outright absurd is that Amazon would collect sales tax on what it calls a "Refund commission fee."

Note that we are also waiting to hear back from eBay to see if it has similar plans.

Comments (51) | Leave Comment | Permalink
Readers Comments

Perminate Link for Amazon to Collect Tax on Seller Fees   Amazon to Collect Tax on Seller Fees

This user has validated their user name. by: NoMoreEbay

Mon Apr 15 15:11:56 2019

@Toolguy
"There will be NO escaping all taxes once the US Government goes to digital cash."

Not sure what you're referring to?

Excluding credit cards (a form of digital currency) that has been around since 1950. Our current form of digital currency is Crypto based (Bitcoin, Etherium,etc.) It is bar none the most anonymous form of electronic commerce in the world.

Then there's Venmo, Zelle, PayPal and the like. All protected by The Right to Financial Privacy Act.

Perminate Link for Amazon to Collect Tax on Seller Fees   Amazon to Collect Tax on Seller Fees

This user has validated their user name. by: toolguy

Mon Apr 15 15:21:45 2019

@iheartjacksparrow

California democrats would only waste the money on a useless bullet train to no where!

Or spend it on illegal aliens

I support neither

Perminate Link for Amazon to Collect Tax on Seller Fees   Amazon to Collect Tax on Seller Fees

This user has validated their user name. by: toolguy

Mon Apr 15 15:27:45 2019

@NoMoreEbay

I'm talking about the US dollar

Over the next decade the US Government will STOP printing currency and minting coins

All US currency will be digital (nothing to do with bitcoin or any other cyber cash)

When a dope dealer sells a bag the US will collect taxes on that sale

When a person paints a house for someone Uncle Sam will collect his share.

Nothing will ever be paid for without the government knowing about it and them taking their slice of the action.

They'll know what brand of paper you wipe your butt with and how much you use and where you buy it.

You won't be able to purchase 10 pressure cookers and 10,000 ball bearings without someone knowing about it.

When we go to digital cash our freedom will be gone FOREVER!

They'll claim it's all for our own safety. . . . . .

Perminate Link for Amazon to Collect Tax on Seller Fees   Amazon to Collect Tax on Seller Fees

by: maxmad This user has validated their user name.

Mon Apr 15 16:30:51 2019

@toolguy

You're very entertaining,, and your comments are so true

Perminate Link for Amazon to Collect Tax on Seller Fees   Amazon to Collect Tax on Seller Fees

by: GoingBroke This user has validated their user name.
Web Site

Mon Apr 15 17:29:06 2019

Taxing our sales is totally different from taxing fees and POSTAGE!  Wow they get a cut of what we pay the post office now and they do nothing for it now a tax on top of it. I've been looking at other options and thinking of getting off Amazon but now it is going to be by the end of the year or I will be out of business. Don't anyone making these stupid decisions know people can only pay so much. Currently both the post office and Amazon make more from my work than I do..that is sad. Oh, I mentioned this to Amazon they said raise your prices!--so they get another raise and that helps me how??. Selling online does not sound so good once you really look at what is happening. We had an opportunity to grow something good for everyone..but GREED is about to destroy that. With so many brick and mortar stores out of business it's pretty obvious that prices are going to go even higher online since we will not have other options. Something to think about for the future!!

Perminate Link for Amazon to Collect Tax on Seller Fees   Amazon to Collect Tax on Seller Fees

This user has validated their user name. by: Bidonmine

Mon Apr 15 21:07:07 2019

Online sales through various venues, for me, started at 100% of sales in 1997. Over the last 10 years, that number has gone down to less than 20% for online sales and now flea markets are 80% and more of my sales. Guess what, my profit has tripled.  

Perminate Link for Amazon to Collect Tax on Seller Fees   Amazon to Collect Tax on Seller Fees

This user has validated their user name. by: RKTOYS
Web Site

Tue Apr 16 06:53:19 2019

I threw together a quick calculator at the link above.

I plugged in the figures I had for Marvel Legends, one of the better selling toy lines amongst collectors right now.  Completely non-competitive on eBay and Amazon and could just barely beat MSRP selling independently.  Offline, though?  Can _almost_ compete with Walmart and squeeze a few bucks out of MSRP.

Not a perfect calculator though.  Doesn't factor in any fixed costs like eBay stores or booth rent.  But, wow, you really have to dumpster dive or prey on desperate bag holders to make it work online with the way these venues are set up now.

Perminate Link for Amazon to Collect Tax on Seller Fees   Amazon to Collect Tax on Seller Fees

by: val2525 This user has validated their user name.

Tue Apr 16 14:58:35 2019

You guys are getting pissed at the wrong entity. You have a problem with taxes on digital products, you need to write your state legislators. Get involved.

Perminate Link for Amazon to Collect Tax on Seller Fees   Amazon to Collect Tax on Seller Fees

This user has validated their user name. by: toolguy

Tue Apr 16 15:30:50 2019

Fees & taxes

My local .99 store has started charging .25 cents to use a shopping cart.

What's next?

Paid parking at Walmart????

Perminate Link for Amazon to Collect Tax on Seller Fees   Amazon to Collect Tax on Seller Fees

by: mindelec This user has validated their user name.

Tue Apr 16 20:37:16 2019

they sent a follow up today which says what they should have said in the first place....

Dear seller,

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: https://sellercentral.amazon.com/gp/help/GA65GGD8MR46A2WL.

You will be able to view the sales tax collected on your fees in the transaction details page of your Payments reports.

For a complete list of seller fees, refer to the following Help pages:
• Selling on Amazon Fee Schedule: https://sellercentral.amazon.com/gp/help/G200336920
• FBA features, services, and fees: https://sellercentral.amazon.com/gp/help/G201074400

Perminate Link for Amazon to Collect Tax on Seller Fees   Amazon to Collect Tax on Seller Fees

by: Chicago48 This user has validated their user name.

Thu Apr 18 04:05:05 2019

There are about 5 states where this is enacted, Illinois where I live is one.  I don't have FBA (so glad!) but it appears that if you rent storage space from AMZ and they ship out they are charging the sellers fees on bubble wrapping the product and other silly service fees.  It makes no sense, and if it spreads to other states I expect a class action lawsuit; or -- FBA sellers will pull out of those warehouses.

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