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: toolguy

Fri Apr 12 03:34:39 2019

Why do I have the feeling Amazon caters to china more then eBay does!

You notice how they say based on "location"

Amazon's growth is fueled by chinese sellers who can crush American competitors who are trying to sell chinese products cheaper then the chinese can. . .

And look at all those FEES! and people complain about eBay! ~ ROTFLMAO

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: The End

Fri Apr 12 04:07:25 2019

AGAIN:
Government is killing Our way of life.

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

by: Silver Ice King This user has validated their user name.

Fri Apr 12 05:49:46 2019

As usual, the politicians have found a way to get more money from their constituents and then manage to blow it on their stupid pet projects in their specific jurisdictions.  I love some of the studies I have seen on the Federal Budget that are so ridiculous all a person can do is laugh, but the politician is proud of it because he brought Federal Tax money to his voters.  I am trying hard to remember the funniest one but all I can come up with is one year there was a study of why pigs vary as to their skin color or something along those lines and they spent over $75 million on it.  There was no need or benefit to this study other than the Congressperson to be able to say they brought $75 Million tax dollars to their voters so they should be voted into office again next election.

It is stupid things like this that get added to the good bills that are trying to make their way through the voting process but every person that agrees to vote for it has to add their own personal spending attachment to it.  This charging sales tax on internet sales and services is just another way for politicians to get more money that they can blow on stupid projects.  If they really needed it and spent the money where it is needed I would not have an issue with it, but that just rarely seems to happen anymore and they bury these junk attachments as deep as they can so they are not brought up and discussed openly,.

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: Rexford

Fri Apr 12 06:02:00 2019

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

Ina, when I read that sentence in the email that I got from Amazon I was gobsmacked.  It makes absolutely no sense whatsoever.

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: Rexford

Fri Apr 12 06:05:29 2019

And here's the irony--Amazon pretty much gets a free ride as it relates to taxes.  Cities beg to subsidize them.

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

Fri Apr 12 10:34:05 2019

I don't sell on Amazon and I no longer buy on Amazon since my free 1 year prime subscription expired. . .

I would rather be a eBaytarian then an Amazonian

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: Rexford

Fri Apr 12 10:54:08 2019

Toolguy says "And look at all those FEES! and people complain about eBay! "

You'll eat those words when eBay and all other ecommerce companies adopts these same policies.

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

Fri Apr 12 12:44:34 2019

1. Listing fee
2. Final value fee
3. Fee for postage
4. Paypal transaction fee
5. Paypal 30 cents fee
6. Postage cost
7. Shipping materials cost
8. Item cost

And now a tax on services

And if that isn't enough, what little profit if any is left is taxed by the Federal govt.

Ten fees, taxes for one single item. Then there's the buyer abuse, lack of seller protections, hidden listings, changes every week, sites flooded with Chinese junk and counterfeits. Every day I wake up and thank G-d I stopped selling on these sites on September 2018.

The government, the postal service and companies like ebay, Amazon and etsy are systematically destroying the online selling experience for small to medium sellers. Literally purging every single dime they can get their greedy hands on.

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

by: industrystones This user has validated their user name.

Fri Apr 12 12:53:34 2019

...And I hear the "extraordinarily reasonable" (Haaa) 3.99 per shipping a single DVD on Amazon is jumping to 4.99 soon.
Can you Imagine ?  Does anyone really buy these things at these shipping prices?
Maybe people would go out and buy tangible product instead of pirate downloads and torrents etc... If certain other people weren't so damn greedy.
Amazon is lame. Has been for a while.

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

Fri Apr 12 13:30:53 2019

Amazon's fees _are_ higher than eBay's though.  They take 10% out of an anemic shipping voucher, which forces you to pad the item price where they charge 15% plus a flat 99c fee.  That's if you aren't paying FBA rent.

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: Rexford

Fri Apr 12 17:17:17 2019

RKToys says "Amazon's fees _are_ higher than eBay's though."

That is true but a plus with Amazon is that I deal what a whole lot less loonies and bottom feeders there.  I do agree with you about the fees though.  The shipping allowance is pathetic.

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: Marie

Fri Apr 12 18:35:41 2019

From the article: "One concept we find outright absurd is that Amazon would collect sales tax on what it calls a "Refund commission fee."  AKA Administrative Fee.

While I find this whole thing outrageous, the line item on the list of fees that I find the most ridiculous Sales Tax Collection fee.  So if they start charging a Sales Tax collection fee, there is going to be another fee for sales tax on the fee charged to collect sales tax.  WHAT??!!??  I'm getting dizzy!!!

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

by: Snapped This user has validated their user name.

Fri Apr 12 19:22:13 2019

"Let me tell you how it will be
There's one for you, nineteen for me
'Cause I'm the taxman, yeah, I'm the taxman

Should five per cent appear too small
Be thankful I don't take it all
'Cause I'm the taxman, yeah I'm the taxman

If you drive a car, I'll tax the street,
If you try to sit, I'll tax your seat.
If you get too cold I'll tax the heat,
If you take a walk, I'll tax your feet.
Don't ask me what I want it for
If you don't want to pay some more
'Cause I'm the taxman, yeah, I'm the taxman

Now my advice for those who die
Declare the pennies on your eyes
'Cause I'm the taxman, yeah, I'm the taxman
And you're working for no one but me."

-- George Harrison / The Beatles

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

Sat Apr 13 06:54:40 2019

With all of these fees, taxes, fees on taxes, taxes on fees, and so on, selling online is getting to be like anything else - if you aren't big already, don't even bother.  Pretty sad when you have to find stuff at pennies on the dollar (eschewing all normal distribution channels in the process) to make a buck.

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

by: Whatever This user has validated their user name.

Sat Apr 13 11:28:48 2019

I told you he'd find the money for that divorce

Reaistically I'm not sure what it's like where you are but in the desert our weather is pretty good daily.  I'm seeing more and more pop-up swap meets - your know vacant corners that sellers just kinda set up a flea market (unlicensed of course) There's more and more "events" held in parking lots outside antique malls - 1 today as a matter of fact.  Those do it yourself auction sites are doing fairly well. Craigslist is jamming - selling in Facebook is ever growing - garage sales have whole website announcing events. UTubers are spreading the word to get off internet selling while you can. Seller groups on Facebook help each other devise new methods to avoid the ever hungry tax man. Ebay's getting killed with their greed and apparently Amazon is about to start their decline. The government is again reaping yet another tax on the peasants - taxation without representation. Remember the tea party? And the government continually gives themselves raise after raise and all the tax evasion breaks it can to the wealthy. It's coming folks - hang on - revolution.

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

by: Grady This user has validated their user name.

Sat Apr 13 21:59:47 2019

Well, Jeffey's wife couldn't trust him either. Someone's got to pay for that big divorce

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: The End

Sun Apr 14 03:53:10 2019

Could this be a Not So Veiled attempt at reviving Brick and Mortar stores ?
Because This is going to destroy everything in online sales.

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

by: lancecorp This user has validated their user name.

Sun Apr 14 05:32:05 2019

As Silver Ice King said - it's more a policy that politicians in certain states - like NY - have come up with and less of an Amazon decision. Taxing online sales has opened the door to all sorts of new taxation states can come up with.

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: The End

Sun Apr 14 07:54:29 2019

And So.....
This is going to destroy everything in online sales.  

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

Sun Apr 14 10:30:10 2019

"I told you he'd find the money for that divorce"

"Someone's got to pay for that big divorce "

It's not like Jeff gets to keep this money!

They are TAXES, the states are the ones making out not Bezos. . . . .

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