Ina Steiner EcommerceBytes Blog
News and insight focusing on ecommerce.
by Ina Steiner, Editor of EcommerceBytes.com
Tue Apr 16 2019 21:29:54

Amazon Reveals Which Sellers Will Pay Tax on Its Fees

By: Ina Steiner

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Are you one of the sellers from whom Amazon will begin collecting state sales tax on its fees? Amazon's April 12th notification was tantalizingly short on detail when it wrote of its new tax-collection practices that take effect on June 1st - an excerpt follows:

"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 are not increasing; however, you might see tax applied to some seller fees." (Typos fixed in the last sentence for readability.)

But which states? Would I be impacted, many sellers were left wondering.

Today, Amazon answered those questions in a follow-up email to sellers (and it actually apologized for failing to include sufficient details in its first email).

However, some sellers remained confused about when the tax would apply to sellers, and understandably so. For many years, the talk was all about states pressuring out-of-state sellers to collect sales tax from shoppers who are residents of those states. But that's not how the sales tax on seller fees works - it doesn't matter where the buyer is based. The tax described in today's notice applies depends on where the *seller* is based, or, in the case of FBA fees, where the Fulfillment Center is based.

Here's Amazon's explanation of how it would determine when to collect (we've added bullet points for clarity):

- 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.

And unlike the sales tax we've all been hearing so much about, this tax comes right out of sellers' pockets, not the pockets of buyers.

Some sellers wrote today on discussion boards that they believe Amazon is trying to get sellers to pay taxes that Amazon itself owed on its income. But as one seller responded, some states consider these to be taxable services, comparing it to an auto repair service bill. 

Other sellers are certain the tax requirements will spread to other states, even if they are spared this time.

We have posted Amazon's full letter separately - here is the link.

Here's the money shot (for now - as Amazon points out, this can change!):

- "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."

- "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."



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by: angryllama This user has validated their user name.

Wed Apr 17 04:56:20 2019

Sure sounds like a Grade A Cluster****** to me.   More to the point it sounds even MORE like this sort of NUISANCE TAX should just be PAID and ABSORBED by Amazon corporate.  No matter how niggly the states might WANT to be .... for them to insist upon the RECIPIENT of any such "service" be charged AND remit such penny-ante $ is ludicrous.   Just think how Teensy-Tiny a value there is on 2 square feet of bubblewrap and how the "sales/use" tax on that $0.02 VALUE would be.... Are they going to make Amazon sellers start paying the taxes in MILLS?    Pssst.   ****** is Fudge

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This user has validated their user name. by: Rexford

Wed Apr 17 06:20:22 2019

I think these states have bitten off more than they can chew.  They should call this The Great Greed Experiment or The Great Money Grab.  Will be interesting to watch how this unfolds.  

I am envisioning state tax collectors holding mom and pop by their ankles and shaking the change out of their pockets.

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by: mcposty This user has validated their user name.

Wed Apr 17 11:49:10 2019

It can only change if citizens change it.

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by: Chicago48 This user has validated their user name.

Thu Apr 18 04:13:30 2019

So glad I'm not FBA and rent warehouse space.  I feel sorry for the sellers who drank the AMZ FBA cool aid. What is a prep fee?  What is a bubble wrap fee?  Does that mean if AMZ uses bubble wrap to wrap your package to ship you are taxed on that also?  I'm trying to logistically understand why a state would tax bubble wrap that's been purchased and taxed before?  isn't that double taxation?

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by: jimcooncat This user has validated their user name.

Thu Apr 18 05:56:27 2019

They make it confusing by calling these "sales taxes" when in reality they are service taxes. As an "Amazon Koolaid Drinker", I'm not very upset by this. I'm glad this got clarified, though. The Selling on Amazon fee service tax applies to seller in those states, so it's up to the sellers to address this with their representatives. More than likely they rolled out these service fees to most service related business in the state and no one except Amazon has a clue about complying.

The tax on prep services? Well, these prep services are completely optional! If I want to pay the warehouse 20 cents to slap a sticker on my product, and they raise that to 22 cents, oh well. Pay or don't pay and put the sticker on yourself! I'm going to bet that Amazon will start routing incoming items to be prepped to other warehouses to avoid this. If so, the states will be shooting themselves in the foot, losing out on employment tax when those jobs are lost.

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by: hawk This user has validated their user name.

Thu Apr 18 06:40:43 2019

don't forget the fee for breathing and staying alive to pay more fees , then tax the fees to breath , and then pay the tax on the tax and other fees.  come on , what the h**l is the matter with these greedy idiots. it's only going to lead to very bad things ,and kill all good things.

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by: Tiffee Jasso This user has validated their user name.

Thu Apr 18 06:51:26 2019

I pay state sales taxes on all my shipping products. I would think that if you got taxed again on those same supplies by other states, it would be unlawful taxes as you did not purchase those shipping supplies from their state nor did you charge the customer extra for the shipping supplies. I imagine a lot of this had to do with Amazon filling their pockets.  

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This user has validated their user name. by: RKTOYS

Thu Apr 18 08:07:18 2019

Taxes just get weirder over time.  I ran into a weird situation this year.  I had started sourcing from clearance racks instead of distributors.  Ad a result of many retailers being unable or unwilling to handle an exemption certificate, I paid sales tax.  If I sold that item over a venue which has no per-sale, let alone per-item, way to toggle tax charges, it collected sales tax that wasn't actually due.  I could probably fix my software to account for this but it's not even on the radar for these offshore developers.

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This user has validated their user name. by: The End

Thu Apr 18 19:18:26 2019

If Amazon (fee-or) is collecting a fee, then Amazon should be taxed NOT the Fee-ee.

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by: mindelec This user has validated their user name.

Thu Apr 18 21:52:57 2019

@The End

the seller is the purchaser of the service, hence pays the sales tax.  kinda like if they started charging sales tax on the prime membership (which thinking about it, they should in these states).

i think this sudden interest of these states in collecting this tax has something to do with both federal funds being diverted for trumps wall and the corporate tax cuts that cut that income stream down by a third.

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This user has validated their user name. by: The End

Thu Apr 18 22:19:38 2019

Dear  mindelec :
I chalk it up to Pure Greed.
Once the economy came back, those whose only talent is taking our money, took the opportunity.



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