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.
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."