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One of the most confusing parts of running an Amazon FBA business is the fact that storing inventory in Amazon fulfillment centers creates sales tax nexus for your business. Sales tax nexus is just a fancy way of saying a significant presence. And if you have nexus in a state, you are required to collect sales tax when you make a sale to a buyer in that state.
Unfortunately, because sales tax is governed at the state level and Amazon doesn’t provide any education about sales tax, many FBA sellers are confused on what to do about sales tax. We talk to many sellers who have been selling for years and are only just now realizing that they have been on the hook to collect sales tax in some states.
Fortunately, an upcoming “sales tax amnesty” will give many sellers the chance to start collecting sales tax with a clean slate.
What is the sales tax amnesty?
In a program managed by the Multistate Tax Commission (MTC), 15 states have come together to offer a “get off the hook free” card to Amazon and other online sellers.
Once a seller applies for amnesty, these 15 states promise that they will not “look back” at past sales tax liability as long as the seller collects and files sales tax going forward.
The amnesty takes place between August 17-October 17, 2017. The following states are participating:
- Colorado (upcoming Amazon state)
- Connecticut (Amazon state)
- Kansas (Amazon state)
- Kentucky (Amazon state)
- New Jersey (Amazon state)
- Texas (Amazon state)
- Utah (upcoming Amazon state)
The MTC is also in talks with 6 more states to potentially participate in the amnesty.
To take advantage of the amnesty, starting August 17th the MTC will provide an application. Sellers should fill out the application and choose which state (or states) in which they wish to participate in the amnesty. From there, the MTC will work with those states on the seller’s behalf. A link to the application will be provided once the amnesty begins.
How do I know if I should participate in the sales tax amnesty?
As with every business decision, this is up to you. If you are concerned that past due sales tax will come back and harm your business, then the amnesty period is perhaps the best possible time to get sales tax compliant with minimal consequences. The fact that these states are participating in an amnesty program demonstrates that they are aware of non-compliant Amazon sellers in their midst.
The decision on whether to participate in this amnesty is up to you. We recommend you take the following steps to determine if the amnesty is right for your business:
- Determine where you have sales tax nexus – You have sales tax nexus in states where Amazon stores your inventory for sale. You can find out where your inventory is stored from within Seller Central by viewing your Inventory Event Detail report. If you use TaxJar, you can see where you have sales tax nexus by viewing the brown Amazon badges next to each state.
- Determine your sales tax liability in each state – If you have nexus in a state, but never make sales there, then it may not be feasible for you to register for a sales tax permit there. However, if you owe a significant amount of money to a state, and your business could be damaged if that state found you and audited you for past sales tax due, then the amnesty is a good time to “get off the hook” free. You can read more about when is the right time to register for a sales tax permit here.
It’s always a good idea to consult professional help. Here’s a list of vetted sales tax experts.
More Resources on the Sales Tax Amnesty
If you wish to learn more about the amnesty, check out these links:
- READ the sales tax amnesty announcement from the Prosper Show
- JOIN the Prosper Show’s Sales Tax Amnesty Webinar with Richard Cram of the MTC (Register here)
- JOIN TaxJar’s Sales Tax Amnesty Webinar with Mike Fleming of sales tax firm Peisner Johnson (Register here)
About the Author
Jennifer Dunn is Chief of Content at TaxJar, a service that makes sales tax reporting and filing simple for more than 9,000 online sellers. Try a 30-day-free trial of TaxJar today and eliminate sales tax compliance headaches from your life!