An Amazon FBA Seller’s Guide to Understanding Sales Tax Nexus

Taxes, taxes, taxes… A Seller’s worst nightmare. They can be filled with scary numbers, calculations, and many complications.

Taxes give you sleepless nights and an urge to bang your head on the table, especially for Amazon Sellers, where the complexity of filing taxes is much more. In fact, many Sellers are not even aware of the sales tax and its regulations on the marketplace.

They might be intimidating, but they’re equally as important for your business to run smoothly. This is why, for compliance reasons, you must be well aware of the ins and outs of sales tax.

Sales tax regulatory laws are a broad topic, and taking it all in one guide can be overwhelming. So, to keep things simple, this blog will cover one of the most vital pieces of sales tax regulatory laws, the sales tax nexus.

Let’s jump right into the very basics…

Do you pay taxes on Amazon FBA?

Many Amazon Sellers are unaware of the fact that they need to pay taxes on Amazon. However, the point still stands — online retailers (including those selling on the e-commerce giant) need to pay taxes like all other brick-and-mortar businesses.

There are two types of taxes: i) income tax, and ii) sales tax. Sales tax is the fixed percentage of the price of a product that a customer pays to the government — the Seller collects the sales tax. On the other hand, income tax is the percentage of your net income that you pay to the government.

As an Amazon Seller, the type of tax that concerns you in this situation is the sales tax — or, more explicitly, collecting it. Collecting sales tax is a crucial step during your transaction as the state and/or the local government will fine you big time if you don’t collect and remit it. You will have to pay fines and remit the taxes from your pocket, which will eventually harm your business, leading things to go downhill.

Ok, we’ve got the significance clear, but how does it work?

Start by registering in states where you are required to collect sales tax. Then, when customers buy your products, you collect the tax, file a report on your sales to the relevant states, and remit the sales…