AlabamaKentuckyOhioAlaskaLouisianaOklahomaArizonaMainePennsylvaniaArkansasMarylandPuerto RicoCaliforniaMassachusettsRhode IslandColoradoMichiganSouth CarolinaConnecticutMinnesotaSouth DakotaDistrict of ColumbiaMississippiTennesseeFloridaMissouriTexasGeorgiaNebraskaUtahHawaiiNevadaVirginiaIdahoNew JerseyVermontIllinoisNew MexicoWashingtonIndianaNew York West VirginiaIowaNorth CarolinaWisconsinKansasNorth Dakota Wyoming But for the first time since 2016, Amazon's critics won't be able to point to the tech giant's nonexistent federal tax bill.
Amazon has been the subject of much criticism over the fact that the company's final federal tax burden has been particularly lacking in recent years. The company also came under fire for seeking huge tax incentives worth billions of dollars as part of its search for a second headquarters, or “HQ2,” in 2018.
In a blog post on Thursday, Amazon touted the fact that the company had “over $1 billion in federal income tax expense” in 2019. And, the company notes in its blog post that Amazon also paid roughly $2.4 billion “in payroll taxes and customs duties” in 2019.
Things are different now, and nobody is impacted more than Amazon .com (NASDAQ: AMZN), the world's largest online retailer and former chief place to buy goods while avoiding local government sales taxes. What Amazon can do is set up processes and systems through which taxes are applied to online transactions.
Amazon is the world's largest online retailer and must comply with state tax codes in many jurisdictions. The laws surrounding online sales taxes vary among states.
For example, in Colorado, Amazon .com purchases must include a 2.9% sales tax,which is much lower than in Illinois, which charges a 6.25% base rate plus whatever municipalities or cities charge, often 1% extra.Of course, consumers pay the tax, not Amazon, but the company must devote time and resources to the collection process. By Aug. 2016, 28 states charged a sales tax on products sold through Amazon .com, including California, Texas, Illinois, and New York.
By the end of 2015, approximately 80% of the U.S. population lived in states where Amazon collected sales taxes. This can be time-consuming and confusing because tax laws vary significantly across the country.
Certain states have enacted legislation, or so-called Amazon Laws,” that requires all online sellers to collect sales taxes. For example, General Motors also reported a net federal income tax benefit in 2018.
Companies as diverse as Southwest Airlines and Goldman Sachs have also reported similar benefits in certain years since 2008. The statement also mentioned Amazon's investment and job creation in the United States.
Watch the video above for more on Amazon and America's corporate income tax rate. Sales tax is a fact of life for most retailers, whether you sell online, at a brick and mortar store or all of the above.
Sales tax for Amazon FBA sellers is a bit more complex than it is for most other retailers. For the purposes of sales tax, e-commerce sellers are treated just like all other online retailers.
As an FBA seller, you are required to collect sales tax in states where your selling meets two criteria: Understanding both will help you determine when and if you are required to collect taxes from your Amazon FBA customers.
Sales tax nexus is just a fancy legalese way to say “significant connection” to a state. Ways to Have Sales Tax Nexus in Different States A location: an office, warehouse, store, or other physical presence of business.
Personnel: an employee, contractor, salesperson, installer or other person doing work for your business. Affiliates: Someone who advertises your products in exchange for a cut of the profits creates nexus in many states.
States with an Amazon Fulfillment Center Arizona California Colorado Connecticut Delaware Florida Georgia Illinois Indiana Kansas Kentucky Maryland Massachusetts Michigan Minnesota Nevada New Hampshire New Jersey North Carolina Ohio Pennsylvania South Carolina Tennessee Texas Virginia Washington Wisconsin An Important Exception to the FBA Rule Nearly every state with an Amazon fulfillment center now has a Marketplace Facilitator Law in place.
States with marketplace facilitator laws consider the online marketplace (such as Amazon, Walmart, eBay and Etsy) to be responsible for collecting sales tax on behalf of sellers. Of course, as with everything having to do with sales tax, individual states may make exceptions to these two general rules.
Some common product categories are not taxable or taxed differently in some states. In Tennessee, grocery items are taxable, but taxed at a reduced rate of 5%.
It’s important to register before you begin collecting sales tax. States consider it illegal to collect sale tax without a permit, no matter if your intentions are pure.
Your filing frequency is generally monthly, quarterly or annually and depends on your sales volume. If your sales dramatically increase or decrease as time goes by, your state may assign you a new filing frequency.
Always be on the lookout for letters or other communications from your state once you ’re registered for a sales tax permit. Fortunately, Amazon has a very robust sales tax collection engine.
Keep in mind that Amazon charges 2.9% of each transaction in order to collect sales tax. The alternative, however, is not to collect sales tax from your Amazon customers and to instead pay out of your profits.
We don’t recommend this because sales tax rates are subject to change frequently. If you sell on other platforms aside from FBA, make sure you are collecting sales tax from buyers in your nexus states on all of your shopping carts and marketplaces.
A sales tax automation will connect with all of your shopping carts and marketplaces, not just Amazon to give you a comprehensive report of all the sales tax you collected from buyers within a state. And finally, keep a few important things in mind when filing your sales tax return.
Be sure to report ALL sales to prevent discrepancies on your returns and questions from the state’s department of revenue. If you fail to file for multiple periods in a row, they may even automatically cancel your sales tax permit.
While this is generally only 1-3% of the sales tax you ’ve collected, it’s still free money! You should now be prepared to tackle Amazon FBA sales tax.
I’ll keep this list updated as new states implement Amazon warehouses. Here are three clever ways to avoid paying online sales tax, and in many cases get free shipping and a price at or below Amazon ’s.
The list of retailers fitting the bill is over 45, and many of them are “online only” and don’t collect sales tax either. A few of the more popular sites include Shoebuy.com, Overstock.com, and even eBay which doesn’t collect tax on most of the auctions you win.
Essentially they work by offering you a kickback on purchases you make using their links. They offer “rebates” at thousands of online retail sites and serve as a nice way to offset the sales tax that you pay.