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R. Klein, EA
R. Klein, EA, Accountant
Category: Finance
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Experience:  Intuit Ask a Tax Expert. QuickBooks Certified Pro Advisor (all editions)
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I sell on Amazon and my question pertains to sales tax. I

Resolved Question:

I sell on Amazon and my question pertains to sales tax. I live in the state of Texas and exclusively sell on Amazon. I ship all of my merchandise to one of Amazon's distribution centers (which are never in the state of Texas) and my merchandise is advertised on Amazon -- listing me as one of the sellers offering the product the buyer is looking at. When someone buys an item I am selling, Amazon ships it to them from their distribution center. Often when Amazon receives my merchandise at their distribution center (which may be, for example, in Philadelphia), they will re-distribute the merchandise to centers around the country to place the products nearest to areas that have historically had the highest demand for that product.

So here is my question. Typically sales tax law dictates that you are obligated to collect sales tax in any state where you have a physical business presence (which for me would only be Texas where my home-based business operates from), when you ship an item to someone in the same state. I, however, NEVER, ship any items to any customers in Texas myself. Amazon may be shipping items on my behalf to my buyers in Texas, but these items are being shipped from Amazon's distribution centers which are NOT in Texas! Therefore, I ship to Amazon (out of state) and Amazon ships to a customer in Texas from an out of state distribution center. In this scenario, am I obligated to charge and collect sales tax for purchases made by customers in Texas? Wouldn't Amazon "technically" be the seller of record? Since I do not ship direct to customers in texas and my merchandise does not get shipped from a Texas location to the customer in Texas, how does this affect sales tax? This is a very confusing topic and I have not found a lot of good information on the subject!
Submitted: 9 months ago.
Category: Finance
Expert:  R. Klein, EA replied 9 months ago.

R. Klein, EA :

Thank you for your question.

R. Klein, EA :

Under the scenario described, since your company has nexus in Texas, you would be obligated to collect and remit sales tax for all Texas buyers.

R. Klein, EA :

To make it more complex, sales tax is calculated based on the address of the recipient. Sales tax here in Texas varies by city and county, above the state's base 6.25%

R. Klein, EA :

You are the seller of record on these transactions; Amazon is simply a distribution channel.

R. Klein, EA :

However, Amazon does have different sales models. If you sell WHOLESALE to Amazon itself, then you do not collect sales tax.

R. Klein, EA :

If you are the seller and Amazon is simply drop-shipping, sales tax must be collected.

R. Klein, EA :

In most cases, Amazon's systems are setup to correctly calculate sales tax even when a third-party vendor is the actual seller. Be sure to check with Amazon on how this is physically accomplished.

R. Klein, EA :

At this point, Amazon has reached sales tax agreements with almost every state in the union. If Amazon is selling product, they almost universally have to collect sales tax unless the buyer is exempt.

Customer:

So this applies if theoretically the product is not being shipped from Texas to the buyer in Texas correct? I have decided to err on the side of safety since starting and have been collecting and remitting sales tax to Texas since I started, even with my questions, but learned other sellers are not, and just wanted to clarify the actual law! It sounds like you are very familiar with this and it is refreshing to hear from someone who has knowledge of this situation! Thank you!

R. Klein, EA, Accountant
Category: Finance
Satisfied Customers: 2880
Experience: Intuit Ask a Tax Expert. QuickBooks Certified Pro Advisor (all editions)
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