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What Being an FBA Seller Means for Sales Tax Compliance

You’ve decided to make the leap and become an FBA seller. Congrats! Logistics for your business just got a whole lot easier. More importantly, your customers will love the faster delivery turnaround.

While you’re working out all of the details of how to play the FBA game, be sure to keep one of the most often-overlooked implications of becoming FBA: sales tax. Committing to FBA involves a lot of work, so it’s understandable that sales tax can slip through the cracks (especially when Amazon doesn’t tell sellers that there are sales tax implications to using their service).

Here’s the best way to summarize how FBA effects your business:

Your business + FBA  = multi-state sales tax compliance

What the heck does that all mean?

Basically, it means that your business changes overnight in terms of sales tax obligations. No matter how much revenue your business is generating, sending your inventory to FBA turns your business from one that collects and pays sales tax in a single state to one that could potentially have to do the same in more than a dozen states.

Here’s why – all states that have FBA warehouses say that your inventory counts as nexus to their state. Nexus means that your business has a presence in a state that is significant enough for it to do the following three things:

  1. Register for a sales tax license in that state
  2. Collect sales tax on taxable items shipped from that warehouse to customers in that same state, and
  3. Remit (or pay) sales tax to the state when they to you to (states usually dictate payment frequency).

Here are some examples from TaxJar’s Blog detailing nexus laws for a handful of the Amazon states. Notice that all of the states specify that your inventory being stored in their state means you have nexus.

Years ago, nexus essentially meant you had to have a building or a salesperson in a state other than your own. But in this era of cash-strapped states, nexus is a whole new ballgame. States are doing everything they can to expand their taxpayer base. Changing their laws to include FBA sellers as taxpayers means they stand to make more money.

Now that you know you have nexus in multiple states, what’s next. Here’s an article about how to register your business for a sales tax license in each state.

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