Sometimes one job just doesn’t cut it. With all the financial demands placed on us by life in general, it just doesn’t seem like one paycheck (or even two if you are a two worker household) can cut. So it hits you, why not sell some of those duck decoys online. But where do you sell them? So, one night you’re browsing the net and see some of your friends talking about selling through Amazon’s marketplace, and you think “Hey, I can sell my duck decoys online.” You go online and start to set up an account. Then your significant other walks in and asks “What do you do about sales tax?” Ugh! You completely forgot about that. How do you add sales tax in to your account?
The great thing about selling on Amazon is that have a sales tax collection service and an outside vendor, Vertex Indirect Tax O series, to support any tax calculations. This should make things a bit easier when setting up sales tax properties for your listings.
The first thing you need to do is contact the departments of revenue for the states you plan to sell and get a sales tax number. This is needed if you want to enable the tax collection features Amazon provides. Please translate the “if you want to” to mean “this is something that you must do.”
To step ups your account to collect sales tax, you need to do the following:
1. In your seller account, go to the Settings tab and click on Tax Settings. A message should appear that says “Welcome to the Tax Manger page.”
2. Select View Tax Calculation Methodology, which takes you to the “Review the Amazon tax methodology” page. Look over the methodology page and make you understand what it says. After you have viewed this and are comfortable with the methodology, select Continue.
3. At this point you will be taken to the View product tax codes page. You will need to click on the link for a product tax code to see information about that particular product tax code. This will also show you the list of conditions that apply when using this code.
4. After you have completed your review of the tax codes you will be using, select Continue at the bottom of the window.
5. You will be taken to the Set up your Tax Collection Settings page. This window will allow you to set up the following:
a. A seller-defined default product tax code.
b. The locations supported by Amazon in which you want to collect tax at the state, county, and city level.
c. An optional custom override rate for a state.
d. Your state tax registration numbers.
e. The tax settings for shipping and gift wrap.
6. At the bottom of the window is the Tax Collection Obligation table. Review this so you are familiar with what you need to do.
7. Look below this listing of states and click on the acknowledgment button, then select Continue.
8. At this point, Amazon gives you a chance for one more review of your settings. If everything looks good, click on Continue.
9. You should now be on the Confirm your tax collection settings page. After you are satisfied with your selections, check the three boxes then click Confirm.
10. At this point, your settings should be saved.
Keep in mind that sales tax is charged at the most localized areas that is specified when you entered the rate. So if the lowest level you entered was a city rate, the city rate will be charged. But if you entered a statewide rate, Amazon will use the statewide rate.
As always, if you have questions, don’t hesitate to contact your local CPA. They can help clarify any questions you have on how to charge sales tax.
Chris Peden, CPA, CMA, CFM has over 15 years in the corporate world helping companies meet their regulatory compliance requirements. He also assists small business owners with organizing and making sense of their finance information. You can reach him at chrispedencpa@yahoo.com. In accordance with Circular 230 Treasury Department Regulations, we are required to advise you that any tax advice contained in this article may not be relied upon to avoid penalties under the Internal Revenue Code. If you are interested in a written opinion that can be relied upon to prevent the imposition of tax-related penalties, please contact the author.
