Taxing Amazon fees: tax form and calculator

States Will Begin Taxing Amazon FBA Fees

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Content overview:

  • Certain states will start taxing Amazon seller fees, though which ones is currently unknown.
  • Amazon states that they are not increasing seller fees.
  • Sellers are already in an uproar over the news, seeing it as “unconstitutional” and “double-taxation.”

Certain states will start taxing Amazon fees.

If you’re a seller on Amazon, or if you logged into Seller Central today, no doubt you heard that some states are taxing Amazon fees.

You may have even come across the following from Seller Central:

“Starting June 1, 2019, some states will consider specific Selling on Amazon fees such as per item, order, and refund fees as a taxable electronic service. Similarly, some states will consider FBA inventory prep fees such as bubble wrap, polybag, taping, and labels as taxable. Seller fees [are] not increasing, however; you may see tax applied to some seller fees. Tax collected will reflect with the order fee on the transaction details of your Payments Reports. Date range payment reports will continue to reflect the sum of fees per order.”

Additional information about states taxing Amazon fees:

This letter was sent out to sellers, letting them know about the upcoming taxation:

Dear Seller,

We are reaching out regarding the possible tax implications on some seller fees beginning June 1, 2019.

Some states consider specific Selling on Amazon fees such as per item, order, and refund fees as a taxable electronic service. Similarly, some states consider FBA inventory prep fees such as bubble wrap, polybag, taping and labels as taxable. Seller fees [are] not increasing, however; you might see tax applied to some seller fees.

For more information regarding this change, refer to the FAQ below:

– What fees are taxable?

Selling on Amazon fees (based on your business location):

  • Referral Fee
  • Subscription Fee
  • Variable Closing Fee
  • Per-Item Fee
  • Promotion & Merchandising Fee
  • Refund Commission Fee
  • Checkout by Amazon
  • Sales Tax Collection Fee

FBA service fees (based on order fulfillment center):

  • Labeling Fee
  • Polybagging Fee
  • Bubble Wrap Fee
  • Taping Fee
  • Opaque Bagging Fee
  • Repackaging Fee

Amazon answers questions:

In addition, Amazon went into greater detail, sharing the following information:

For a complete list of seller fees, refer to the following Help pages:

How will tax be calculated on my seller fees?
For Fulfillment services, the fulfillment center performing the taxable service will determine the tax rate. For Selling on Amazon fees, the location of your business in a taxable state will determine the tax rate calculated.

When does this begin, and where can I see any tax collected on my seller fees?
Beginning June 1, 2019, Amazon will start collecting sales tax on taxable seller fees. Tax collected will reflect with the order fee on the transaction details of your Payments Reports. Date range payment reports will continue to reflect the sum of fees per order.

Can I opt out of using FBA fulfillment services that may be taxable?
FBA services are performed on your items when you elect to purchase these services from Amazon, or when the packaging and prep requirements are not met.

To manage your FBA settings and minimize FBA service fees by prepping your items before sending to an Amazon fulfillment center, visit Fulfillment by Amazon settings at https://sellercentral.amazon.com/gp/ssof/configuration/index.html/ref=xx_fbasettings_dnav_xx.

To learn more about packaging and prep requirements, refer to the Help page available at https://sellercentral.amazon.com/gp/help/200141500.

For more information on Amazon fees, please visit the Selling on Amazon Fee Schedule at https://sellercentral.amazon.com/gp/help/200336920.

What are sellers already saying and asking about this?

On Amazon’s post about this change, the most common issue sellers are talking about is the lack of information regarding which states will be collecting these taxes. Some sellers see it as a “seller-killer”, and Amazon’s seller support team isn’t giving any details in open cases:

“Amazon, we need a list of states this pertains to, as this is a ‘seller-killer.’ I opened a case for this issue, they couldn’t give me an answer.”

And sellers are seeing this development as “double-taxation”:

“Is this NOT double taxation? I sell a $10 item, customer pays tax on $10, then Amazon charges me 15% and I pay tax on the 15%.”

Others, however, see the upcoming taxation as the normal cost of doing business. In other words, sellers pay Amazon for a service and, therefore, states have a right to collect taxes on said service:

“The states are claiming that you the seller are paying Amazon for a service and they want to charge YOU sales tax on that service.”

Already, research is being done to figure out whether or not this is constitutional:

“Paul Rafelson, of the OMG [Online Merchants Guild], has posted his belief that this constitutes an illegal Cost of Goods Sold tax and is gathering more information to determine the best way to fight it.”

We attempted to contact Mr. Rafelson for a response, but didn’t get a reply before publishing this article.

Breaking down what all this means.

Bottom line, certain states (yet unnamed) will start levying taxes on your Amazon fees beginning June 1, 2019.

Currently, Amazon issues its tax statements to sellers with all of the sales tax collected on their end, and then sellers must write off their expenses. What will change, once these new taxes take effect, is that states will be able to claim all of the sales collected by Amazon, ignoring the fees and costs already associated with selling on Amazon.

This means the taxes you pay to the state could increase.

This comes from the states, not Amazon.

As a seller, my first instinct when I heard about this was to point fingers at Amazon. However, this taxation comes from the states themselves. As the states continue to increase their grip on Amazon and other e-commerce businesses sales, things like this should be expected.

Of course, Amazon could change its accounting structure to make items like this more apparent to states. For example, fees could be broken out of sales on the backend. But, while this could be something they’re already working on, Amazon makes no mention of making any such adjustments.

That is to say, it’s unlikely that Amazon will change how their fees are applied.

Fees aren’t going up.

Amazon makes it clear in both their message on Seller Central and in their email that fees won’t be increasing. However, on a seller level, this could mean that the cost to sell on Amazon could go up.

Not only would sellers have to pay Amazon’s seller fees, but they could end up paying additional taxes on top of those fees. Effectively, Amazon and state tax commissions would be “double-dipping” to earn income from sales made by third-party sellers.

As more news comes about the taxing of Amazon fees, we’ll let you know.

This is only our first report of this major development. As more information breaks on this topic, expect Jungle Scout to be your first source of information!

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Image from Shutterstock, used with permission.

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