Sales Tax Permit Registrations
DO YOU NEED TO GET REGISTERED FOR SALES OR USE TAX?
Here is what you need to know before you get started with your sales tax permit registrations:
- Do you sell a product subject to sales tax in the U.S.? The odds are yes; 97% of all products sold are subject to sales tax. Sales tax is added to the sale, unlike in the EU, where VAT is included in the final sales price. If you sell products like supplements, depending upon the ingredients, the supplements may be taxes in some states and not in others.
- Which states do you have nexus? Nexus means a presence. There are 45 US states with sales tax, plus the District of Columbia (D.C.). As a seller, if you have nexus in a state, you or your marketplace facilitator (like Amazon) have a responsibility to collect and remit sales tax on sales to residents in that state.There are several types of nexus; the most common are the following:
- Physical Nexus (FBA stock). There are 30 states that have FBA warehouses where your stock is shipped to a customer. If you have stock in one of these 30 states, that creates physical nexus. Once you have physical nexus, you have the responsibility of collecting and remitting sales tax on any sales to customers in those states. The great news, as a new seller, Amazon is likely ALREADY collecting sales tax for you in those states, so you may only need to register for a sales tax permit/license, and basically file a zero or information sales tax return.
- Economic Nexus. This was developed as a result of the 2018 US Supreme Court Case, Wayfair vs South Dakota. Basically, the states developed thresholds of sales and or transactions and, if you pass those thresholds (most common is $100K in sales or 200 transactions), you need to collect and remit sales tax for all new sales in that state after that point. Again, Amazon may already be collecting in those states, so all you need to do is register (in most cases) and file zero or information returns. There are currently 44 economic states. If you sell on a non-marketplace facilitator platform such as your own website or Shopify, you will be responsible to track when did your sales cross economic thresholds. There are 26 states with only 200 transactions that create economic nexus.
- Marketplace Nexus. This is where the marketplace facilitator (Amazon, eBay, Walmart) that offers a platform for third-party sellers, like yourself, is responsible for collecting and remitting sales tax once the marketplace facilitator passes a threshold. This is great news for you, as an Amazon seller. This means Amazon will collect and remit on your behalf; but, in most states, you still need to register and file sales tax returns (even if zero tax is owed on your part). There are currently 41 marketplace nexus states, and Amazon is collecting and remitting on your behalf in 39 of them.
- Amazon is collecting and remitting in 39 states. See this link for updates. This number will increase over time. There are 4 FBA states currently where you may have stock, and Amazon is not collecting. These include Florida, Georgia, Kansas, and Tennessee. Our Complete 8-step sales tax permit registration process through our sister brand, Sales Tax System, is the most complete in the industry. Top e-commerce and accounting firms use our registration services for their clients.If you are operating as a sole proprietorship, you may want to strongly consider forming your separate legal entity before you get registered in all the states you have sales tax nexus. This will save you a lot of time and money later having to re-register for sales tax once you form your new entity later.
Questions? We’d Love to Hear from You.
We are pleased to receive questions, comments and suggestions. If you ask for a specific piece of information or a reply, we will respond as soon as possible; however, please be patient as we do receive a lot of correspondence.