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What is Marketplace Facilitator Tax? – for Amazon FBA sellers

What is Marketplace Facilitator Tax? – for Amazon FBA sellers


Hey guys, so I want to talk about something
that is happening on your account and you might not even know it. So if you sell on Amazon.com at the moment
you are collecting sales tax in Washington state. In fact Amazon is collecting it on your behalf,
but on your account in seller central, you will see every person who’s buying from you,
who’s from Washington state, you will see a tax charge being charged to them. So you are in fact collecting it and then
Amazon is reimbursing you in the same transaction. So there are some things that you need to
know about how it looks like, what it does to your revenue and the do you even need to
worry about it or a submit any income tax reports in Washington and so on. So let me tell you about all of these things
step by step. Okay? So first let’s look at the specific order
example. So for example, I sold one unit of this item,
right? And when I look at the breakdown, I see that
the price was $29, 99. And actually that’s all it is. Twenty nine 99 and I don’t collect any tax
normally in United States because I’m from Canada and I don’t charge shipping because
Amazon is doing the shipping for me Fba warehouse. So all I would expect to see is the price,
but what I see in breakdown is these items. So there was some kind of tax that I apparently
charged my customer on top of the price. And then there was a charge back called facilitator
tax chargeback. So this tax that I charged the customer was
given back to me, by Amazon, and then there was a shipping charge that I apparently charged
the customer, but actually it was the Amazon who charged the shipping. So they gave me back the shipping cost as
well. They also charged the shipping text to the
commerce customer, which they also gave me back. So you’ll see, you can see all the math here
in the breakdown, but in fact you had 21.99 and you still have 21.99 that you charge your
customer. Right? So in the end, after everything, you make
that much profit. So, um, let me show you how you would see
all this working out within the seller central. So when you go to seller central and you look
at the transaction details for this particular order, what you would see is a section which
contains all those marketplaces, marketplace facilitator tax and shipping and principal
and so on. So exactly the same things that I’ve just
showed you within Amz pink, appear within seller central. So you’re maybe a new to this and you might
not know why this is even happening. So let’s start from the very beginning. Do you even have to worry about the sales
tax in the United States? Well, the answer most likely is yes. Even if you are not from Washington state,
maybe you’re from another state in the United States, maybe you are from UK or France or
Canada and so on. You still have to pay, collect the sales tax
in United States, even though you may not be registered a company in United States or
not have a nexus. Well, there is something, a certain expression
called nexus, which means sufficient physical presence. That is how each state decides whether they
should charge you the sales tax, or whether you should collect the sales tax or you shouldn’t. Right? So now you have to decide if you have a nexus
or you don’t. And you have to, there’s a little bit of gray
area involved, like you have to take your own risks and make your own decisions. But I will tell you three factors here which
are important when deciding whether you should collect or you can skip and not collect for
a little while. Well, all my advice, take it with a grain
of salt because I’m not a tax consultant. This is just something that I know from researching
and reading a lot about this topic. So of the factors that help you decide whether
to collect sales tax in the specific state. First of all, do you have an office? You have physical presence, like your house,
any warehouse or a car, or any kind of registration, driver’s license? I don’t know. Something related to that state. If you have any ties at all with that state,
yes. Then you have to collect sales tax. Another thing that people look at is at the
actual tax amounts that they would have to submit. If let’s say at the end of the year, you would
look at your all of your sales in Arizona for your Amazon sales and if you see that
you only had 12 sales in Arizona that year, that means your total sales tax would be,
you know, five percent of your sales. It’s like $20.. but actual submission of taxes
and filing them and paying Taxjar or Avalara, for the service that would cost you like $300-$400
and then the registration… That is way, way more than the actual tax
you would you collect, you know, that is called not material and in that case, most likely
you would not register in that state. So if the tax is so small that seven years
later if the audit comes and they tell you, hey, come and pay tax now for all the seven
years that didn’t and your company doesn’t go broke because of this number. Then many sellers at the moment are just leaving
be, because they are waiting for the better days that I will just talk about in a few
slides. Another very important thing to consider is
do you have any inventory in that state? And that’s where the most confusing part comes
in because Amazon Fba has many warehouses and they, when you send them your stock over
100 units, they keep a little bit in one state, a little bit in another state and another
state. So if they keep any at all in Arizona, you
would automatically have a nexus there because your units are stored in Amazon warehouse
in Arizona and that makes you have to pay the sales tax unfortunately. So, the blue states are the ones that at the
moment of recording a have fba warehouses in them, but a few of them are only announced
recently and I am sure in one and a half year from now, all of them will be blue. So Amazon will come to all the states for
sure because look at the map. They are already everywhere almost. So it doesn’t, you know, like I said here,
if you have any stored inventory in the state, you would have to worry about paying sales
tax. So today you only have to worry about these
blue ones, right? But very, very soon you will have to worry
about the rest as well. Now let’s talk about the few special cases
now where this marketplace facilitator tax comes in. Certain states, for example, this one, which
is Washington and Pennsylvania at the moment have enabled something called marketplace
facilitator. Instead of going after all these thousands
of little guys like you and me, they go after the big guy who is the Amazon, the marketplace
facilitator. That means they have their own marketplace,
which is Amazon.com. They facilitate it, they host it, and they
invite other sellers to sell on it and that’s why they deemed them responsible to collect
the sales tax from all the sales that happen in Washington. So that is exactly what Amazon is doing. They are collecting the sales tax for you
in Washington and Pennsylvania. And if you look at the seller central tax
settings, you will see that whatever settings you had before it’s been overwritten in Washington
and Pennsylvania right now to say that it’s automatically collected whatever you are. Even if you’re not registered, you’re out
of country. It doesn’t matter. They are collecting sales tax for all the
sales in Washington and Pennsylvania. And Trust me, this is just the beginning. There’s also on the line, the Rhode Island
and Minnesota very soon going to be added to the list. I am expecting eventually that all the states
will do that at the moment. Situation is a little bit more complicated
than that because some states like Washington is saying, okay, from now on you collect sales
tax. But some states unfortunately some a little
bit more picky ones are suing Amazon for all historic tax that they didn’t collect and
they have to now to pay them this big, big amount of money, you know, for the taxes that
they apparently didn’t collect. So even though you didn’t collect that tax,
now Amazon is on the hook and they are being sued instead of you. So just feel yourself very, very lucky that
there is something that marketplace facilitator tax is coming hopefully to every state and
then hopefully you don’t have to do it. Now there is one case when you still have
to collect sales tax in Washington yourself, is if you sell not on Amazon, if you sell
on Ebay or shopify or etsy or something like that, whoever doesn’t have a contract yet,
but these are also in the works. They are talking now with Etsy and Walmart,
to also collect sales tax automatically for sellers. So you may not need to, if you wait out the
moment, you may not need to register yourself. There are some special things that even this
tax laws are still not worked out. For example, even though Amazon is collecting
sales tax for you, but still Washington state says that you still need to file a tax report
even though somebody else is collecting tax for you. So hopefully they will waive this later on. So if you are like me, just waiting out the
ride and just because I am out of country, I’m from Canada, so for me this a little bit
… for them it’s much harder to control the situation like this, so I’m just waiting it
out and seeing where it’s gonna go. If you want to keep up to date, which states
are already registered as automatic tax collection, you can go to help files on seller central
and look up marketplace tax collection Faq and there will be a list of which states they
are collecting at the moment. So if you’re watching this video , go and
check at the moment to your help section of south central just because the video was recorded
in the past and you need to have the most up to date information. So like I said, let’s hope that all of these
states will have this automatic thing so we don’t have to worry about it. Let’s hope for that. And now I just wanted to mention that AMZPing,
whichever, whichever state is going to join, we include that automatically in our breakdown. Right. So, the tax, for example, I am from Canada,
right. And I am collecting HST tax in Canada. So there’s in this number, there are some
sales from Canada and some from United States and some from UK, so some tax that I collected
myself, we are including. Then there is this and also the facilitator tax is included in this number, then there’s
a certain amount of chargeback so Amazon gives back what they collect and then the end, the
math works out exactly what you have to pay, what you collected, what you remitted and
things like that. So if you, if you would join AMZPing right
now, we have a free trial for 14 days, there is no credit card required. If you would sign up, you will be able to
see if you have any facilitator tax being applied on your account at all. Are you having any tax? Like how does your breakdown look like? What is your profit? And so on, so feel free to sign up and check
it out and that’s it for this video. Take care.

Comments (1)

  1. A third party thinking it has a right to pay your taxes for you is so unconstitutional it is making my ears burn

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