How Amazon Sales Tax Updates Affect Your Business

Over the past several years, Amazon has been on the radar of many legislators looking to justify a national sales tax bill that forces online merchants to pay sales tax. With this year’s additions of Illinois and Ohio and many European countries Amazon and its Fulfilled by Amazon (FBA) seller’s tax liability grows.

25 states now require Amazon to pay sales tax when making in state sales:

Arizona Illinois Massachusetts North Carolina Texas
California Indiana Minnesota North Dakota Virginia
Connecticut Kansas Nevada Ohio Washington
Florida Kentucky New Jersey Pennsylvania West Virginia
Georgia Maryland New York Tennessee Wisconsin

Why Does Amazon’s Sales Tax Matter?

If you ask a brick and mortar business what these sales tax requirements symbolize they will tell you that this action goes a long way toward leveling the retail playing field.

When a business can get away with not having to charge sales tax because of lack of nexus, it boosts the business over others which do have to charge sales tax. A 2013 study confirmed that consumers would look for sales tax-free options when shopping online and, for a time, Amazon saw a reduced spending trend occur in states with newly implemented sales tax policies.

As Amazon expands, adding more warehouses and suppliers, they are also building nexus that is subject to sales tax. Amazon is quickly on its way to collecting sales tax in almost all of the United States.

Although there are still many places where Amazon doesn’t charge sales tax, population density means that the majority of Americans pay sales tax when they shop with Amazon. Amazon is now at nearly the same disadvantage as brick-and-mortar stores across the country.

How Does Amazon’s Sales Tax Policies Affect Other Online Business?

What does this mean for other online retailers? Only time will tell. For sales tax obligations to affect Amazon, the company must have established nexus. Just as your business must collect sales tax in any state in which it has a presence, Amazon must collect sales tax because it has a presence in the state.

However, with Amazon and other online retail giants collecting and remitting sales tax in half of all states and many physical businesses getting into online retail, the momentum for broader online sales tax may die down.

Sales tax laws are always changing and can be confusing when new developments take place. It is our goal to help our clients more accurately report sales tax obligations. To sign up for a free evaluation and try out the accuracy of our sales tax software with your own data contact us and see where your business could be more efficient.

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