Amazon Integration

As the second largest retailer, it’s no surprise that many online sellers use Amazon to run their business. The company generated $628 billion dollars in revenue in 2024 and acts as a marketplace facilitator, collecting and remitting sales tax on behalf of most sellers.

Having sales tax software directly integrated with Amazon can save you time and ensure you’re tax compliant. When an Amazon integration is set up correctly, it can automate sales tax calculation, ensuring you stay compliant by paying the correct amount of sales tax to the states you operate in.

This article will discuss how to use an Amazon sales tax integration to help your business ensure sales tax compliance.

Sales Tax for Amazon Sellers

Sales tax varies from state to state, and as an Amazon store owner, understanding the variations in state and local taxes is crucial to maintaining compliance. Every state and local jurisdiction has different sales tax rates and rules, which can complicate the tax collection process. If online sellers fail to comply or pay sales tax, they can incur significant fines and penalties.

Understanding your sales tax obligations always begins with the concept of economic nexus. Nexus is a physical or economic connection to a state or locality that obligates you to collect and remit sales tax. This is typically triggered if you have a physical presence in a state, such as an office or warehouse, or reach a certain threshold in sales or transactions.

For Amazon store owners, determining where you have sales tax nexus will guide your compliance strategy. You’ll want to identify where your business activities and sales give you a tax obligation and ensure you adhere to each state's sales tax laws and tax filing requirements.

Does Amazon Remit Sales Tax for Sellers?

Like other major e-commerce sites, Amazon is a marketplace facilitator. This means it is responsible for calculating, collecting, remitting, and refunding state sales tax on sales made by third-party sellers.

While Amazon is required to charge and collect sales tax on most orders, several factors will determine the rate that is charged, including:

• The seller
• The type of item or service
• The time and location of fulfillment
• The shipment or delivery address

What States Does Amazon Collect Sales Tax For?

Amazon collects sales tax in 47 states and Puerto Rico. The states with marketplace facilitator laws include:

How Sales Tax Works on Amazon

As mentioned, Amazon is a marketplace facilitator and typically handles state sales tax for most sellers' transactions. But to stay compliant with the states, you’ll need to understand the ins and outs of sales tax nexus to ensure your obligations are being met with your Amazon business.

How Sales Tax Nexus Works for Amazon Sellers

Simply put, nexus is determined by a physical presence or economic connection to a state or locality that requires you to collect and remit sales tax. There are two common ways to establish nexus:

• Physical nexus: You have a physical presence in a state, such as a studio, home, or warehouse.
• Economic nexus: This typically applies to any company with an online presence. It’s triggered in states when you meet the thresholds for sales activity.

Determining your sales tax nexus will guide your compliance strategy. This should include identifying where your business requires you to pay state sales taxes so that you can learn about filing requirements and deadlines.

Sales Tax Thresholds for Amazon Sellers

Each state establishes nexus thresholds to determine how much of a connection a business has with a state. Some states have a specific dollar amount that triggers nexus, while others look at the number of sales transactions. This is usually $100,000 in sales or 200 transactions.

Marketplace facilitators, like Amazon, must adhere to each state's rules. Maintaining sales tax compliance and keeping up with requirements can be challenging.

Which Products in Your Amazon Storefront Are Taxable?

As with all storefronts, you must determine which products to collect sales tax on. Each state has a list of taxable goods, and depending on the state and product category, some items or goods may be sales tax exempt.In general, most food, clothing, and textbooks are exempt from sales tax. This means that the majority of Amazon sellers will be required to charge sales tax on their products.

Setting Up and Automating Sales Tax on Amazon

You must take several steps to automate your sales tax management on Amazon. First, you’ll need to determine what products you sell and the tax on those items, such as services and goods or digital products. Afterward, you must register in the states where you must file sales tax.

When it comes to setting up and automating sales tax on Amazon, you’ll need to:

1. Add product tax codes and the states and areas you need to collect tax in your Amazon Seller Central account
2. Check sales tax reports to ensure accuracy and that everything was paid out correctly
3. Remit any sales tax not collected by Amazon and file your state sales tax returns

Alternatively, you can download a sales tax app, like Zamp Tax, to do all of this for you.

Benefits of Automating Sales Tax on Amazon

Using automated sales tax software has several benefits. This software can handle sales tax calculations across multiple jurisdictions and states, minimizing the risk of errors that can lead to non-compliance penalties.

In addition, automating sales tax calculations can save you time during tax season, reducing the stress associated with manually reporting and calculating the amount you owe. A solution that integrates seamlessly with Amazon allows you to keep up-to-date with the latest tax laws and other rates, providing you with peace of mind and more time to grow your business.

Best Practices for Sales Tax Compliance for Amazon Sellers

Amazon store owners are responsible for keeping sales tax rates and settings up-to-date to maintain compliance with changing tax laws and regulations. Here are the best practices to stay on top of sales tax compliance for your Amazon business:

1. Stay current on tax changes. Sign up for updates on tax regulations in the jurisdictions where you have sales tax nexus. Many state tax departments have email alerts that will keep you up-to-date on any tax law changes.
2. Consider automated tax management tools. Amazon may charge, collect, and remit sales tax on your behalf, but you have to stay on top of tax data to know if the right amount of money is being remitted to the states. Automated tax tools like Zamp inform you of tax rate changes and offer compliance features to help you grow your business.
3. Conduct regular tax reviews. Schedule time to review your tax settings on Amazon at regular intervals — bi-weekly, monthly, quarterly, or bi-annually. This cadence should align with your company’s sales patterns and tax filing schedule.
4. Keep detailed records. As a business owner, you should maintain accurate records for all your Amazon transactions, tax calculations, and sales tax filings. This not only fulfills a compliance requirement but can be invaluable if you are audited by the IRS or a state’s Department of Revenue.
5. Get advice from professionals. While automated sales tax management tools can help manage your sales tax day-to-day, a tax expert can help you if you find yourself in a complex situation or face a significant change in your business.

Streamlining Tax Filing Processes for Your Amazon Storefront

If you want to streamline your tax reporting and remittance process to avoid audits for your Amazon storefront, here are some things you can do:

Amazon Integration: Conclusion

Integrating with an Amazon sales tax solution doesn’t just help ensure you stay compliant; it can also boost your business’s operational efficiency. The best sales tax management software ensures every transaction in your storefront is processed correctly, protecting your business from compliance issues.

Note that it’s important to keep your sales tax strategies flexible to match legislative updates and business growth. As your business grows, you want a solution that will grow with you to manage increased tax responsibilities.

By following these practices, Amazon store owners will have an enhanced selling experience that meets tax requirements and builds a stronger business. 

Why Use Zamp?

Zamp isn’t just another sales tax compliance solution; we’re shaking up the industry by putting our customers first. We’ve been named a Major Player in the Small, Mid, and Enterprise SUT markets in IDC’s 2024 IDC MarketScape for Worldwide SaaS and Cloud-enabled Tax Automation Software, along with being featured in the top ten best sales tax software companies by taxtech500.

We help businesses outsource their sales tax from start to finish. Our platform manages the complete sales tax lifecycle by offering:

• Hands-off onboarding: We set up everything for you and ensure it’s done right.
• Full sales tax compliance service: We offer nexus tracking, registrations, roof-top accurate calculations, product taxability research, mapping, reporting, and filing. All this is included in our pricing model — one fee for everything.
• Proactive account support: We are always looking for any changes in sales tax requirements, and our team is happy to answer any questions you may have.

See how you can save time and stay sales tax compliant with Zamp. Book a call below!