FBA Sales Tax Nexus: What Amazon Sellers Should Know

1. General Education, Not Tax Advice

I'm an Amazon seller, not a tax professional. Sales tax rules change by state and sometimes by city. Use this post to understand the moving parts, then confirm your obligations with a CPA or tax attorney who handles e-commerce.

If you haven't read it yet, start with Amazon seller tax basics. Income tax and sales tax are separate systems, and this post covers the second one.

2. What Nexus Means

Nexus is the connection a state says you have with it that lets it require you to register, collect or file. Two kinds come up for sellers:

• Physical presence: an office, employees, or inventory stored in the state
• Economic nexus: enough sales into the state, by that state's own rules

The 2018 Supreme Court case South Dakota v. Wayfair let states tax remote sellers based on economic activity. Each state wrote its own threshold after that, so there is no single national number. Your CPA looks them up for the states you sell into.

3. Why FBA Makes Nexus Messier

When you send inventory to Amazon, you don't pick the warehouse. Your units can sit in fulfillment centers in states you've never visited, and some states treat stored inventory as physical presence.

Ask your CPA how your states treat FBA inventory. Seller Central reports show where your units sit. Pull them before the meeting so your CPA isn't guessing.

4. Amazon Collects in Every State With a Sales Tax

A marketplace facilitator law makes the marketplace, Amazon, responsible for collecting and remitting sales tax on orders its sellers make. Amazon's US Marketplace Tax and Regulatory Fee Collection FAQ says every US state with a sales and use tax had enacted these laws as of January 1, 2023.

The same FAQ lists exceptions, including Colorado home rule cities, some Alaska cities and boroughs, rentals in Alabama and services in New York. By selling on Amazon, you agree to this automatic collection whatever your location or volume.

The buyer pays the tax. Your order reports show the collected amount and a matching deduction, because Amazon remits it as the facilitator.

5. What Amazon Says Stays Your Job

Amazon's Tax policies page says you're responsible for identifying your tax obligations and for calculating, remitting and reporting taxes within them. It also says Amazon doesn't report or remit taxes to any government on behalf of any seller.

Translation: Amazon collects on marketplace orders as the marketplace. Any filing or registration a state wants from you is still yours. So are sales outside a marketplace, like your own website or local cash sales.

6. Your Home State May Still Want a Permit

Texas is a clear example. The Texas Comptroller's page on marketplace providers and sellers says a Texas seller using a marketplace is "still responsible for having a Texas tax permit and filing your sales and use tax returns timely," even if all sales go through a marketplace provider.

The same page says remote sellers who sell into Texas only through a marketplace provider don't need a Texas permit, but must keep records of those sales for at least four years.

Other states write their own rules. Ask your CPA what your home state requires from a seller whose sales all run through Amazon.

7. Sales Tax You Pay When You Buy Inventory

"So, we get these at 1253 right there in Florida. We do not pay sales tax on these... on grocery."

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Sales tax on your purchases changes your buy cost. It depends on the product category and the state the order ships to, which is why the same grocery item can cost a seller in one state more than a seller in another.

Many states offer a resale certificate that lets you buy inventory for resale without paying sales tax. Retailers decide whether to accept it, and the rules for getting one vary. Your CPA or your state revenue department can tell you whether you qualify.

8. Prep Centers and Ship-To Addresses

"Instead of shipping them to our house where we are going to pay sales tax, what we can do is ship them to a company that we call a prep center."

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Retailers charge sales tax based on where they ship. Sending orders to a prep center in a state with no sales tax changes what the retailer charges you at checkout.

It doesn't settle what you owe at home. Some states have a use tax on purchases where no sales tax got charged. Ask your CPA how your state handles that before you build your sourcing around a ship-to address. The guide to choosing a prep center covers the operational side.

9. Selling Outside Amazon

The marketplace facilitator rules cover sales through the marketplace. If you sell returns on your own site, at a flea market or in a local pickup deal, you may owe sales tax on those yourself.

If you run FBM orders through Amazon, Amazon still collects as the marketplace. The difference between FBA and FBM matters for shipping and inventory location, not for who collects on Amazon orders.

10. Records to Keep

• Amazon's monthly sales tax and order reports
• Inventory location reports, at least once a quarter
• Purchase receipts showing sales tax paid or a resale certificate used
• Any state permits and filing confirmations

Store these with your income tax records. Texas asks remote marketplace sellers to keep marketplace records for at least four years, and your CPA may tell you to keep more.

Questions on how I source with tax built into my numbers? Come to Thursday's free training and watch me run a product from start to finish.

11. Next Steps

Five posts that pick up where this one stops:

• Amazon Seller Tax Basics - the income tax side, 1099-K and records
• How to Start Amazon FBA - the full startup path
• How to Choose a Prep Center - what to check before you send your first order
• EIN and Business Bank Account - the IDs most state registrations ask for
• LLC vs Sole Proprietor - the structure question that affects your filings