Did you get a notice from Amazon about potential tax changes? Don’t worry. The overall seller fee is not increasing; however, FBA fees may change. We are here to break down what these “possible tax implications” could mean for sellers.
Potential Changes
Like any business owner, Amazon sellers have to pay taxes. Sellers are required to collect sales tax, and FBA sellers are often required to pay taxes on storing inventory in some particular states (inventory nexus). So, FBA sellers have sales tax nexus simply by having their product stored in an Amazon fulfillment center. However, drop-ship sellers may also run into sales tax nexus.
Some product categories are not taxed this way and may not even be taxed at all. Think groceries, clothes, and textbooks.
Great, so what’s changed?
Amazon reached out “regarding the possible tax implications on some seller fees beginning June 1, 2019.” In an effort to be transparent with sellers, the company sent out a mass email letting people know that there might be some financial changes.
In addition to charging for inventory housed in Amazon fulfillment centers, some states are considering “specific Selling on Amazon fees as per item, order, and refund fees as a taxable electronic service.” That means online Amazon transactions could become taxed in some states.
Is that all? Unfortunately, no.
“Similarly, some states consider FBA inventory prep fees such as bubble wrap, polybag, taping and labels as taxable.” This potential tax would expound upon the existing nexus to include inventory preparation materials and fees, not just inventory storage.
Amazon states that these changes won’t affect your Amazon seller fee, but you can expect your taxes to increase regardless.
While Amazon charges 2.9% tax on each transaction to collect taxes, this may still be the easiest option for sellers to gather taxes. Sellers can always opt not to have Amazon collect tax from customers, but the alternative is to pay taxes out of your own profit.
Taxable Fees
According to Amazon, the following categories are up for being taxed for all sellers.
- Referral Fee
- Subscription Fee
- Variable Closing Fee
- Per-Item Fee
- Promotion & Merchandising Fee
- Refund Commission Fee
- Checkout by Amazon
- Sales Tax Collection Fee
Keep in mind, however, that not all states require these fees. So, depending on your business location, you might be in the clear.
Here are some FBA-specific service fees:
- Labeling Fee
- Polybagging Fee
- Bubble Wrap Fee
- Taping Fee
- Opaque Bagging Fee
- Repackaging Fee
The tax rate will be determined by the fulfillment center who houses your inventory. With this fee determined by the fulfillment center itself, it’s unclear how much the cost will be.
These changes should go into effect on June 1, 2019, so sellers have until then to decide if it’s worth it to rely on FBA and incur additional expenses. As we get more information about this new policy change, we will let Amazon sellers know, so stay tuned at nozani.com/blog!
About the Author: Alyssa Ball has been working in digital marketing for several years. She graduated from Brigham Young University with her degree in English linguistics and is currently pursuing an MBA. Alyssa’s position as a content writer and keyword strategist at Nozani has allowed her to master both Google and Amazon SEO.
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