Amazon is the most popular sales channel for TrustFile users. If you are an Amazon seller, you should be able to find everything you need in these resources to have your Amazon Seller Central account setup to work with TrustFile as well as information on the tools and processes within TrustFile which are of most importance to you.
Sales Tax & Amazon
For many years buying and selling online meant the exclusion of having to pay sales tax, as sales tax liability was tied to a physical connection to a state in which the business was conducted. With the increasing popularity of online shopping, states were missing out on millions of dollars of much needed sales tax revenue so needed to come up with solutions for this missing revenue. Amazon became a large focus for states as they are one of the world's largest online retailers. As such, businesses taking advantage of the opportunities that selling through Amazon's marketplace offered them also now have to contend with ever expanding and confusing sales tax liability.
For many years tax liability was tied to physical nexus only, in fact when people refer to tax nexus they are almost always referring to their physical presence still. As of June 2018, the definition of nexus was altered. In South Dakota v. Wayfair, Inc. the Supreme Court ruled in favor of South Dakota granting the state authority to impose sales tax obligations on out-of-state transactions. This now means that although you may not have a physical presence in a state you may have economic nexus in that state based on your history of economic activity within that state.
The Supreme Court decision determined that, generally, $100,000 or more of sales or 200 separate transactions during a 12-month period could trigger economic nexus. Since that decision, many states have passed laws to add economic nexus to their sales tax requirements.
We have created a few helpful sites, with frequently updated information, for all of the states' requirements around physical & economic nexus. You can use these sites to assist you in determining where you may have nexus and will potentially need to get registered to start collecting sales tax.
South Dakota v. Wayfair, Inc. (overview of the decision & each state's alignment)
Find your Nexus (state by state guides for nexus determination)
Amazon Fulfillment Center Locations (detailed information that can be used to determine physical nexus)
In addition to the above sites we offer a tool for Amazon sellers in TrustFile to try to enable you as much as possible to determine where you may have compliance issues or possible liability gaps.
The free Amazon FBA Inventory Report in TrustFile allows you to view the scope of your Amazon FBA sales for information that can guide you in determining whether you may have physical or economic nexus in states within the Amazon warehouse infrastructure.
You can use the information in the Inventory Report to cross-reference with the information provided on the sites listed above to give yourself a baseline on where you may have tax liability based on either physical or economic nexus.
Once you have determined where you have nexus, you need to register for sales tax collection with those states. Within our state guides we link directly to the states Department of Revenue (DOR) sites. Registration can be completed through the states' DOR sites or you can click here for more information on the registration services that we offer at Avalara.
Determining where you have nexus can be confusing and decisions on where to register come down to you and your business. If you are looking for additional help in determining where you may have nexus it is recommended that you reach out to your Avalara account manager or click here to get more information on the tax advisory services we offer.
Tax Settings within Amazon
Once you have determined where you have nexus and completed your registrations with those states you will need to start collecting tax on your Amazon sales.
To setup tax collection on Amazon follow these steps:
- Login to your Amazon Seller Central account
- Click Settings
- From the dropdown menu select Tax Settings
- Choose View/Edit your Tax Collection and Shipping & Handling and Gift Wrap Tax Obligations Settings and agree to the terms and conditions for tax collection
- Choose your product tax codes (ensure you understand what tax codes you should be using for the products you sell so that you are collecting the correct amount of tax on each transaction)
- Choose which states and local areas in which you are registered to collect tax (you will need your registration number for each state to complete this step)
- Choose a custom sales tax rate (optional)
- Choose shipping & handling and gift wrapping sales tax (this can vary state by state per their requirements so ensure you understand your taxability requirements for each state)
Once you complete these steps, sales into the selected states will be collecting tax in Amazon moving forward.
Note on Marketplace Facilitator Tax Collection
As you probably noticed during the setup there are states in which tax collection is automatically turned on. These states all have what is known as Marketplace Facilitator tax collection as part of their state tax laws.
Each of these states passed laws dictating that the liability for tax collection and payment should fall to the owner of the greater marketplace instead of the individual sellers within that marketplace. For this reason, Amazon is collecting tax on your sales into those states whether you choose them to or not and you are unable to opt-out of tax collection there. To determine your requirements for reporting and/or registration in those states it is recommended you speak with a tax professional who has experience with sales tax as some states do still expect you to register and file returns with them regardless of the payments they are receiving from Amazon. Additional information can be found here.
One additional note, TrustFile is built with the understanding of the Marketplace Facilitator tax so any orders that are synced to TrustFile from Amazon have rules built-in to account for the tax already paid. This means that the tax collected for those states by Amazon is reported on the return, but the amount already paid by Amazon is deducted from the amount due on the return automatically in TrustFile. You will not be paying for the tax twice but it will be accounted for on the return appropriately.
Syncing Amazon with TrustFile
Importing your sales into TrustFile from Amazon couldn't be easier.
To begin the sync, you need to authorize TrustFile to connect to Amazon. To do this:
- Log into TrustFile
- Click Data Sources
- Click the Amazon logo
- Choose the date in which you would like the sync to begin (This date should align with the earliest date you need to include for your current returns only)
- Click Authorize and a pop-up window will appear with step-by-step directions to navigate to Amazon Seller Central to gather the Seller ID and MWS Authentication Token needed to establish the connection
- Click Submit and the sync will begin
Note: The initial sync can take up to 24-48 hours to complete if you have a large number of transactions that need to be imported. Once the initial sync is complete new transactions will be synced daily. Also, Amazon's reporting is usually a day or two behind so you will not see completed reporting for the month in TrustFile until at least the 2nd or 3rd of the next month. For example, if you are trying to verify sales numbers for October it is best to check after November 3rd to give Amazon enough time to finish the reporting for October.
Verifying Imported Transactions
As with all technology, TrustFile is not infallible and it is important to verify the transactions that you have synced from Amazon into TrustFile.
You will verify your data under the Transactions tab within TrustFile. The transaction list provided is a great reporting tool to get a quick look at what transactions have been imported and are included on current returns.
You are able to quickly see how many transactions are currently being included in the list, how many of those have Errors, how many have Alerts, as well as a quick glance of what the Gross Sales and Tax Collected for the items in the list are. You are able to search for specific Order IDs as well as filter the list by date range. The Advanced Filtering options allow you to dig deeper into what will show on the list. You can arrange the list by any of the columns as well simply by clicking on the heading title to reorganize the data.
Note: When looking at the transactions list it is important to verify that the amount of Tax Collected aligns with what you have in your records but the Gross Sales number may be different. TrustFile will never adjust the amount of tax collected but will adjust the sale amount to reflect to proper tax rates. If you see a variance in Gross Sales compared to your records that can be expected.
Within TrustFile we try to make it as obvious as possible when something isn't quite right with the data you have imported into our system. On the Transactions tab we call out Errors that we find in your sales data. Below are a couple of Errors that are common to Amazon orders.
If you see an Error with "Confidential" listed under the DEST. column of the transaction list, that was an order in which the customer requested to have their address hidden for privacy reasons. The initial order confirmation for the customer would have included their address so the item could be shipped but then it is scrubbed from Amazon's system and all subsequent reporting. This causes an issue when it comes to sales tax because sales tax collection and remittance is tied to the address in which the order was shipped and if that address is no longer available it is not clear where that tax should be remitted.
There are a couple of options for correcting these errors and having the tax added onto a return.
For both options, start by clicking the checkbox to the left of the order then click the now active Edit button.
Option 1: If you have the original order confirmation email.
Enter the shipping address from the order confirmation into the Shipping Address fields.
Click Save and Exit.
The order will be added to the appropriate return.
Option 2: If you do not have the original order confirmation email you have no way of determining where the order was shipped to, so you can associate it with where it was shipped from.
Copy & Paste the address information from the Origin Address into the Shipping Address.
Click Save and Exit.
The order will be added to the origin state return.
Note: This is obviously not a perfect solution but since you have no way of proving which jurisdictions the tax was actually collected for, the best course of action is to remit it to the jurisdictions which you can prove a connection to.
You may occasionally see orders under Errors that list FL under the DEST. column but they have not been added to the FL return. The reason for this is that there is a non-taxable jurisdiction in Sarasota, FL which Amazon does not have marked as being non-taxable so they collect tax on orders into that jurisdiction but when those orders import into TrustFile that tax cannot be aligned with the proper jurisdiction on the return so it creates an Error.
Fixing this error is relatively simple.
Click the checkbox to the left of the order.
Click the now active Edit button.
Change the Shipping Address to another address within FL.
Click Save & Exit.
The order will now be added to the FL return into a taxable jurisdiction.
You are able to select multiple orders to edit or delete by either clicking each individual checkbox, clicking the first line then holding SHIFT and clicking the last one to select a number of lines in a row, or clicking the checkbox next to the Delete above the list to select all items. You can then mass edit or delete items. It is recommended to edit or delete as many lines at a time as each time you hit Save & Exit the system will update the appropriate returns and it will slow down the process if you do one at a time.