Sales tax for Amazon FBA sellers is a much more complex than it is for most other retailers.
If you are selling on Amazon, you will need to give a product tax code to your products. This is a guide for Amazon FBA sellers. You will get the scoop on collecting and filing sales tax.
What are Product Tax Codes?
FBA ( Fulfillment By Amazon) sellers use Amazon’s sales tax collection service. In order to that Amazon requires each product an assigned Product Tax Code (PTC). Product Tax Codes direct Amazon how to charge sales tax to your customers in the states where you tell them to charge sales tax.
Take a look at this image below for getting a visual idea.
Product Tax Codes don’t cover every item. They do cover items that are sometimes taxed
differently across different states or jurisdictions. For example, the state of New York does not have a sales tax on clothing which is less than $110. But if you go to South Carolina you will find clothing taxable.
So, if you have sales tax nexus in both New York (maybe you live there) and South Carolina
(perhaps your goods are in one of South Carolina’s Amazon Fulfillment Centers) you would want to make sure that you have entered a Product Tax Code on any clothing you may sell to ensure If the product is correctly taxed in both of the states.
The seller-defined default PTC is used to apply a single PTC assignment to multiple offers that do not have an item level PTC already assigned.
To view or edit the Default Product Tax Code:
- In Seller Central, go to Settings.
- Click Tax Settings.
- Click View / Edit your Tax Calculation Obligations.
- Locate and click Use default Product Tax Code.
- Using drop-down, select your seller-defined default Product Tax Code.
- Read and click the acknowledgment statement, and then click Review Changes.
- Review your Tax Calculation Settings and click Continue.
- Read and check the Tax Calculation Service Setup acknowledgments and click Confirm.
Seller-defined item PTC is used for designating a specific PTC to a single listing. For that listing, it will override the seller-defined default PTC.
To view or edit item-level product tax code:
- Go to Manage Inventory
- Click Edit for the individual product
- This will take you to the Edit Product Info page
- In the offer, tab locate the Tax Code field
- Assign your seller-defined product tax code
- Click Save and finish
Why should I enter product tax codes? Why can’t I just use A_GEN_TAX?
A_GEN_TAX: the most common product tax code you’ll see. It means that you are selling a taxable item which doesn’t need any special sales tax consideration.
But if you want to sell the following types of products, you’ll likely want to choose a PTC:
- Books and Periodicals
- Health & Beauty Products
- Infant & Baby Supplies
- School Supplies
- Sporting Goods
Above products may be taxed differently in different states and at different times. For example, textbooks are non-taxable in some states. Also, many states will have a sales tax holiday in 2017. For a few days, usually a weekend but sometimes longer, things like clothing and school supplies are not taxed or taxed at a reduced rate. When you have your PTC’s set up properly, Amazon knows not to collect sales tax from buyers in those states on those particular items during the sales tax holiday dates.
What will I do if I can’t find a product tax code for my product?
That’s okay. If you can’t find a PTC that seems to work for your product, it’s probably because the product isn’t specially taxed (or not taxed!) in any state. You can use A_GEN Tax in this case.
Should I set up my state tax settings or my product tax codes ? or both?
PTCs and state tax settings are two different kinds of tax. You Have to set up both.
Product tax codes are applied to each of the product you sell, whereas, state sales tax settings tell Amazon in which states you want to collect sales tax. It is best when you make them work together.
For FBA seller, you have sales tax nexus in your home state and the states where Amazon stores your inventory. When you use Amazon’s tax collection service, you need to tell them where you want to collect sales tax. Also, you have to tell some important details, such as if you want to collect sales tax on shipping and on gift-wrapped items.
It isn’t as hard as it sounds so you don’t need to worry about.