Sales Tax for Amazon Sellers

How Amazon Marketplace Facilitator Tax Works

All 45 US states with a sales tax plus the District of Columbia have enacted marketplace facilitator laws that require marketplaces like Amazon to collect and remit sales tax on behalf of third-party sellers. Amazon began collecting marketplace tax on a state-by-state basis as each state's law went into effect, and by October 2019, Amazon was collecting in all applicable states. This applies to all third-party seller orders regardless of the seller's nexus status, meaning Amazon collects tax even if you as the seller have no nexus in the customer's state.

Amazon calculates the tax based on the customer's shipping address, the product's tax category, and the applicable state and local tax rates. Amazon handles the entire process: calculating the correct rate at checkout, collecting the tax from the customer, and remitting it to the appropriate state. The tax amount appears as a separate line item on the customer's order receipt. As the seller, you never touch the tax money, it goes directly from Amazon to the state.

The tax Amazon collects does not show up in your seller disbursements. Your payouts from Amazon represent only the product revenue, minus Amazon fees. However, the tax amounts are recorded in your Amazon tax reports, which you need for your own filing and nexus tracking purposes.

FBA Inventory and Physical Nexus

If you use Fulfillment by Amazon (FBA), your inventory is stored in Amazon's fulfillment centers across the country. Amazon's network spans over 150 facilities in approximately 30 states. When you send inventory to Amazon, the company distributes it across multiple warehouses based on demand patterns, proximity to customers, and warehouse capacity. You typically have no control over which states your inventory ends up in.

Having inventory stored in a state creates physical nexus in that state, even though the warehouse belongs to Amazon. This physical nexus exists independently of marketplace facilitator laws. While Amazon handles tax collection on Amazon orders, your FBA-created nexus means you also have a collection obligation on direct sales (through your own Shopify store, for example) in every state where your FBA inventory is stored.

The challenge is that Amazon does not proactively tell you which states your inventory is in. You can access inventory placement data through the Inventory Event Detail report in Seller Central, but the information is not presented as a simple "your inventory is in these states" summary. Tax automation services like TaxJar can pull this data from your Amazon account and use it to identify your physical nexus states automatically.

FBM Sellers and Sales Tax

If you use Fulfilled by Merchant (FBM) and ship orders directly from your own warehouse, you do not have FBA-related physical nexus issues. Amazon still collects and remits marketplace tax on your FBM orders as a marketplace facilitator, so your Amazon tax obligations are handled regardless of your fulfillment method.

The difference for FBM sellers is simpler nexus exposure. Your physical nexus is limited to states where you actually have a physical presence (your home state, warehouse state, employee states), and your economic nexus is based on your total sales into each state across all channels. FBM sellers generally have nexus in fewer states than FBA sellers, which means fewer registration and filing obligations for direct sales.

How Amazon Sales Affect Your Direct Sales Nexus

This is the most commonly misunderstood aspect of Amazon sales tax. Even though Amazon handles tax collection on Amazon orders, your Amazon sales revenue still counts toward economic nexus thresholds in most states for your direct-sale channels. If you sell $80,000 on Amazon and $30,000 on Shopify to customers in Texas, your total Texas sales are $110,000, which exceeds Texas's $500,000 threshold... wait, in this case it does not. But the point is that Amazon sales are included in the calculation in most states.

A few states explicitly exclude marketplace sales from the economic nexus calculation for direct sales, but this is the minority approach. In most states, all of your sales to customers in that state, regardless of the channel, are combined for nexus threshold purposes. This means high-volume Amazon sellers often have economic nexus for direct sales in more states than they realize, because their Amazon sales push them over thresholds even when their direct sales alone would be below.

Tax Settings in Amazon Seller Central

Amazon's tax settings in Seller Central are primarily informational and record-keeping tools rather than collection controls, since Amazon handles collection automatically under marketplace facilitator laws. The key settings and reports are found under Settings, then Tax Settings in your Seller Central account.

Tax calculation settings historically let sellers configure their own tax collection states and rates, but these settings have been largely superseded by Amazon's marketplace facilitator obligations. Amazon now calculates and collects tax in all applicable states regardless of your individual settings. The settings page may still show legacy options, but Amazon's automated collection takes precedence.

Product tax codes are assigned to your product listings and determine the tax treatment of each item. Amazon uses a library of product tax codes (PTCs) that map to state-specific taxability rules. Assigning the correct PTC ensures that Amazon charges the right tax on your products, particularly important for products that are exempt or reduced-rate in some states, like clothing, food, or medical supplies. If your products are standard tangible goods, Amazon's default PTC typically works correctly.

Amazon Tax Reports for Filing

Even though Amazon collects and remits marketplace tax, many states require you to report Amazon sales on your sales tax returns. The return typically has a line for marketplace sales where the marketplace collected the tax, which you report as a deduction from your total. To prepare these returns, you need Amazon's tax report data.

The key reports are the Sales Tax Report (found under Reports, then Tax Document Library in Seller Central), which shows the tax Amazon collected and remitted on your behalf by state, jurisdiction, and transaction. The report includes the order date, ship-to address, product tax code, taxable amount, tax rate, and tax collected. Export this report for each filing period and use it to populate the marketplace sales section of your state tax returns.

If you also sell on your own website, you need to combine your Amazon data with your direct-sales data for each state return. TaxJar and Avalara both connect to Amazon Seller Central and pull this data automatically, merging it with your Shopify or WooCommerce data into unified state-level reports.

Filing Requirements for Amazon Sellers

If you are registered for sales tax in a state (because of FBA physical nexus or economic nexus from combined channel sales), you must file returns in that state even though Amazon collects and remits the marketplace tax. Your return will show your total sales (including Amazon), deduct the marketplace sales where Amazon collected tax, and calculate tax due only on your direct sales. In many cases, the tax due on direct sales is small or zero, but you still must file the return.

If you sell exclusively on Amazon with no direct sales channel, and your only nexus in a state comes from FBA inventory, the practical filing obligation is filing zero-dollar returns (since all your sales are marketplace-facilitated and Amazon handled the tax). Some tax practitioners argue that FBA-only sellers without direct sales do not need to register or file in their physical nexus states because Amazon is already handling all tax obligations. However, the conservative and technically correct approach is to register and file in all states where you have physical nexus, even if every return shows zero tax due.

If you also sell on Shopify, WooCommerce, or another direct channel, the filing calculation is straightforward: total state sales minus Amazon (and other marketplace) sales equals your direct taxable sales. Tax due is calculated on the direct taxable sales at the applicable rate. The marketplace deduction ensures you are not double-paying tax that Amazon already remitted.