Most Georgia small business owners who are Amazon FBA sellers want to follow the laws of the state. But the legal rhetoric can be confusing and sometimes conflicting. For this reason, Windward Tax offers Amazon FBA and other e-commerce sellers help with state registration for sales tax.
We receive questions all the time about the requirements to register in states outside Georgia. The truth is that most sellers assume that Amazon is collecting and remitting sales tax in the qualifying states outside of Georgia. As long as they are registered in Georgia, these sellers think their sales tax obligations are covered.
Think again. Amazon does not take responsibility for collecting, filing or remitting sales tax - that burden falls on the seller. If the business has nexus in another state, the seller is required to register and remit sales tax in that state.
What is nexus?
Nexus is the minimum presence in a state that requires you to act as an agent for the state and collect sales tax. Most sellers assume that nexus only occurs if you have a physical presence in a state – an office, an employee or a manufacturing facility. In most states, nexus will also be created if you have inventory in that state, including inventory in a third party warehouse.
Amazon FBA warehouses
Amazon currently has 21 states with fulfillment warehouses, and more are set to open in the near future. If you are only collecting sales tax in your home state, you could potentially be non-compliant in the other 20 states.
What happens if a state comes looking for you?
If you have not been collecting tax and you have had the legal obligation to do so, you will be held liable for that tax. You will then have to register and pay back taxes on all sales from the date that nexus was established (when your inventory arrived in that state). Plus, penalties and interest will apply. That could add up to more money than you are able to pay, and the result may be devastating for your business.
Like most things in life, sales tax is easier to manage if you can stay ahead of it. Preemptive planning is the only way to make sure you are not liable for something that you didn’t even know about. The first step is to determine where you have nexus, which can be done by pulling inventory reports from Amazon. The next step is to register in the states where you have nexus. Windward Tax can help with this step. Then you collect the tax at the point of sale, file the taxes with the state and remit the money. If you take care of it at the time you have nexus, you will not be liable for taxes owed in arrears.
Take the time to educate yourself about sales tax nexus and understand your responsibilities. Addressing the issue now will directly impact the long-term success of your business.
What obstacles have you encountered trying to register in states? Which states are the best and worst for registering? Share your advice with FBA sellers who are starting the registration process.
Other recent “Georgia (GA)” posts by Lauren Stinson, CMI:
- Sales Tax on Labor: In Georgia, Not All is Created Equal
- A Review of Georgia's Sales Tax Exemption Certificates
- Georgia's New Rule for Itemization of Sales and Use Tax
- Georgia FBA Sellers: Your Sales Tax Registration Obligations
- Georgia DOR Is Making Big Changes to Direct Pay Permit Rules