Author: 14 Feb 2023minutes read
Information in this blog post doesn't constitute tax, legal, or other professional advice. Please don't use it as such. If you have any questions, consult your professional tax advisers.
It’s very likely that you, like many online business owners, dread filing taxes. Yes, it can be an overwhelming process, but with the right tools, planning, and help from professionals, it can be a simple and painless process.
We’re going to explore some key questions that you might have related to how adding Buy with Prime to your ecommerce site could impact your business taxes.
First things first. When you are in the business of selling goods, you are obligated to pay taxes to the local or state government when a purchase is made. If your business is connected to the jurisdiction where a purchase was made, and you have an "economic nexus" or connection to that jurisdiction, you’ll need to send in a portion of your earnings to cover your taxes.
Consumers have to pay a sales tax on the goods or services they receive, but it’s the merchant’s responsibility to collect those taxes and remit to the government. When purchasing Buy with Prime products on your site, customers have a variety of options to view the sales tax tied to their purchase–checkout page, thank you page, order confirmation email, order details page, and their invoice.
Giving customers options to view taxes before and after purchases creates a transparent transaction to avoid surprising customers with unexpected charges or fees.
Unlike selling on Amazon.com, Buy with Prime merchants are responsible for identifying their tax obligations, preparing and filing their returns, and submitting their taxes to the government.
In the United States, 45 states, and many cities, counties, and other municipalities have a sales tax. If a sale is made, you must comply with the tax rules and regulations for the jurisdiction in which the sale occurred. Of course, there are exceptions — in some places, certain goods up to a specific price are exempt from sales tax.
Figuring out whether or not you have an economic nexus with a jurisdiction can be complicated. Each state and even some counties have their own definition of the term for tax purposes.
For example, having a sales representative or storing inventory in an Amazon warehouse can constitute a nexus in many states. Whether you should collect and file taxes in specific states is a decision you’ll have to make on a case-to-case basis.
We recommend consulting a professional accountant if you have questions about rules governing sales tax across states or regarding your liability relating to any jurisdiction to which your business is connected.
Every Buy with Prime merchant is responsible for configuring their tax settings in the merchant console in accordance with their business obligations.
You can use the merchant console to activate tax settings, add locations to specify where you need to collect taxes, configure how tax should be calculated for each location, create tax categories, and tax override rules. For more information, visit our help article about taxes.
You don’t have to input every tax setting manually. We recommend consulting a tax advisor to determine when to use the automatically created tax rates for different locations, including state and local jurisdiction taxes. Buy with Prime automatically applies the sales tax rate based on each order. Depending on your circumstances and professional advice, you can keep most of the automatic tax settings, but manually override taxes for one—or several—locations.
For example, if you sell clothing or footwear, you can adjust tax settings on Buy with Prime and apply relevant tax rules based on the shipping address. In New York, Massachusetts, and Rhode Island the tax rate is 0%, when certain conditions apply. If you want to use the automatic tax setting feature, choose which products fall into the category of general clothing and footwear in your merchant console tax settings. For more information, go to Taxes, and then the FAQ section.
Make sure to revisit the tax settings on a regular basis, to ensure that your current tax obligations remain up-to-date.
Buy with Prime merchants are responsible not just for collecting, but also for filing and submitting their business taxes.
In the “Orders” section of the merchant console, you can download a CSV file that contains all of the relevant tax information from your sales. This file includes your orders' details, including dates, shipping and payment status, and payment and tax amounts.
You should direct all tax-related questions, beyond how Buy with Prime tax settings work, to your professional tax advisor.
Learn more about Buy with Prime. If you’re ready to add Buy with Prime to your ecommerce site, you can sign up today.