How does tax settings work when selling on Amazon FBA?

[SuzieA]

1.) So my inventory is with amazon FBA. I am starting out, not enough for an economic nexus in any US state. If let's say, I have inventory at a warehouse in Texas, and someone makes a purchase and it ships to Oklahoma, what state would be considered nexus? and do I add said nexus state permit to "regions I am collecting in?" Do I input all the states that are listed in my inventory locations? And do I need to get a selling permit per each state that my inventory is located at, in an amazon warehouse? If someone purchases a product by using amazon pay, does amazon do the tax collecting, versus using their CC? I have Shopify Tax on my account. 2). Now, if selling a digital product like an art pdf,  I know I would need to collect taxes as it is a digital good, would I get a sales permit per state?  would I pay sales tax to the states that I sold any prints in? I think I am on the right track, but can someone just re clarify this for me?

[Moira · Accepted solution]

Hey @SuzieA!

1. In general, sales tax nexus is established in a state when you have a physical presence in that state, which can include having inventory stored in a warehouse. So if you have inventory in a Texas warehouse and make a sale to a customer in Oklahoma, you would likely have sales tax nexus in both Texas and Oklahoma.

Regarding permits, each state has its own rules and requirements for obtaining a sales tax permit, so you would need to check with the relevant state tax authority to determine if you need to register and obtain permits in the states where you have nexus.

If you are using Amazon FBA to fulfill orders, Amazon may handle the collection and remittance of sales tax on your behalf. However, it's important to note that you are ultimately responsible for ensuring that the correct amount of sales tax is collected and remitted, so it's important to monitor your sales and tax collection to ensure compliance.

Regarding Shopify Tax, this is a feature that helps you automatically calculate and apply sales tax to your Shopify store's orders based on your tax settings. However, you will still need to ensure that your tax settings are correctly configured for the states where you have nexus.

2. For digital products like PDFs, the rules around sales tax can be complex and vary by state. Some states may not impose sales tax on digital products, while others may have specific rules around the taxation of digital products.

In general, you would need to collect sales tax on digital products in states where you have sales tax nexus. Depending on the state, you may be required to register and obtain a sales tax permit, or you may be able to use a special registration or filing system for digital products.

It's important to consult with a tax professional or the relevant state tax authority to determine your sales tax obligations for digital products.

Although we aren't tax experts and aren't able to provide tax advice, we do have some guides that you can read to get you started and help answer some of your preliminary tax questions. Feel free to take a closer look at them below:

• Guide to US taxes
• US taxes reference
• How to charge sales taxes in the US
• Guide to taxes for independent contractors

[SuzieA]

Thank you! That was very helpful!

[Moira]

Don't hesitate to reach back out if you require any further assistance as you continue to work on your store. 

All the best,