Amazon starts collecting sales tax on behalf of third-party sellers in Washington
From now on, the responsibility of calculating and paying sales taxes will move from third-party sellers to Amazon. For a long time the marketplace has argued that sellers should be in charge of collecting sales tax in the states that levy it. Because of multiple accusations from sellers claiming that Amazon shirks its legal obligation to remit taxes, the company took initiative and is now responsible for processing all sales taxes on behalf of third-party sellers.
Washington is the first state where Amazon has enforced this new rule. As of January 1st, 2018 sellers no longer need to calculate and collect sales taxes on orders made either from or to the state of Washington. Starting from April 1st, 2018 the same applies to sellers in Pennsylvania.
This change regarding sales tax collection was caused by the Marketplace Facilitator Law. Online transactions are difficult to monitor and purchases made via the internet are rarely taxed, meaning that states lose out on millions of dollars in revenue. Meanwhile, Amazon reported a revenue of $60.5 billion for the fourth quarter of 2017 which is almost 30% more than a year earlier.
Just a few days ago, President Trump criticized Amazon and expressed big concerns on Twitter regarding their business practices.
What’s the Seller’s Responsibility Now?
Amazon will remit and report all sales tax collected on behalf of their sellers under their own tax account. Thus, they do not need your UBI number (Unified Business Identifier). If you need to know the amount of tax Amazon collected and submitted to the Washington Department of Revenue on your behalf, you may contact them in this regard.
Sellers in the state of Washington still have to file a sales tax return. The real benefit is that Washington sellers don’t have to break down their Amazon sales by specific taxing districts (city, country, etc.) any more.
When filing your Washington sales tax return, you should:
- Contact Amazon and confirm the total amount of tax they’ve collected on your behalf to avoid inaccuracies that may result in penalties
- Indicate that amount as an “Other” deduction on your sales tax return
- Label this deduction as “sales tax remitted by third-party”.
You do not have to make any changes in your Seller Central Account to accommodate Amazon collecting sales tax on your behalf.
Regardless of these changes, Amazon sellers are still required to do the following:
- Register for a Washington sales tax permit. Fill out a Business License Application online at bls.dor.wa.gov. Once the form has been processed, the seller will receive a UBI number (or account ID). If you face any difficulties when registering, contact the Business Licensing Service at 1-800-451-7985.
- File and pay a Washington B&O tax (Business and Occupation) which is 0.484% from the seller’s gross sales in the state
- Sellers who promote their goods not only through Amazon (for instance, Walmart, Shopify, etc.) will still have to collect and remit sales tax on those non-Amazon sales. They are also required to break down all non-Amazon sales by special taxing districts (city, country, etc.)
What are the chances the Amazon Sales Tax will spread to the rest of the states?
Massachusetts has already taken preliminary steps. Last year the state tried to crack down on online retailers who sell goods within the state and do not collect sales tax. Amazon was forced through court to provide data about the marketplace vendors who promote and sell their goods in this state. However, Amazon declined this request, so the game is still on. Connecticut tried to do the same, yet without any success. Similar scenarios already took place in Rhode Island and South Dakota.
Max Behlke, director of budget and tax policy at the National Conference of State Legislatures, comments, “If Washington state is successful, I can all but guarantee you other states are going to copy provisions of it to level the playing field”. So it could be very soon that Americans will see lots of new sales tax laws in the rest of the states.