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Podcast (10k-podcast): Play in new window | Download (Duration: 26:57 — 22.2MB)
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What is nexus Amazon? Learn why it’s essential to learn about the tax nexus laws when you ship your Amazon items across different states.
How do we determine where a business has sales tax nexus?
What is “nexus”?
You have a sufficient presence in a state to have sales tax responsibility.
Sales Tax nexus results how?
- Physical presence
- Economic nexus
- Affiliates
- Employees, contractors, renting or leasing property
The most common one for online businesses is an economic and physical presence.
Physical presence
If you’re based outside the USA, you may still have a physical presence if you have inventory stored there, including in FBA warehouses.
A number of FBA warehouses have been audited – eg: Wisconsin
Economic Nexus
Passing certain thresholds on Nexus Amazon.
Most common is $100K revenue, the other 200 transactions.
They vary a lot in how they define.
Example
If I ship in stuff to LA (CA), and it gets moved into 3 states… bear in mind that Amazon will redistribute the inventory across 40 states!
If the inventory were just in 3 warehouses (in 3 different states), that means you have nexus in those 3 states (ignoring Marketplace Facilitator Laws). You would need to get a sales tax permit, collect and remit sales tax on Nexus Amazon.
Marketplace Facilitator Laws states
Generally, you don’t have to get a permit.
However, in general, if you’re selling in a marketplace, you don’t have much.
How do we figure out which states have sales made?
DIY
Pull the transactions out and do some manual excel work with a pivot table.
Taxjar also has a tool that is helpful.
Getting help
There is a link on their website that has information which also provides services and analyses sales state by state. Analysis fee counts towards the first invoice if a client of TaxValet.
For nexus analysis, you look at many factors:
- Transactions
- Where inventory is being stored
- Other areas like affiliates, other businesses, contractors
- Affiliates
- Employees, contractors, renting or leasing property
Visiting trade shows can cause tax nexus!
Generally working with an affiliate doesn’t cause an issue but if affiliates are a substantial share of your revenue, it could create sales tax nexus.
Getting permits
Implications for International businesses
Does it make a difference where you’re based? (Which country)
It doesn’t make any difference in theory for Nexus Amazon.
There is a different process for international sellers.
What is the basic process of registration for sales tax for international sellers?
Getting permit
TIN
- It can be difficult to submit the permit without a TIN people; you’d need an EIN (tax identity) for the company
EIN is simple – for companies – it’s also cheap to use an online service say $100 to get it for you.
TIN is much more challenging – it takes 3-4 months.
Alex has a partner who only does TINs for international businesses.
Online systems
These don’t work for international sellers eg: you can’t put in the address etc.
But many States have a paper application so use these if you’re outside the USA.
Other issues paying Sales Taxes
Paying sales tax
They often will only take a bank account and only a US bank account!
That means you can’t pay the tax!
Alex cleaned up for an Amazon seller based in Poland
Got permits in 20 states without a TIN.
They came after her for not paying the tax. She had the money but in a non-US bank account.
Opening a US bank account
You’ll need a TIN to get this.
You need typically to visit the US to open a US bank account.
However, Alex has a partner who can do this for you.
The States make it hard to do this!
You can’t use a Transferwise number!
Payoneer also doesn’t work.
You need a bona fide bank account.
To learn more about Tax from Alex Oxford, here are the other two episodes:
FBA Sales Tax with Alex Oxford of TaxValet
Paying Sales Tax for Small Business with Alex Oxford of TaxValet
Watch my full interview with Alex Oxford
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