We all know what the fun part of our FBA business is – making money! Those checks every two weeks from Amazon are happy, happy events. The agony of our business? Paperwork and taxes. Groan.
Having just paid my quarterly sales tax last week, it is much on my mind. While Amazon does a lot to make it easier on its sellers, there’s still a lot of confusion about sales tax.
I don’t know about you, but I was surprised to learn that my CPA doesn’t cover sales tax issues. Her focus is federal taxes. While she pointed me in the right direction and gave me specific questions to ask, I was on my own to set up my sales tax certificate and learn how to pay my taxes on a quarterly basis.
I went in to my local comptroller’s office (there’s at least one in every major city of your state) and did everything in-person. I’m glad I did because they answered my questions very patiently. I wrote down the date and the people with whom I spoke (including a supervisor). If there’s ever a question in the future about my taxes I can demonstrate that I was relying on information received from the state and am acting in good faith.
That was then. This is now. Instead of just our own states, we may be responsible for every state where Amazon has a warehouse and where we sell goods. Amazon.com has been making deals with states to pay taxes and they are going into effect over the next year or so.
The question is, “What does this mean to you?”
FBA seller Kat Simpson and tax attorney Michael Rice have just written a book specifically for FBA Sellers that covers this painful-but-oh-so-important topic called Introduction to Sales Tax for Amazon FBA Sellers: Information and Tips to Help FBA Sellers Understand Tax Law.
You may have heard them talk about this subject on FBA Radio where Michael has been a frequent guest and Kat is one of the show hosts.
Launched today, the tax knowledge in the book is current as of July 1, 2012. The authors believe that we should be paying sales tax in all the states Amazon has warehouses since our inventory is in their warehouses. In chapter one they explain a “nexus” and how that term relates to us as FBA Sellers.
In a nutshell, here is a summary of their advice:
- Register with each state. The book tells you in which states Amazon has a warehouse so you can register and obtain a sales tax certificate in those states. It also shows you the forms, how much it costs to register in each state and whether or not you can pay online. The authors warn it can take a while to get everything set up. [Chapters 3 & 4]
- Use Amazon’s reports to help you determine your sales tax obligation. The book shows you where to find the reports you need to file your sales tax. It also covers how Amazon’s program works for collecting sales tax. [Chapters 8 & 9]
- Pay quarterly. Most sellers like us will qualify for quarterly reporting. Once you are generating more than $1,000 in sales per month in a state, you will likely have to go to monthly reporting for that state.
- Understand how sales tax works. [Chapters 2, 5-7]
You can pull Amazon’s reports into Excel – or some other spreadsheet program – and sort to get the information you need. In addition, Kat Simpson uses a program called outright.com to help her with her sales taxes payments. I wish there had been more about how to sort the Amazon reports and how she pulls her Amazon reports into Outright.com in the book. Outright.com is an online bookkeeping software program designed for online sellers.
I’m invested in Quickbooks as I’ve been using it for more than 17 years and run three businesses on it, but Outright seems like a good program for new sellers wanting a bookkeeping program. It is significantly cheaper at about $10 a month vs. the approximately $60 a month I pay for QB Online.
While nothing in the world will make paying taxes fun, books like this make it easier.