Published March 18, 2025
Amazon FBA Sales Tax Requirements: A Complete Guide for Sellers
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The sales tax landscape for online sellers has been tumultuous for years. Following the landmark South Dakota v. Wayfair case in 2018, states quickly implemented economic nexus laws, expanding sales tax obligations beyond physical presence. Marketplace facilitator laws soon followed, impacting Amazon FBA sales tax requirements and shifting tax collection responsibilities to platforms like Amazon.
Fulfillment by Amazon (FBA) has revolutionized ecommerce, allowing sellers to leverage Amazon’s vast logistics network to outsource order fulfillment. However, with this convenience comes the complexity of sales tax obligations—especially given this strained ecosystem. Understanding these detailed requirements is essential for FBA sellers to maintain compliance and avoid potential penalties.
How can sellers not only understand their obligations and ensure compliance in an evolving tax landscape but also thrive in the face of it? In this blog, we’ll delve into the intricacies of Amazon FBA sales tax requirements, including why it’s so crucial for sellers to understand sales tax. Let’s dive in.
Sales tax nexus is a crucial concept, referring to the connection between a business and a taxing jurisdiction that creates an obligation to collect and remit sales tax. For FBA sellers, nexus can be established in two primary ways: physical nexus and economic nexus.
Physical nexus is created when a seller has a physical presence in a state, whether it’s a store, office, or warehouse. For FBA sellers, this often occurs through Amazon’s network of fulfillment centers. When Amazon stores a seller’s inventory in a warehouse within a state, it could create physical nexus for their business in that specific state.
However, just because Amazon has a fulfillment center in a state doesn’t mean a seller automatically has nexus there. Similarly, simply because a seller sells on Amazon FBA doesn’t mean it must register for a sales tax permit and collect tax from buyers in every state where an Amazon fulfillment center is located. The business can only have nexus in states where Amazon physically stores its products.
Following South Dakota vs. Wayfair, states also implemented economic nexus laws that require a business to register to collect and remit sales tax. These laws establish obligations based on a seller’s economic activity in a state—regardless of physical presence. Each state sets its own thresholds for economic nexus, typically based on transaction volume or sales revenue. In some states, even exempt sales of goods and services can count toward your economic nexus threshold.
Amazon’s fulfillment network can significantly impact a seller’s nexus footprint. As Amazon moves your inventory to optimize logistics, you may find yourself with nexus in several states. This dynamic nature makes it difficult—but absolutely essential—for sellers to regularly monitor where their products are stored. While marketplace facilitator laws have simplified some aspects of sales tax compliance, they haven’t eliminated the need for sellers to understand and monitor their obligations.
Amazon FBA sales tax requirements can vary significantly from state to state. Here’s an overview of states with major Amazon fulfillment centers and warehouses.
California is home to several Amazon fulfillment centers and has complex sales tax laws. As of 2025, California requires out-of-state sellers to collect sales tax if they made more than $500,000 in annual sales the previous year.
Texas is an origin-based sales tax state for in-state sellers but destination-based for remote sellers. With a significant Amazon presence, sellers meet the economic nexus threshold in Texas if they made $500,000 or more in annual sales the previous year.
After Florida enacted its marketplace facilitator law in 2021, the state’s economic nexus threshold is $100,000 in annual sales from the previous calendar year. Amazon now collects and remits sales tax on behalf of third-party sellers in the state.
In Illinois, a business is considered to have economic nexus if it made $100,000 or more in sales or 200 transactions in the previous calendar year.
Like Illinois and Florida, a business has economic nexus in Pennsylvania if it made $100,000 or more in sales in the previous year.
Michigan has some of the most Amazon warehouse space in the country. If a business made $100,000 or more in sales or 200 transactions in the previous calendar year, it meets the economic nexus threshold in Michigan.
Each state also has its own registration requirements, filing frequencies, and deadlines. In California, for example, sellers with nexus must register with the California Department of Tax and Fee Administration and file the returns based on their assigned filing frequency.
Besides state-level taxes, some jurisdictions impose local sales taxes. Local tax rates can vary significantly between cities and counties. Sellers must account for these variations when collecting and remitting taxes.
Amazon is required to calculate, collect, and remit sales tax on behalf of third-party sellers in most states. However, sellers may still have reporting obligations in states where they have nexus—even if Amazon handles tax collection. Understanding Amazon FBA sales tax requirements is crucial for maintaining compliance.
While Amazon manages sales tax collection and remittance for sales made through its platform, sellers still have key responsibilities, including:
If you sell through multiple channels, you’re responsible for collecting and remitting sales tax for those sales, making your obligations more complex. Your nexus applies to your entire business, not just one sales channel. While some states exclude marketplace facilitator sales from triggering nexus, others consider total sales into the state, including Amazon sales. This means sellers must track sales across all platforms to stay compliant.
Compliance with tax deadlines is essential to building a positive business reputation and avoiding unnecessary financial burdens. Despite Amazon’s role in the sales tax process, FBA sellers may still need to register for permits in certain states. The registration process typically involves the following steps:
Keep in mind that registration fees and timelines also vary by state. Some states offer free registration, while others charge a fee, and processing times can range from immediately to several weeks.
After you register, it’s crucial to maintain a compliance calendar to track filing deadlines. Depending on your sales volume and state requirements, these deadlines can be monthly, quarterly, or annually, so you’ll want to be clear on expectations and stay up to date on the latest information. Be sure to maintain accurate records to avoid errors and consider using sales tax software to automate the process with built-in sales features to automate calculations and streamline the process.
For sales not covered by marketplace facilitator laws, sellers will need to set up tax collection in Seller Central. This involves enabling tax collection for specific states, setting up product tax codes to ensure correct taxability, and configuring tax collection on shipping and handling fees.
Proper record keeping is essential for sellers to prove their sales tax compliance. FBA sellers should maintain sales records by state, exemption certificates, tax return and payment records, and Amazon’s tax reports and documentation in preparation for potential audits.
Amazon provides various reports that can help with sales tax compliance, like the Sales Tax Report and the Marketplace Tax Collection Report. By regularly reconciling these reports with their own sales data, sellers can maintain accurate reporting.
To prepare for a potential audit, all sellers should do the following:
With a defined and dedicated record-keeping process, sellers can ensure that they are well protected and compliant with state and federal requirements.
FBA sellers don’t need to manage every aspect of their sales tax obligations alone. There are great resources available to help guide sellers and empower them to protect their business.
The following tools can help sellers manage the process:
Leveraging these resources can significantly streamline the sales tax management process for FBA sellers, ensuring compliance and reducing the risk of errors without overburdening internal resources.
Sellers often encounter several common pitfalls when managing Amazon FBA sales tax requirements. For example, many sellers fail to register in states where they have nexus. Sellers must regularly review their nexus footprint, including both physical presence through inventory and economic nexus thresholds. This is one example where working with a professional can help significantly.
Similarly, it can be easy to misunderstand product taxability. To combat this, we recommend that sellers research the taxability of their products in each state where they collect tax, consider using product taxability databases, and consult with tax professionals to ensure that they have the most accurate and up-to-date information.
FBA sellers may also fail to file returns in states where Amazon collects tax. Even if Amazon is collecting and remitting tax on their behalf, they may still need to file tax returns in some states. Additionally, they can often overlook local tax obligations, changing sales tax laws and economic nexus thresholds, and shifting news services. In these situations, it’s increasingly important to implement a system for staying up to date on sales tax law changes and keeping up with state regulations.
Whether it’s regularly reviewing sales data and nexus status themselves, using automated solutions to ensure compliance, or engaging a tax professional to face these complex situations, FBA sellers need to have a system in place that protects them and their business.
While Amazon’s marketplace facilitator status has simplified sales tax collection for many FBA sellers, it’s still crucial to understand your obligations and maintain compliance. As a seller, you must remain vigilant and proactive in managing your tax responsibilities.
By staying informed, utilizing tools and resources, and seeking professional help when needed, you can navigate the complex world of sales tax with confidence. Remember, compliance is about more than just avoiding penalties—it’s about building a sustainable, responsible business that thrives in the competitive ecommerce landscape. As you grow your Amazon FBA business, make sales tax management a priority by partnering with The Sales Tax People to navigate the complexities of compliance. We offer invaluable resources and services tailored specifically for ecommerce sellers, with experience in helping businesses like yours understand their obligations, optimize their processes, and ensure compliance across states. Discover how you can scale your Amazon FBA business with confidence with us at sales.tax/services/sales-tax-management/.
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