Updated March 20, 2018 to explain Washington’s new filing form for 3rd party marketplace sellers
Last month, Amazon notified sellers that they would collect Washington sales tax on behalf of all 3rd party sellers starting January 1, 2018. While this is excellent news that will make an Amazon FBA seller’s life easier, sales tax is rarely simple. To find out what happens next, we emailed with a representative from the Washington Department of Revenue (to get answers in writing) and held a panel of sales tax experts from across the country.
You can watch the expert panel here:
And here are answers to the most common questions sellers have asked us since Amazon made the big announcement:
Why will Amazon begin collecting sales tax on behalf of 3rd party sellers in Washington starting January 1, 2018?
Washington passed a “marketplace facilitator law” stating that online marketplaces that meet certain criteria (which you can read about on the Washington Department of Revenue website), are required to collect sales tax on behalf of any 3rd party sellers selling via the marketplace.
According to sales tax attorney Mike Dillon of Dillon Tax Consulting, the letter of the new marketplace facilitator law does not actually require Amazon to collect sales tax on behalf of Amazon FBA sellers. The fact that Amazon is collecting on behalf of all third-party sellers is due to an agreement between Amazon and Washington.
Do 3rd party Amazon sellers who previously had nexus in Washington still have nexus in Washington?
Yes. And this is one of the most confusing parts of this change. According to Washington’s tax law, sellers with inventory stored in the state have sales tax nexus in the state. This has not changed, even though Amazon is now collecting sales tax on behalf of 3rd party sellers.
So, what does that mean? If you make sales via other online shopping carts and marketplaces, like eBay, Shopify, Walmart, etc. then you are still required to collect sales tax from Washington buyers.
Do 3rd party Amazon sellers who still have nexus in Washington still need to pay Washington’s Business & Occupation (B&O) tax?
In almost all cases, yes. You are still required to pay Washington’s Business & Occupation (B&O) tax even if you only sell on Amazon and are no longer required to collect sales tax from your customers. Current Washington sales tax filers will note that you file and pay your B&O tax along with your Washington sales tax filing. According to sales tax expert Mike Fleming of Peisner Johnson, B&O tax is roughly half of one percent of your gross sales into Washington.
Note: There is one very rare exception here. If you are sell on Amazon but not FBA, have no inventory or other nexus in Washington, and exceed the $10,000 economic nexus threshold in Washington, you are still required to file Washington B&O form, but you can take a credit for “no local activity” to remove the expectation that a B&O is due. This is highly confusing, so we always recommend you contact the Washington Department of Revenue if you have questions about whether or not B&O is due. Their best phone number can be found here.
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