Frequently Asked Questions
Isn’t the marketplace responsible for sales tax?
All US states require businesses who sell from their own website to register and collect sales tax, sales made via an online marketplace are generally the marketplace’s problem.
But be careful: although in most states Amazon, Walmart and other online platforms that are classified as marketplaces will be legally responsible to collect the sales tax on your transactions, you may still have an obligation to register with the state.
Even though the marketplace is accountable for reporting and paying the taxes – many states still require sellers to register for a sales tax permit are report all your sales.
Nexus for marketplace sellers
There are two types of nexus: physical and economic. Physical nexus is established when a business has a physical presence in a state, such as a warehouse, office, or employee. Economic nexus is established based on sales activity in a state.
Each state has its own threshold for economic nexus, which varies from state to state and can be based on sales revenue or transaction volume.
If you sell on a marketplace like Amazon, you may not have physical nexus in every state where your products are sold. However, because Amazon has warehouses in multiple states, using Amazon’s Fulfilled by Amazon (FBA) service can create physical nexus in those states.
This means that if you have inventory stored in an Amazon warehouse in a particular state, you may be considered to have physical nexus in that state and would be required to register and report your sales.
If you sell exclusively on marketplaces, you will certainly have reduced US sales tax obligations – but you are not completely exempt unfortunately. Some states will expect you to register if the volume or value of your sales reaches the economic nexus thresholds. (Although most states do exclude marketplace sales from the nexus calculation.)
If you sell off both a marketplace and your own website (“omnichannel”), then you might not be responsible for the tax on the marketplace sales, but your registration and reporting obligations will be the same in most states because of your website sales.
Even if most of your sales are done on a marketplace, if you are omnichannel and also sell across the US from your own site, the obligations will still apply for those sales. Therefore, when evaluating economic nexus thresholds, the marketplace sales might be included in that calculation.