Amazon FBA sales tax guide: Compliance, nexus, and deductions

Amazon FBA helps your business with a lot of things, but it doesn’t handle sales tax for you… and in fact, it’s more complicated than that!

Not many business owners understand how Amazon affects tax compliance obligations. You know, the legal requirement to collect taxes from buyers and pay it to the state governments, on time or else. Amazon sellers using FBA must abide by Amazon’s sales tax rules, but being sales tax compliant is becoming more and more difficult.

Especially because the American state governments are rapidly implementing new and extensive tax laws that apply to marketplace facilitators, like Amazon, and remote sellers, like you.

Here you’ll find all the information you need about how using Fulfillment by Amazon impacts your US sales tax obligations.

What is Amazon FBA and how does it work in the US?

Fulfillment by Amazon is a service Amazon provides its sellers, to take over product storage, distribution, and delivery. As a business owner and Amazon seller, once you sign up for FBA, you ship and track your shipments to Amazon fulfillment centers. Amazon’s online seller tools help you through the process.

Amazon Prime customers get super fast, free shipping on your products, and all other customers can often quality for free shipping, too, which makes your products more competitive. Amazon fills those orders and sends tracking information directly to the buyer.

Not only that, Amazon FBA provides all of your customer support, such as buyer inquiries, refunds, and returns.

Pro tip: You should stay aware of which FBA centers are housing and sorting your merchandise. Because this triggers sales tax nexus for your business.

Where are the Amazon fulfillment centers in the US?

There are well over 100 Amazon FBA warehouses in the United States, located across the country. The following states have at least one Amazon fulfillment center:

Arizona, California, Colorado, Connecticut, Delaware*, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Hampshire*, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington, Wisconsin.

Here is a list of Amazon FBA locations around the world.

*These states actually don’t collect sales tax. So although some of your merchandise may be stored here and sold here, it won’t trigger nexus. 😃

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Understanding the Amazon FBA tax structure

First of all, it’s not a nationwide policy, such as VAT throughout the European Union or GST in Australia. Rather than administered on a federal level, US sales tax exists at the state and local levels. States and local jurisdictions have the power to set their own tax laws and tax rates.

• 45 states and the District of Columbia collect statewide sales taxes. (Alaska, Delaware, Montana, New Hampshire, Oregon don’t have any!)
• 38 states have some form of local tax, collected in part or all of the state.

As a result, there are thousands of tax jurisdictions in the United States! Within those states and local jurisdictions, there are several other factors that determine whether your business is liable or not — which is to say, whether your business has nexus. If you don’t know about nexus yet, take a quick moment to read our Guide to US Sales Tax Nexus.

Sales tax nexus for Amazon FBA sellers

Before you can comply with US sales tax rules, you need to understand nexus — the legal term that determines whether your business is required to collect and remit sales tax in a given state.

In simple terms, sales tax nexus is a connection between your business and a state. If your business has nexus in a state, you’re legally obligated to register, collect sales tax from buyers in that state, and file returns.

There are two main types of nexus that apply to Amazon FBA sellers:

Physical nexus: If you store inventory in a state — such as in an Amazon fulfillment center — that creates physical presence and establishes nexus.

Economic nexus: Even if you don’t have physical operations in a state, you may create nexus by exceeding certain sales thresholds (usually based on revenue or number of transactions). These rules vary by state.

Because Amazon distributes your inventory across multiple fulfillment centers, it’s common for FBA sellers to unknowingly establish nexus in several states. That’s why it’s crucial to monitor where your products are stored and keep track of your sales volumes across the US. You can read more about nexus in our complete guide.

Once you know where you have nexus, you can move on to the next steps: registering for tax permits, collecting the right amount of sales tax, and filing returns on time.

How to collect sales tax on Amazon FBA

Collecting sales tax as an Amazon FBA seller used to be a complex task. Now, thanks to marketplace facilitator laws, the process is much simpler, but there are still a few key things you need to know and do to stay compliant.

As of now, Amazon collects sales tax in all states that require it, covering nearly every scenario where you would otherwise need to do it yourself. This has taken a huge burden off sellers, especially those with nexus in multiple states.

Even with Amazon collecting sales tax, you’re not completely off the hook. Here's what you should still take care of:

1. Know where you have nexus Determine which states you have sales tax nexus in, either through inventory stored in Amazon warehouses, economic thresholds (like total sales or transaction volume), or other business activities.

2. Register where required You must register for each state’s tax system individually. You should visit the state’s Department of Revenue website, which you can find on this helpful directory from the IRS. Another option is to register for the SSUTA states at once, using a simple (and free) online application through the Streamlined Sales Tax Registration System (SSTRS). You can pick and choose which of the 24 states are relevant to your business. Learn how to register for a seller’s permit.

3. Charge sales tax to customers in that state This includes the overall state tax rate, plus any county or district taxes that apply. Not every state has local-level taxes, though. Usually the tax rate is based on where the customer is located, a destination-based tax. Only a few states have origin-based taxes, meaning you charge tax according to wherever your business is based. Read more about origin and destination-based sales taxes.

You need to set up each of these manually in Amazon Seller Central. Only once you configure your account to collect these taxes, then Amazon will do it for you.

4. File sales tax returns in that state When you register, each state will assign you a filing frequency. It could be once a month, once a quarter, or once a year. Be sure to note your deadlines and pay on time to avoid penalties. Again, check the individual states’ official websites for specific information on how to file.

5. Check your Amazon tax settings Even though Amazon handles collection, you need to ensure your Seller Central tax settings are correctly configured. Set up the correct product tax codes and verify that collection is turned on for each state where it's required.

6. Maintain records Amazon provides tax collection reports in your account. Keep these for your records, as they’re essential if you’re audited or need to verify that taxes were properly collected and remitted.

7. Monitor for changes Sales tax rules are constantly evolving. New states may pass marketplace facilitator laws, or thresholds may change. It's a good idea to review your nexus and compliance status regularly, especially as your business grows.

But there’s a huge, and growing, exception to all of the above! And that’s when a state has a “marketplace facilitator law.”

What are US marketplace facilitator laws?

Marketplace facilitator laws are tax policies that require online marketplaces, such as Amazon, eBay, or Etsy, to collect and remit sales tax on behalf of all their merchants (i.e.- on your behalf!).

These laws are designed to simplify the state’s process for recouping as much sales tax as possible. Obviously it’s much easier to make Amazon, a single entity, responsible for the tax from all the sales on its platform, rather than to chase up each individual Amazon seller.

As for you, this means that in the “marketplace facilitator” states where you have nexus, you don’t need to worry about tax for any sales you make via Amazon. The marketplace is responsible for charging, collecting, and remitting that tax money.

But you are still responsible for collecting tax on sales made through other channels and avenues in the state. And you’re likely still expected to maintain a valid tax permit for as long as you have nexus there, even if you only make sales on Amazon and never collect sales tax yourself.

Marketplace facilitator laws are cropping up fast and rapidly covering the map. The following states currently have versions of a marketplace facilitator tax policy already in place or in the works (but given how quickly these laws are developing, this list may not be fully up to date!):

Alabama, Connecticut, Iowa, Minnesota, New Jersey, Oklahoma, Pennsylvania, Virginia, and Washington.

The key word there is “versions.” Not all marketplace facilitator policies are the same. Each state has its own nuance. For example, while you don’t have to manage the tax collection on your Amazon sales, you may still have some tax reporting duties in some states.

How to report and file taxes as an Amazon FBA seller‍

Selling through Amazon FBA is a powerful way to grow your business, but it also means you’ve got tax responsibilities to stay on top of. Whether you’re just getting started or scaling up, it’s essential to understand how to report your income correctly, manage your sales tax obligations, and keep your filings compliant.

As an Amazon FBA seller, you're considered self-employed in most jurisdictions. That means you’ll need to report all your business earnings, even if you’re not incorporated. You’ll also be responsible for tracking expenses, collecting and remitting any applicable sales tax, and filing an annual tax return.

The good news? With the right tools and a clear process, tax season doesn’t have to be stressful. Let’s break down the key forms and steps you’ll need to follow.

Understanding the 1099-K tax form

If you sell on Amazon in the U.S., you may receive a 1099-K form. This document is issued by third-party payment networks (like Amazon Payments) and reports your gross sales transactions for the year.

You’ll receive a 1099-K if your sales pass a certain threshold — currently $600 in total payments for the year. That’s a low bar, so most active Amazon sellers can expect one.

Here’s what to keep in mind:

• The 1099-K shows gross income, not your profit. It includes shipping, sales tax, and refunds.

• You’ll still need to track your business expenses separately to calculate your net income.

• Make sure the numbers match your records. It’s a good idea to reconcile your Amazon statements with the figures on your 1099-K.

If anything looks off or you didn’t receive a form you expected, reach out to Amazon directly or consult a tax advisor.

Filing annual income tax returns

When it’s time to file your annual income tax return, you’ll report all of your Amazon FBA income, even if you didn’t receive a 1099-K.

Here’s how it usually works:

• If you’re a sole proprietor, you’ll report your business income and expenses on Schedule C of your personal tax return.

• If your business is structured as an LLC or corporation, your filing requirements may vary.

Make sure you:

• Report all gross income from your Amazon sales.

• Deduct allowable business expenses (e.g., shipping costs, packaging, tools, and Amazon fees).

• Include any self-employment tax you owe, if applicable.

Using accounting software or a tax automation tool can make this process much smoother. And if you're unsure about any part of your return, working with a tax professional is always a smart move.

Tax deductions for Amazon FBA sellers

As an Amazon FBA seller, you’re running a business and that means you can deduct certain business-related expenses from your taxable income. Knowing what you can write off not only keeps you compliant, but also helps you keep more of what you earn. Read more about how to maximize small business tax deductions for financial growth.

Here are some common Amazon seller tax deductions:

1. Cost of Goods Sold (COGS)

This includes the cost of inventory you purchase to resell on Amazon. If you use a supplier or wholesaler, that purchase price is fully deductible once the items are sold.

2. Amazon fees

Amazon takes a cut, and those fees can add up (referral fees, FBA service fees, storage fees, shipping fees) all of these are legitimate business expenses you can deduct.

3. Shipping & packaging

Any materials you purchase to ship or prepare your products (like boxes, tape, poly bags, labels) are considered deductible. This also includes the cost of shipping items to Amazon’s fulfillment centers.

4. Software & tools

Subscription costs for business software such as accounting platforms, inventory trackers, or product research tools are fully deductible as business expenses.

5. Professional services

Fees paid to accountants, tax professionals, consultants, photographers, or virtual assistants can be written off.

5 Tips to simplify Amazon FBA Sales Tax compliance

Sales tax compliance can feel overwhelming, especially when handling Amazon inventory stored across multiple states or countries. But with the right strategy, staying tax compliant doesn't have to be a headache. Here are five practical sales tax tips for Amazon sellers:

Use automated tax software

Save time and minimize mistakes by using tax automation tools like Quaderno and others. These solutions calculate taxes, track deadlines, and often file returns automatically.

Configure Amazon Seller Central correctly

Ensure your tax settings in Seller Central are accurate. Assign the right product tax codes and enable tax collection for all applicable states.

Track filing deadlines and frequencies

States require sales tax filings at different intervals — monthly, quarterly, or annually. Keep a clear calendar or use software reminders to never miss a deadline.

Keep thorough documentation

Organize and save all sales data, tax collection records, and filing confirmations. Having well-maintained records is crucial in case of audits or discrepancies.

Stay updated on Sales Tax law changes

Sales tax rules evolve regularly. Subscribe to newsletters or use tools that alert you about changes in tax laws, thresholds, and filing requirements to stay compliant. You can subscribe to our newsletter here.

What can help you handle Amazon FBA sales tax?

Once you have nexus and are registered in more than one state, Amazon seller taxes can get really confusing.

Where Amazon’s service stops, Quaderno takes over. The Quaderno integration with Amazon FBA will seamlessly handle all the following sticking points:

Automatic calculation and collection. Quaderno charges the correct amount of sales tax, based on the ship-from or ship-to location.

Automatic tax-compliant receipts, fully customized. Amazon’s receipts don’t allow you to customize the tax information that laws require. Quaderno includes all necessary tax info. Plus it sends receipts, credit notes, and invoices automatically – and keeps all your records straight.

Automatic threshold notifications. While Amazon FBA doesn’t monitor any economic nexus thresholds for you, Quaderno automatically tracks your annual sales and tax thresholds in every state.

Instant tax reports for easy filing. In the click of a button, Quaderno provides you with a full tax report for each state where you have a tax permit. Before you file any tax return, use Quaderno’s instant reports to have all the necessary info at a glance. You can file tax returns in mere minutes.

Or, if you’d rather leave tax returns to the professionals, we’ll connect you with a verified tax filing service!

And another great thing? Connecting Quaderno with your Amazon account only takes a minute. Give us a try with a seven-day free trial.