Amazon Marketplace Facilitator Tax for Sellers
Understand how Amazon's role as a marketplace facilitator changes your sales tax obligations, even in states where they collect and remit tax on your behalf.
The 2018 Supreme Court decision in South Dakota v. Wayfair allowed states to require online retailers to collect and remit sales tax even without a physical presence in that state. In response, states with a sales tax have enacted marketplace facilitator laws. These regulations identify platforms like Amazon as the “facilitator” and legally require them to handle sales tax on behalf of third-party sellers. For sellers, this means Amazon manages the sales tax process for transactions in these states, which simplifies tax collection for states and reduces the compliance burden on individual sellers.
Amazon’s Role as a Marketplace Facilitator
In states with marketplace facilitator legislation, Amazon assumes the legal obligation for sales tax on its platform. Amazon is designated as the retailer for tax purposes and is responsible for calculating the correct rate, which includes state, county, city, and other local taxes. When a customer in one of these states makes a purchase, Amazon’s system automatically determines the applicable sales tax, adds it to the total, and collects the full amount.
Amazon also remits the collected funds directly to the appropriate state and local tax agencies. Sellers do not receive the sales tax portion of the funds in their disbursements for these orders. Amazon handles the filings and payments for all sales on its platform within that state, consolidating its own sales with those of its third-party sellers into a single return.
Amazon’s role is limited to sales and use taxes. All federal and state income tax liabilities that arise from a seller’s profits remain the seller’s responsibility. Any gross receipts taxes or other business-related fees are also outside the scope of what Amazon manages under these laws.
Sellers can verify which states have these laws through their Amazon Seller Central account. Amazon maintains a list of jurisdictions where it performs Marketplace Tax Collection (MTC). This resource is updated as legislation changes, so relying on this official source is preferable to third-party lists.
Seller Responsibilities in Marketplace Facilitator States
Even though Amazon handles sales tax in these states, sellers are not absolved of all compliance duties. A primary responsibility is to register for and maintain a sales tax permit if the seller has established “nexus” with a state. Nexus can be created through a physical presence, such as storing inventory in a fulfillment center, or through economic activity.
Economic nexus is established when a seller’s sales into a state exceed a certain threshold. This threshold is often $100,000 in annual sales, but the specific amount can vary by state. Many states have also removed previous transaction-based thresholds.
Maintaining a sales tax registration is also necessary for sales conducted outside of the Amazon platform. If a seller operates their own e-commerce website, sells at physical events, or uses other online channels, they are personally responsible for sales tax on those transactions. The marketplace facilitator laws only apply to sales made through the designated marketplace.
Sellers registered in a marketplace facilitator state must continue to file sales tax returns. These filings will report total gross sales within the state, followed by a deduction for sales handled by the marketplace facilitator. This often results in a “zero-dollar” return, but failing to file these returns, even when no tax is owed, can lead to penalties.
Accurate record-keeping is necessary to correctly complete these filings. Sellers must be able to distinguish between their Amazon sales and sales from other sources to properly report total sales and deduct the amounts handled by Amazon. This documentation is also important in the event of a state audit.
Using Amazon’s Tax Reporting Tools
Amazon provides reports within Seller Central to help sellers manage their tax reporting obligations. These tools provide the data needed to file returns accurately, especially for deducting the amounts handled by Amazon when reporting total sales.
To find the relevant documents, go to the “Reports” tab in Seller Central and select “Tax Document Library.” For sales tax purposes, the primary document is the “Marketplace Tax Collection Report.” This report provides a breakdown of all orders for which Amazon has handled sales tax on the seller’s behalf.
The Marketplace Tax Collection Report can be generated for specific date ranges and shows transaction-level detail, including the jurisdiction and the tax amount. This allows a seller to identify the sales figures needed for their state tax filings. When filing a zero-dollar return, this report provides the exact amount to list as “sales taxed by marketplace facilitator.”
The “Sales Tax Reports” section, also under the Reports tab, is another useful area. These reports can be configured to show sales data by state, which is helpful for monitoring economic nexus thresholds. This information helps in determining registration requirements and managing tax obligations for sales made outside the Amazon platform.