Important Changes to Seller Fee Taxability on Amazon

Important Changes to Seller Fee Taxability on Amazon.com

The Amazon sales tax policy has changed many times over the years. And these changes raise questions every time. But of all the questions, there’s one that stands out.

Who’s going to cover the costs?

Should we increase our prices, or is Amazon going to cover the bill?

Well, it’s time for another change to tax policy. But only for certain states this time. Let’s find out if you’ll be affected.

What’s Changing?

As of the 1st of June, 2019, certain seller services will be considered taxable – but only in some states. This looks like it’s outside of the usual Amazon seller central tax. The information we’ve got from Amazon at the time of writing is vague, but here’s what we’ve been able to dig up…

Specific selling fees, such as per item, per order and refund fees will be taxable as an electronic service. Which means these fees will increase according to the specific state’s tax laws – which we’ll get into in a minute.

Some states will also consider FBA prep fees, such as bubble wrap, polybag, taping and labels as taxable. And while Amazon sellers fees won’t be raised by Amazon themselves, you might see a slight extra charge on these services – applied to your Amazon sellers fees.

Before we go into more detail, let’s take a look at the states that could be affected.

Will You Be Affected?

The following states will have tax applied to the referral fee, subscription fee, variable closing fee, per-item fee, promotion & merchandising fee, refund commission fee, checkout by Amazon, and sales tax collection fee.

  • Connecticut
  • the District of Columbia
  • Hawaii
  • South Dakota
  • West Virginia

As for the FBA services, the following states will be affected:

  • Arizona
  • Connecticut
  • Illinois
  • West Virginia

And this includes the labeling fee, polybagging fee, bubblewrap fee, taping fee, and opaque bagging fee.

How Much Tax Will You Pay?

This is dependant on each state. According to your state tax, you’ll pay x% on any of the above-mentioned fees.

For example, if you paid a bagging fee of $0,80, and your state’s tax is 10%, you’d be liable to an $0.08 tax charge.

Unconfirmed Information That Could Affect You

Whenever there’s a change to tax on Amazon seller fees, there are the inevitable rumors and unconfirmed information flying around.

At the moment we’ve got a list of states doing the rounds. These states are also said to be affected, but it seems to be an unofficial list. So if your state wasn’t listed above, but it’s listed below, you should confirm with Amazon just to be sure.

  • Arizona
  • Colorado*
  • Connecticut
  • Hawaii
  • Kentucky
  • Massachusetts
  • New Mexico
  • New York
  • Ohio
  • Pennsylvania
  • Rhode Island
  • South Dakota
  • Tennessee
  • Texas
  • Utah
  • Washington
  • West Virginia
  • District of Columbia (DC)

*In applicable Colorado jurisdictions only.

Since this list is unconfirmed, we’ll be keeping an eye out for your comments correcting us. If you live in one of these states and you have additional information, we’d love to hear from you.

No Need For Panic – But Check your Margins

These tax increases on Amazon are usually small and not enough cause for the widespread panic they cause. But those of us who run on narrow margins better be ahead of the game.

So don’t panic, but check your margins – now. These changes are coming into effect on the 1st of June. At the time of writing, there’s not much time left for us. So get busy!

Do you have additional information about the latest tax increase on Amazon? Or do you live in an affected state that isn’t listed? Help out your fellow seller and drop us a comment below. We love hearing from you.