Costly Mistakes to Avoid when Applying for Sales Tax Permits – for Amazon FBA Sellers
Third-Party Amazon FBA Sellers are Still Required to Collect and Remit Sales Tax
Update 2020: Marketplace nexus now means Amazon will collect and remit in 43 out of 44 marketplace nexus states. There are 7 states where an Amazon seller will need to register where either Amazon is not collecting, or they are, but registration is still required.
As of April 1, Amazon.com is now collecting and remitting sales tax in all 45 states that charge sales tax, BUT you as a third-party seller are still required to collect and remit where you have nexus (your stock locations in the FBA states). This means applying for sales tax permits or licenses to collect and remit sales tax.
We have applied for thousands of sales tax permits for clients over the last several years, and we wanted to share some key costly mistakes to avoid.
- Application Mistakes. If you make any mistakes on the application, you may not receive a rejection notice 2 months later! Then you have to re-apply. This may include checking the wrong box for the type of legal entity to not submitting the required documentation when applying for the permit.
- Time Frames. If you are an international seller without an SSN, these states will require you to MAIL in a sales tax application, Minnesota, Texas, and Wisconsin. The challenge is with those three states. The time frame may range from 2-8 weeks. This means you will continue to pay sales tax, plus penalties and interest out of your own pocket until you have a license to collect.
- Mailing address. We recommend all international sellers now consider using a U.S. mailing address for the states they have permits vs. their home country address. The main reason is the issues with permits and any important updates going to a foreign address. Most states don’t pay attention to the proper postage, and eventually, the permits are returned, and you may never see them, much less any updates of future sales tax due. We do have a US address service if you need support.
- Specific State Issues- Arizona– When you apply for a permit online, there is a second step that requires you to link your business. The process is precise about the information that will be accepted. For example, the applicant must know the exact amount of payments made in the last 6 months to the state.
- California no longer accepts a paper application. If you are a foreign seller and have applied by mailing your application to California, odds are it will be rejected. Our recommendation is to call the state to confirm your sales tax permit was issued.
- Connecticut’s $100 fee is NOT required unless you are applying for a Sales tax number. This only applies to in-state residents.
- New Jersey-There is two parts to the registration. When you are done registering the business, you must proceed to the premier business services and register to receive your permit.
- Nevada (like any state) makes sure you have the current start date for doing business in the state, separate from your incorporation date. A recent client used a three-year-old date and was issued a citation to appear in court to file past returns and payback sales tax, penalties, and interest.
- Washington- You must change the prefilled state of incorporation field or direct you to a completely different route for applying.
- Steps After you Apply for Sales Tax Permits. Do you know which states have a nexus questionnaire, and depending upon how you answer their forms, will determine if your business entity needs to qualify to do business in the state? Delays in getting permits are costly. The states are making updates and changes, but every month we see more mistakes, and our goal is to help you avoid them.
As you can read, applying for sales tax permits is not always easy and can be a big pain in many cases (especially when you call the state after 90 minutes on hold and you are placed back on hold, and you are disconnected and have to start all over again). If you need support, we are here to help. Become a Sales Tax System client and let us handle applying for your permits so you may focus on growing your Amazon.com FBA business and profits!