Accounting and Sales Tax: What do Amazon Sellers Need to Know?
Estimated reading time: 6 minutes.
Please note: ecommerce sales tax is still evolving and changing. These guides are correct at the time they are written but please consult official government pages or accounting professionals for the most up-to-date information applicable to you.
The Supreme Court ruled in favor of South Dakota, granting the state authority to impose sales tax obligations on out-of-state transactions. Online sellers will have a new set of obligations and challenges ahead of them, while states could potentially gain billions in revenue. But what does it mean for your business?
In an exclusive webinar from the tax pros at Avalara & A2X, we explain everything you want to know about sales tax compliance and automating accounting.
(Skip to 5m20s for the start):
The video explores:
- An introduction to A2X
- How to automate your accounting
- Marketplace facilitator laws you should know
- How economic nexus is triggered
- Which types of companies are most affected
- How to determine whether you’re on the hook for sales tax based on where you conduct business
- How to manage these changes with your Amazon and e-commerce sales
For more information on sales tax for ecommerce sellers
Check out our other resources below:
- Understanding Ecommerce Sales Tax - A Guide
- Accounting and Sales Tax: What Do Amazon Sellers Need to Know?
- eBay Sales Tax Guide: Everything You Need to Know
The A2X Component of the Webinar Transcription
How I got into using A2X was through my first Amazon Seller client who already had A2X set up and running. The first time I used it, it was a game changer. It took just a few minutes, no spreadsheet wrestling, no matter how many sales!
Years before this, I made the leap to cloud accounting when moving my first ecommerce seller from desktop. At the time, large volume sales for ecommerce could be entered through spreadsheets, which I found time consuming and prone to errors.
Now every day, I have the satisfaction of showing Accounting professionals and sellers all over the world how to benefit from this great number crunching app.
A2X has lots of great features and is always innovating. Our latest launch is a powerful tool that processes transactions from Shopify, saving time and money.
As I share a few tips on A2X today, please let us know if you have any questions.
Why are businesses automating accounting?
Did any of you experience this when you first started out? All the time you took to source and buy product, stuff like shipping to Amazon, listings, tracking inventory, what happened to that stock transfer?…and sales tax - it gets to be too much to keep track of manually really quickly.
And it is unrealistic to try and be equally skilled and knowledgeable in all aspects of managing the business.
Even if you delegate tasks to others, so many operations just don’t have to be done manually anymore. Automating tasks using apps is an important adaption for ecommerce sellers.
Your business is going to grow. It may be exponential. Stay organized, be on top of your numbers and your compliance without such a huge effort. With key apps, you can both keep up with compliance and focus on key drivers for your success, like product research and marketing.
Sales tax is one of those responsibilities we have when selling products online just about anywhere. As states in the US and countries all over the world see the advantage of taxing ecommerce, more rules are being made regarding sales tax and the complexity becomes very daunting to keep up with.
But keep up with it, we must! Fortunately, Avalara is one sales tax powerhouse, offering products to help with all aspects of sales tax tracking, returns, and filing for small, medium, and large sellers. This is automation at your fingertips! Let your business grow without all that worry!
How A2X and Avalara work together
A2X relies on Amazon settlements for generating accounting entries. The settlement is a time period of transactions that occurred on the Amazon platform in relation to selling your products. The net sum of those transactions is what Amazon deposits into your bank account.
A2X is best known for translating Amazon settlement data into summarized transactions that can be mapped and sent into your accounting system where they can be reconciled to Amazon deposits.
This completes two tasks at once:
- Recording a summary of all your sales, fees, loans, held back funds, and, of course, sales tax liabilities.
- Reconciling to your Amazon deposits.
All in just a few clicks. Talk about automation! This is a big help for ecommerce sellers.
Now, A2X does not specialize in sales tax by state tracking in the US. There is a good reason for this. There is very specific information required to determine the rates for each sale and it is just not available in settlement files from Amazon.
However, in summary accounting this is ok. Best to use an app like Avalara that directly connects to that part of Amazon where all the sales tax details are. Avalara can track your sales tax details for you instead.
As you pay your sales tax returns from business accounts, you pay down your liability when you allocate those payments to your sales tax liability account. Let Avalara handle the complexity outside of your accounting system and let A2X help you keep it simple inside your accounting system.
Marketplace Facilitator Tax - what is it?
Some of you may have seen this before.
Marketplace facilitator = a marketplace that 3rd party sellers (Amazon sellers) use to promote and sell products.
In this example, Amazon is the marketplace facilitator. There are others up and coming such as Etsy who are required to handle sales tax for certain states now. Other ecommerce platforms should let you know when these new rules will start to apply to you.
Certain states now require Amazon to take sales tax where appropriate on behalf of the seller. This moves responsibility away from sellers when it comes to collecting and remitting sales tax.
You may ask: Do I still submit sales tax returns for marketplace facilitator tax states?
The consensus is that it depends. As a seller with sales in such states, seek advice from Avalara and a sales tax expert especially if you have large volume sales outside of Amazon to states with these kinds of laws.
The Amazon accounting for marketplace facilitator taxes plays out in A2X as part of a normal sum of sales tax charges during a settlement period, and then gets deducted from your settlement as a separate transaction so Amazon can then pay those states that have this marketplace facilitator relationship with Amazon.
These transactions mapped to your sales tax liability account, will wash out as Amazon does its thing.
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Also on the blog:
- How-to Guide: Collecting Amazon Sales Tax
- Sales Tax Strategies for Amazon FBA Sellers
- Understanding Ecommerce Sales Tax
- Changing the Landscape of Tax Law
- Options for Filing Tax Returns
- An In-Depth Tax Series for Amazon & Shopify
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