Nexus Amazon with Alex Oxford of Tax Valet

What is nexus Amazon? Learn why it's essential to learn about the tax nexus laws when you ship your Amazon items across different states.

How do we determine where a business has sales tax nexus?
What is “nexus”?

You have a sufficient presence in a state to have sales tax responsibility.
Sales Tax nexus results how?

Physical presence
Economic nexus
Affiliates
Employees, contractors, renting or leasing property

The most common one for online businesses is an economic and physical presence.
Physical  presence
If you’re based outside the USA, you may still have a physical presence if you have inventory stored there, including in FBA warehouses.

A number of FBA warehouses have been audited - eg: Wisconsin
Economic Nexus
Passing certain thresholds on Nexus Amazon.

Most common is $100K revenue, the other 200 transactions.

They vary a lot in how they define.
Example
If I ship in stuff to LA (CA), and it gets moved into 3 states… bear in mind that Amazon will redistribute the inventory across 40 states!

If the inventory were just in 3 warehouses (in 3 different states), that means you have nexus in those 3 states (ignoring Marketplace Facilitator Laws). You would need to get a sales tax permit, collect and remit sales tax on Nexus Amazon.
Marketplace Facilitator Laws states
Generally, you don’t have to get a permit.

However, in general, if you’re selling in a marketplace, you don’t have much.

How do we figure out which states have sales made?
DIY
Pull the transactions out and do some manual excel work with a pivot table.

Taxjar also has a tool that is helpful.
Getting help
There is a link on their website that has information which also provides services and analyses sales state by state. Analysis fee counts towards the first invoice if a client of TaxValet.

For nexus analysis, you look at many factors:

Transactions
Where inventory is being stored
Other areas like affiliates, other businesses, contractors

 

Affiliates
Employees, contractors, renting or leasing property

Visiting trade shows can cause tax nexus!

Generally working with an affiliate doesn’t cause an issue but if affiliates are a substantial share of your revenue, it could create sales tax nexus.
Getting permits
Implications for International businesses
Does it make a difference where you’re based? (Which country)
It doesn’t make any difference in theory for Nexus Amazon.

There is a different process for international sellers.

What is the basic process of registration for sales tax for international sellers?
Getting permit
TIN  

It can be difficult to submit the permit without a TIN people; you’d need an EIN (tax identity) for the company

EIN is simple - for companies - it’s also cheap to use an online service say $100 to get it for you.

TIN is much more challenging - it takes 3-4 months.

Alex has a partner who only does TINs for international businesses.
Online systems
These don’t work for international sellers eg: you can’t put in the address etc.

But many States have a paper application so use these if you’re outside the USA.
Other issues paying Sales Taxes
Paying sales tax

They often will only take a bank account and only a US bank account!

That means you can’t pay the tax!

Alex cleaned up for an Amazon seller based in Poland

Got permits in 20 states without a TIN.

They came after her for not paying the tax. She had the money but in a non-US bank account.
Opening a US bank account
You’ll need a TIN to get this.

You need typically to visit the US to open a US bank account.

However, Alex has a partner who can do this for you.

The States make it hard to do this!
You can’t use a Transferwise number!
Payoneer also doesn’t work.

You need a bona fide bank account.

 

To learn more about Tax from Alex Oxford, here are the other two episodes:

FBA Sales Tax with Alex Oxford of TaxValet