What to Know About Amazon’s Tax Exemption Status
As Amazon grows, so does the number of Amazon sellers and eCommerce entrepreneurs looking to get in on some of the action. Amazon has created a program designed to help business owners understand and navigate their tax obligations- the Amazon Tax Exemption Program (ATEP).
This article will provide an overview of the ATEP and how you can apply for Amazon’s tax-exempt status. We’ll explain the Amazon tax exemption program, how you can apply for Amazon tax-exempt status, and help you understand which Amazon fees are tax-deductible. On a related note, check out how FBA return fees affect Amazon FBA sellers.
Understanding and joining the Amazon tax exemption program (ATEP) can help your business save your profits from selling on Amazon, and invest them back into your business.
What Is the Amazon Tax Exemption Program (ATEP)?
The Amazon Tax Exemption Program (ATEP) is designed to help Amazon sellers and other eCommerce entrepreneurs understand their tax obligations. The ATEP provides information on state sales and use taxes, as well as Amazon seller fees.
If you’re an Amazon seller or are looking to source products for Amazon, it’s vital that you understand the Amazon tax exemption program and how to apply for Amazon tax-exempt status.
What Are the Benefits of Amazon Tax Exemption?
There are several benefits of Amazon Tax Exemption, including:
- Reduced or eliminated state sales and use taxes on Amazon purchases.
- No sales tax is collected by Amazon on products sold by Amazon.
- Reduced Amazon seller fees.
You may be paying more than necessary in Amazon seller fees by failing to receive an Amazon tax exemption when your business qualifies for it. Fortunately, it’s easy to see whether you are eligible for an Amazon tax exemption and apply for Amazon tax-exempt status.
Some sellers may even receive tax exemption status within fifteen minutes of applying if you have all the necessary information on hand.
Amazon will not charge you the sales tax that it collects from buyers, which can be significant depending on where you are located.
Who Is Eligible for Amazon Tax Exemption?
There are several categories of individuals who are eligible for Amazon tax exemption. These include:
Nonprofit Organizations and AmazonTax Policy
Nonprofit organizations are eligible for Amazon tax exemption in the US and many other countries. To be eligible, your nonprofit must meet Amazon’s requirements, including being registered with the IRS as a 501(c)(three) or equivalent organization.
Government Entities and Amazon Tax Exemption Policy
Government entities are eligible for Amazon tax exemption in the US and many other countries. Your government entity must be registered with Amazon as a public sector organization to qualify.
Educational Institutions and Amazon Tax Exemption Status
Educational institutions are eligible for Amazon tax exemption in the US and many other countries. Your educational institution must be registered with Amazon as an accredited school or college to qualify.
Low-Income Taxpayer Amazon Sellers
Low-income taxpayers can also take advantage of Amazon tax exemption. If you’re seeking eligibility, your low-income must meet Amazon’s requirements, including being below a certain income threshold.
Amazon Sellers Who Work and Live Abroad and Tax Exemption
Some citizens that work and live abroad may also be eligible for Amazon tax exemption. If you have an overseas Amazon account and meet Amazon’s eligibility requirements, you may be able to take advantage of Amazon tax exemption.
Amazon Sellers Who Qualify for Multiple Tax Deductions
Some individuals have so many tax deductions that they don’t have to pay taxes. If this is you, Amazon tax exemption can still be a valuable tool. Amazon’s Tax Exemption Wizard will help you determine whether or not Amazon tax exemption is the best option for your business.
Tax Exemption for Amazon Sellers With Dependents
Taking care of several dependents can be costly, and the tax deductions can add up. If you have several dependents, Amazon tax exemption may help reduce your taxable income.
Tax Exemption Status for Amazon Business Entities
Business entities are eligible for Amazon tax exemption in the US and many other countries. In order to qualify, your business entity must register with Amazon as a business.
What Does It Mean to Be “Tax Exempt” as an Amazon Seller?
If you receive tax-exempt status, Amazon will send you a certificate that you can show to your buyers. When Amazon receives an order from a tax-exempt buyer, the company will automatically apply that exemption to the order. Amazon will also collect and store all exemption documents for future reference. Fortunately, Amazon makes it simple to access, review, and use your tax documents.
They’ll even send your tax-exempt information to other sellers when you make a purchase on Amazon.com and similar marketplace sites.Thus, being tax-exempt on Amazon saves you money in more than one way. Amazon will not charge tax on your purchases, and Amazon will also not charge you the sales tax that it collects from the buyers. This is a win-win for sellers who buy items on the platform.
How Does Being Tax-Exempt Help Your eCommerce Business?
Participating in the Amazon tax-exempt program can save your eCommerce business a lot of money. Amazon will not charge you the sales tax that it collects from buyers, which can be significant depending on where you are located.
For example, if Amazon charges a buyer in California state sales tax, but the seller is exempt because they are based in a different state, Amazon will refund the sales tax to that seller.
In addition, Amazon does not charge tax on your purchases. This can mean considerable savings, especially if you buy a lot of inventory from Amazon or other Amazon marketplace sellers.
Imagine trying to collect individual tax-exempt certificates from your customers. This undertaking would create an administrative nightmare and require additional business resources to complete. Fortunately, Amazon does this on your behalf when you enroll in the Amazon Tax Exemption Program (ATEP).
What Happens If Amazon Sellers Do Not Follow Tax Policy?
Although having a tax-exempt status for your business is beneficial, you need to follow the rules carefully to avoid negative consequences. For example, if caught selling taxable items on Amazon without Amazon’s tax-exempt status, your account can be suspended.
It’s important to follow Amazon’s rules and regulations for the Amazon Tax Exemption Program so that you can continue taking advantage of its benefits.
You’ll also want to avoid buying personal purchases using your tax-exempt Amazon account. If you accidentally (or purposefully) do this, Amazon may remove your tax-exempt status.
Tax-Exempt Certificates Don’t Work In Every State
There are several states where Amazon cannot provide you with tax-exempt status. After discussing your Amazon tax exemption eligibility with an accountant, you may find that your business cannot take advantage of this program like other sellers.
This is because some states have laws that prevent Amazon from providing tax-exempt certificates to out-of-state sellers.
If this is the case for your business, don’t worry – there are still plenty of ways to save money on Amazon taxes. Sometimes, tax authorities in your local, city, or state governments can authorize a certificate for you.
How to Complete the Amazon Tax Exemption Wizard
Now that you know who is eligible for Amazon tax exemption let’s look at how to complete Amazon’s Tax Exemption Wizard. The wizard will ask you for your business details, including:
- Business entity type
- Organizational address
- Amazon account information
Once you have entered all of your business details, the Amazon Tax Exemption Wizard will review your information and let you know if you are eligible for Amazon tax exemption.
How to Collect Your Business Details
If you are not already registered with Amazon as a business, you will need to provide Amazon with some basic information about your business. This includes:
- Business entity type
- Organizational address
- Uses for Amazon tax-exempt status
You can provide this information by registering for an Amazon Seller account and completing the tax exemption section of the registration form.
Why Sellers Should Join the Amazon Tax Exemption Program
As an Amazon seller, there are a few reasons why you should want to be in the Amazon tax exemption program. First and foremost, being in the Amazon tax exemption program can help reduce your state sales and use taxes. Additionally, Amazon does not charge sales tax on products sold by Amazon, saving you a significant amount of money. Finally, Amazon seller fees are reduced for those in the Amazon tax exemption program.
How to Apply for Amazon Tax-Exempt Status
The process of applying for Amazon’s tax-exempt status is relatively simple. You can complete the Amazon Tax Exemption Wizard, which will ask you a series of questions about your business and eligibility for Amazon tax exemption.
You’ll need to provide information about your:
- Business entity type
- Organizational address
Both of these pieces of information should be relatively simple to provide. Amazon uses this data to determine your eligibility for Amazon tax exemption.
Uses for Amazon Tax-Exempt Status
Once you’ve completed the Amazon Tax Exemption Wizard, Amazon will review your application and let you know whether or not you’ve been approved for Amazon tax exemption.
If approved, Amazon will provide you with a certificate of Amazon tax exemption. What’s nice about receiving tax-exempt status from Amazon is that it carries over with several other businesses.
As an Amazon merchant, if you ever work with com LLC, Amazon Digital Services, Inc., Amazon Services LLC, or Warehouse Deals, Inc, then the income you generate from those services will also be tax-exempt.
Are Amazon Fees Tax Deductible?
Amazon seller fees are not tax-deductible. However, state sales and use taxes on Amazon purchases may be tax-deductible. The amount of the deduction will depend on your unique individual tax situation.
To determine whether the Amazon fees your organization pays are tax-deductible, be sure to speak with your accountant.
Conclusion
In order to make it easier for Amazon sellers and eCommerce entrepreneurs to understand their tax obligations, Amazon has developed the Amazon Tax Exemption Program (ATEP). The ATEP provides information on state sales and uses taxes, as well as Amazon’s seller fees. Sellers can benefit from Amazon tax exemption by registering for Amazon’s Tax Exemption Program and completing the Amazon Tax Exemption Wizard.
Being in the Amazon tax exemption program can help reduce state sales and use taxes, as well as Amazon seller fees. Additionally, Amazon does not charge sales tax on products sold by Amazon. If you are an Amazon Seller and would like to apply for an Amazon tax exemption, the process is relatively simple. You can complete the Amazon Tax Exemption Wizard, and Amazon will review your application.If approved, Amazon will provide you with a certificate of Amazon tax exemption.
This certificate carries over with several other businesses, so if you work with com LLC, Amazon Digital Services, Inc., Amazon Services LLC, or Warehouse Deals, Inc., your income from those services will also be tax-exempt. Amazon Seller fees are not tax-deductible, but state sales and use taxes on Amazon purchases may be. Be sure to speak with your accountant about whether Amazon seller fees are deductible for your organization.
