Amazon Sales Tax Collection: Coming To Your State Soon!

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Salestax.com

In “Marketplace Fairness Act Adds Automation to Tax Confusion” I wrote:

Amazon is currently collecting sales tax for purchases shipped to nine states. It will begin collecting sales tax on purchases for Virginia in September 2013.

The nine states Amazon is currently collecting sales tax are Arizona, California, Kansas, Kentucky, New York, North Dakota, Pennsylvania, Texas, and Washington. It will begin collecting sales tax on purchases for Virginia in September 2013. Here is the future schedule for sales tax collection:

  • Virginia (September, 2013)
  • Indiana (January, 2014)
  • Nevada (January, 2014)
  • Tennessee (January, 2014)
  • South Carolina (January, 2016)

Here is Amazon’s information about sales tax as of 5/12/2013:

About Sales Tax on Items Sold by Amazon.com

Items shipped to certain states are subject to tax.

Items sold by Amazon.com LLC, or its subsidiaries, and shipped to destinations in the following states are subject to tax:

  • Arizona
  • California
  • Kansas
  • Kentucky
  • New York
  • North Dakota
  • Pennsylvania
  • Texas
  • Washington

Note:No sales tax is charged when purchasing gift cards; however, purchases paid for with gift cards may be subject to tax.

How Sales Tax is Calculated

If an item is subject to sales tax in the state to which the order is shipped, tax is generally calculated on the total selling price of each individual item. In accordance with state tax laws, the total selling price of an item will generally include item-level shipping and handling charges, item-level discounts, gift-wrap charges, and an allocation of order-level shipping and handling charges and order-level discounts.

The amount of tax charged on your order will depend upon many factors including Identity of the seller, type of item purchased, and destination of the shipment. Factors can change between the time you place an order and the time of credit card charge authorization, which could affect the calculation of sales taxes. The amount appearing on your order as Estimated Tax may differ from the sales taxes ultimately charged.

California Tax Regulations for Wireless Devices

The state of California has specific tax regulations regarding the sales of cellular phones and other devices like tablets or mobile hot spots that use wireless service. These devices are often subsidized (sold at a discount) with a requirement that the customer enters a contract with a wireless service provider. For example, a phone that sells for $599.99 without a contract may sell for $0.01 with a two-year contract for wireless service. California requires that devices sold at a discount with a wireless service contract are taxed on the full, undiscounted price of the device without a contract. So in the example above, a phone sold for $0.01 with a two-year contract would be taxed on the $599.99 no-contract price.

The regulations described above for wireless devices sold at a discount with a contract are not applicable to the sale of devices that are end-of-life or obsolete.

Your estimated tax will be displayed when you review your order during checkout. For additional details on California tax rates and to see what rate applies to you, please visit the California State Board of Equalization website.

Note:

  • The tax rate applied to physical orders will generally be the combined state and local rate for the address where your order was shipped. Therefore, the sales tax rate applied to your order may be different for an order shipped to your home address versus an order for the very same items shipped to your work address.
  • Electronically delivered products (e-books, e-documents, and electronically delivered software) are considered to be shipped to your current credit card billing address.

And here is Amazon’s information about tax requirements for states in which tax isn’t collected on orders as of 5/12/2013:

About Tax Requirements for States in which Tax isn’t Collected on Orders

Customers purchasing from Amazon.com LLC, Amazon Digital Services, Inc. or Warehouse Deals, Inc. and shipping to Colorado, Oklahoma, South Carolina, South Dakota, Tennessee, or Vermont may have additional tax requirements.

State Requirement
Colorado Colorado HB 1193, enacted in February 2010, requires online retailers to provide a detailed purchase report to customers with more than $500 of annual Colorado purchases by January 31 and to provide a summary purchase report with the total amount of each customer’s annual Colorado purchases to the Colorado Department of Revenue by March 31. This law is currently the subject of a legal challenge brought by the Direct Marketing Association and others. In the meantime, the U.S. District Court has suspended enactment of the law while the legal challenge proceeds.
Oklahoma Tax may be reported and paid on the Oklahoma individual income tax return [Form 511] or by filing a consumer use tax return [Form 21-1]. The referenced forms and corresponding instructions are available on the Oklahoma Tax Commission website. We’re required to provide the notice above for Oklahoma purchases based on Oklahoma law (HB 2359) enacted in June 2010.
South Carolina South Carolina customers may owe use tax on purchases made from Amazon.com LLC, Amazon Digital Services, Inc. and Warehouse Deals. Payment and reporting information can be found on the South Carolina Department of Revenue’s Website. S.C. Code Ann. § 12-36-2691(E)(3) requires us to provide South Carolina customers a notification of the total sale price amount for purchases made from Amazon.com LLC, Warehouse Deals, and Amazon Digital Services, Inc. Learn more about South Carolina Use Tax notifications.
South Dakota Tax may be reported and paid on the South Dakota use tax form. The use tax form and corresponding instructions are available on the South Dakota Department of Revenue website. We’re required to provide the notice above for South Dakota purchases based on South Dakota law (SB 146) enacted in April 2011.
Tennessee Purchases shipped to Tennessee may be subject to Tennessee Use Tax (T.C.A. § 67-6-210) unless an exemption exists under Tennessee law. A sale is not exempt under Tennessee law because it is made through the Internet. Payments of applicable Tennessee use tax may be made through the Tennessee Department of Revenue’s Website. Learn more about Tennessee Use Tax notifications.
Vermont Tax may be reported and paid on the Vermont use tax form. The use tax form and corresponding instructions are available on the Vermont department of taxes website. We are required to provide the notice above for Vermont purchases based on Vermont law (H 436) enacted in May 2011.

And here is Amazon’s information about use tax as of 5/12/2013:

About Use Tax Notification

You may owe use tax on certain purchases.

Use the total sales price included on your notification e-mail when completing your income tax return in order to calculate any use tax owed – unless you’ve already paid the tax or your purchases are otherwise not subject to tax. This information should not be used for any federal income tax reporting purposes.

Tip: Use Order History Reports to download an itemized list of your orders. For more information, go to Create an Order History Report.

South Carolina

S.C. Code Ann. § 12-36-2691(E)(3) requires us to provide a notification of the total sale price amount for purchases made from Amazon.com LLC, Warehouse Deals, and Amazon Digital Services, Inc. to customers that had purchases delivered to South Carolina.

Note: Your total sales for Amazon Digital Services, Inc. only include sales of certain Kindle devices and accessories, as digital goods are not subject to tax in South Carolina.

Tip:Go to the South Carolina Department of Revenue website for more information:

Tennessee

Tennessee Code T.C.A. § 67-6-515(f)(3) requires us to provide a notification of the total sale price amount for purchases made from Amazon.com LLC, Warehouse Deals, and Amazon Digital Services, Inc. to customers that had purchases delivered to Tennessee

For more information, go to Tennessee Department of Revenue.

For additional information on Amazon’s tax policies they have an entire section of their website to talk about their Amazon Tax Exemption Program (ATEP), the Internet Tax Freedom Act and more.

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David John Marotta is the Founder and President of Marotta Wealth Management. He played for the State Department chess team at age 11, graduated from Stanford, taught Computer and Information Science, and still loves math and strategy games. In addition to his financial writing, David is a co-author of The Haunting of Bob Cratchit.