FAQs

Q: What is Form 1099-K and When Will I Receive It?

Form 1099-K is an IRS tax form that Amazon issues to report your total gross sales for the year. For the 2024 tax year, you'll receive a 1099-K if your sales exceeded $5,000. This threshold will decrease to $2,500 in 2025 and $600 in 2026, as thresholds continue to be lowered. The form reports your gross sales to the IRS, helping ensure accurate income reporting. It's important to note that this is a reporting document - you still need to calculate your actual taxable income by deducting your business expenses from these gross sales figures.

Q: Is Sales Tax Different from Income Tax?

Yes, sales tax and income tax are completely separate types of taxes with different purposes and recipients. Sales tax is collected from your customers at the point of sale and must be remitted to state governments. You're acting as a collection agent for the state - this money never belongs to you. Income tax, on the other hand, is paid on your business profits to the federal government (IRS) and potentially to state governments as well. This is calculated based on your net earnings after expenses. Both types of taxes must be filed and reported separately, and they're calculated using entirely different methods. It's critical not to confuse the two, as they serve distinct purposes in your tax obligations.

Q: Can Incorrect Product Tax Codes Create Problems for Amazon Sellers?

Absolutely. Using the wrong Product Tax Codes can lead to serious complications for your Amazon business. When you apply incorrect PTCs, you risk collecting the wrong sales tax amount from customers, which can result in: • Compliance issues with state tax authorities • Customer complaints and refund requests • Potential audit problems from states • Financial liability if you under-collect taxes The consequences can be financially devastating for small sellers, as states may demand payment of uncollected taxes directly from your pocket, often with added penalties and interest. Always ensure you select the PTC that accurately represents your product category to avoid these risks.

Q: What are Product Tax Codes (PTCs)?

Product Tax Codes (PTCs) are classifications created by Amazon to help apply the correct sales tax rate to your products in each state. Tax rates vary by category. For instance, clothing, groceries, and books may each be taxed differently, or even exempt altogether in certain jurisdictions.

Q: How do I set up sales tax collection in Amazon Seller Central?

To set up sales tax collection, log in to Amazon Seller Central and navigate to Settings → Tax Settings . From there, add your sales tax registration numbers for each state where you have a tax obligation, and assign the correct Product Tax Codes (PTCs) to your listings. Once configured, Amazon automatically calculates and collects the right tax based on each buyer’s location.

Q: Do I need to register for sales tax permits?

If your business has sales tax nexus in a state. Whether through physical presence or economic activity. You’ll typically need to register for a sales tax permit there, even if all your sales happen on Amazon. That said, many states exempt sellers from registering when they only sell through marketplace facilitators and have no other nexus in the state.

Q: Do my Amazon sales count toward economic nexus if I sell on other platforms?

Yes — in most situations, you’ll need to combine sales from all your channels when determining if you’ve met a state’s economic nexus threshold . That means including revenue from Amazon, your own website, eBay, Etsy, and any other platforms where you sell.

Q: How do I know which states my inventory is stored in?

You can find out where Amazon is storing your inventory by downloading the Inventory Event Detail report in Seller Central or by using tax automation tools such as TaxJar , which mark the states where your products are held. Because Amazon frequently transfers inventory between warehouses, it’s smart to check this information regularly .

Q: Does storing inventory in Amazon FBA warehouses create nexus?

Yes — in most states, storing your products in an Amazon FBA fulfillment center creates a physical nexus , which can trigger the need to register for a sales tax permit in that state. However, there are exceptions. For example, Pennsylvania has determined that FBA inventory on its own does not establish nexus for out-of-state sellers who only sell through marketplaces like Amazon.

Q: What is a marketplace facilitator?

A marketplace facilitator is a platform that connects buyers and third-party sellers, listing products, processing customer payments, and managing transactions. Under marketplace facilitator laws , companies like Amazon must collect and remit sales tax on sales made through their platform, removing that responsibility from individual sellers.

Need help with your taxes or bookkeeping? We are ready to help. Request a Tax Proposal or Schedule a Strategy Session today!

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