Quick answer: Every US state with a sales and use tax has a marketplace facilitator law, and Amazon says all of them were in effect as of January 1, 2023. Under these laws Amazon calculates, collects, and remits sales tax on orders shipped to those states, for all sellers, regardless of where you are located or how much you sell. Amazon does not file taxes for you. You may still have reporting obligations, income or gross receipts taxes, and responsibility for sales into jurisdictions where marketplace collection does not apply. This article explains Amazon’s published rules; it is not tax advice, and Amazon itself tells sellers to consult a tax professional.
Sales tax used to be one of the most confusing parts of selling on Amazon, especially for FBA sellers whose inventory sits in many states. Marketplace facilitator laws changed who collects the tax, but not every obligation moved to Amazon. This guide sets out what Amazon’s own help pages say it does and does not handle.
What a Marketplace Facilitator Is
Amazon defines a marketplace facilitator as a business that contracts with third-party sellers to facilitate sales through an online store, and states that Amazon is one. Amazon uses the term Marketplace Tax Collection (MTC) for the laws that make it responsible for collecting and remitting sales and use taxes, and in some cases regulatory fees, on products shipped to customers in jurisdictions that have enacted them.
Who Is Responsible for What
| Task | Responsible party, according to Amazon |
|---|---|
| Calculating, collecting, and remitting sales tax in MTC jurisdictions | Amazon |
| Refunding MTC tax on returned orders | Amazon |
| Sales tax in jurisdictions where MTC does not apply | The seller |
| Filing tax returns, including income or gross receipts taxes | The seller |
| Any reporting obligation on MTC sales | The seller may still have one |
| Regulatory fees Amazon does not support | The seller |
Where Marketplace Collection Does Not Apply
Amazon notes some exceptions where state marketplace laws do not apply, including Colorado home rule cities, some Alaska cities and boroughs, rentals in Alabama, and services in New York. Fees that apply to a buyer’s whole order, such as the Colorado Retail Delivery Fee, are not shown in your order details or payment reports. Sellers are responsible for tax obligations on sales into jurisdictions without marketplace collection.
How Amazon Decides What Is Taxable
Amazon says it uses the product category and item description you provide when creating a listing to determine whether tax or fees apply. When marketplace collection applies, your own tax settings and product tax codes are not used in Amazon’s calculation. This makes accurate categorization part of tax compliance as well as listing quality.
Marketplace Tax Collection vs Tax Calculation Services
These are easy to confuse:
- Marketplace Tax Collection (MTC): Amazon calculates, collects, remits, and refunds the tax as the marketplace facilitator.
- Tax Calculation Services (TCS): an optional service for Professional sellers that calculates tax where MTC does not apply. Tax calculated through TCS is collected from the customer and disbursed to you, and you report and remit it.
What It Looks Like in Your Reports
Amazon shows marketplace-collected tax in your order details and payment reports with a reporting identifier, MarketplaceFacilitatorTax for US orders, along with a matching deduction. You do not remit tax that Amazon has collected and identified as MTC. Amazon notes that if you remitted MTC tax yourself as well, you need to work with your tax advisor or the state about a refund.
Sellers Outside the US
Amazon states that marketplace collection in the US follows the rules where the buyer is located, so it applies to sellers based outside the US and to products shipped from outside the US. Amazon also collects similar taxes in other countries, such as Mexico, Australia, and New Zealand, under its Marketplace Withheld Tax rules.
Practical Steps for Sellers
- Keep product categories and descriptions accurate, since Amazon uses them to determine taxability.
- Reconcile your payment reports and separate MTC amounts from any tax you collect through TCS.
- Do not remit marketplace-collected tax a second time.
- Ask a tax professional about registration, filing, and income tax obligations in states where you have inventory or sales.
Our Amazon inventory reconciliation service helps sellers reconcile their Amazon records. For FBA basics, read facts you need to know about FBA.
Frequently Asked Questions
Does Amazon collect sales tax for third-party sellers?
Yes, in every jurisdiction with a marketplace facilitator law. Amazon says all US states with a sales and use tax had such laws by January 1, 2023.
Do I still need to file sales tax returns?
Amazon does not file on your behalf and says you may still have reporting obligations. Ask a tax professional what applies to your business.
Does marketplace tax collection apply to sellers outside the US?
Yes. Amazon says US marketplace collection is based on where the buyer is located.
What happens if I remitted tax Amazon already collected?
Amazon says to work with your tax advisor or the state to determine refund options.
Is Tax Calculation Services the same as marketplace collection?
No. With TCS, the tax is disbursed to you and you remit it. With MTC, Amazon remits it.
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Sources
- Amazon Seller Central, US Marketplace Tax and Regulatory Fee Collection FAQ
- Amazon Seller Central, Marketplace Withheld Tax
- Amazon Seller Central, Tax policies
