6-Figure Amazon Brands: Sales Tax Secrets!

6-Figure Amazon Brands

Hitting six figures on Amazon is a major milestone—but managing multi-state sales tax obligations can quickly become overwhelming as you scale. From marketplace facilitator laws to economic nexus thresholds, this 2025 guide reveals the essential sales tax strategies for six-figure Amazon brands, so you can stay compliant and focus on growth.

Tax Code References

• Economic Nexus (South Dakota v. Wayfair, 138 S. Ct. 2080): States may require out-of-state sellers to collect sales tax once you exceed a sales or transaction threshold.
• Marketplace Facilitator Laws: In many states, Amazon is responsible for collecting and remitting tax on behalf of third-party sellers for marketplace sales.
• Seller-Collected Tax (IRC § 6421 Safe Harbor): While federal law doesn’t govern sales tax, ensuring your collection aligns with state rules avoids penalties.
• Deductible Compliance Costs (IRC § 162): Sales tax software subscriptions and service fees are ordinary and necessary business expenses.

Relevant Forms

• State Sales Tax Permit Applications: File online in each state where you exceed nexus thresholds or where Amazon does not remit.
• Amazon Tax Settings & Reports: Use Seller Central’s tax settings and transaction reports to verify collections.
• Form 1040, Schedule C: Deduct sales tax software and compliance fees under “Other expenses.”
• Form 1040-ES: Account for any changes in cash flow due to sales tax collections when setting estimated tax payments.

Detailed Example

Scenario: StellarStyles LLC sells beauty tools on Amazon across the U.S. in 2025.

• Annual Sales: $500,000
• Amazon Facilitator States (30 states): Amazon collects tax, remits on StellarStyles’s behalf.
• Non-Facilitator States (20 states): Invoice sales exceed thresholds in CA ($150K), TX ($120K), and FL ($110K)
• Sales Tax Rates: CA 7.25%, TX 6.25%, FL 6%
• Software Subscription: $2,400/year for tax automation

Tax Impact:

1. Amazon-Facilitated Collections: In 30 states, Amazon remits $27,000 of tax (combined) directly.
2. Seller-Collected in Non-Facilitator States:
   • CA: $150K × 7.25% = $10,875
   • TX: $120K × 6.25% = $7,500
   • FL: $110K × 6% = $6,600
3. Compliance Costs Deduction: $2,400 under IRC § 162 on Schedule C.
4. Avoiding Penalties: Late filing or under-collection in CA/TX/FL could trigger interest and penalties of 5–10% of uncollected tax.

Step-by-Step Compliance Guide

1. Identify Facilitator vs. Seller States
   • Review Amazon’s marketplace facilitator list; note states where you still must collect tax.
2. Monitor Economic Nexus Thresholds
   • Track gross sales and transactions by state; once you cross a state’s threshold, you must register and collect.
3. Register for Sales Tax Permits
   • Apply online for CA, TX, FL permits (or any newly triggered states) before making further sales into those states.
4. Configure Amazon Tax Settings
   • In Seller Central, enable seller-collected tax for non-facilitator states; set appropriate rates.
5. Integrate Sales Tax Automation
   • Subscribe to a tax automation service (e.g., TaxJar, Avalara) to map correct rates and file returns.
6. Reconcile Collections Monthly
   • Compare Amazon’s remitted tax reports with your own records; ensure collections match sales.
7. File & Remit Returns
   • Submit returns and pay collected tax in CA, TX, FL (monthly/quarterly as required).
8. Document Compliance Costs
   • Retain invoices for software subscriptions and service fees; deduct on Schedule C.
9. Adjust Cash-Flow Projections
   • Factor in sales tax remittances when forecasting revenue and estimated tax payments.

Conclusion

Six-figure Amazon brands must master the nuances of marketplace facilitator laws and economic nexus to avoid steep penalties. By systematically registering, automating collections, reconciling reports, and deducting compliance costs, you’ll ensure seamless growth and full sales tax compliance in 2025.

Strong Call to Action

Stay ahead of the sales tax curve!
Book your free strategy session with CPA Anshul Goyal and secure a tailored sales-tax compliance plan for your Amazon brand.
Book Your Free Strategy Session

 Disclaimer

Anshul Goyal, CPA, EA, FCA, is a licensed Certified Public Accountant and IRS-admitted Enrolled Agent. He advises e-commerce sellers on sales tax compliance and cross-border tax planning. This blog is informational and not a substitute for professional advice.

About Our CPA

With over a decade of U.S. and international tax expertise, Anshul Goyal helps Amazon entrepreneurs navigate sales tax laws, optimize compliance workflows, and focus on scaling their business.

Frequently Asked Questions

1. What is a marketplace facilitator state?
States where Amazon is legally required to collect and remit sales tax on your behalf.

2. When does economic nexus begin?
Typically when you exceed a state’s sales or transaction threshold—often $100K or 200 transactions.

3. Can I rely solely on Amazon’s collections?
No—if you sell into non-facilitator states, you must register and collect tax yourself.

4. Are sales tax software fees deductible?
Yes—under IRC § 162 as an ordinary and necessary business expense.

5. How often must I file returns?
Varies by state; many require monthly or quarterly filings based on volume.