Amazon Collects Your Sales Tax. Here's What That Still Leaves on You.

If you sell on Amazon in the US, you've probably had this thought at some point: Amazon already collects and sends in the sales tax on my orders — so I don't need to think about this anymore, right?

Mostly right. Partly wrong. And the part that's wrong is the part that gets expensive.

What Amazon actually does

Every US state that charges sales tax now has a marketplace facilitator law. Under these laws, Amazon calculates, collects, and remits sales tax on the orders it processes — automatically, on your behalf, in every one of those states. You don't set a rate, you don't file a return for that specific transaction, and you don't cut a check to the state for it. That part is genuinely handled.

What it doesn't do

Marketplace facilitator laws cover exactly one thing: the mechanics of collecting and paying over sales tax on a given sale. They don't touch three other things that are still entirely your responsibility:

Registration

In most states, once you have nexus — a large enough revenue footprint or a physical presence like inventory — you're expected to hold a sales tax permit and file a return in that state, even if Amazon already remitted the tax itself. Some states will accept a $0 return that just reports the marketplace sales; some skip this requirement for marketplace-only sellers. It varies, and "Amazon collects it" is not the same statement as "I have no filing obligation here."

Physical nexus from FBA inventory

This is the one that catches sellers off guard. Amazon's fulfillment network moves your inventory around to speed up delivery, often without you choosing where. If your stock lands in a warehouse in, say, Texas or New Jersey, that alone can create a nexus obligation in that state — independent of how much you've actually sold there. You can have inventory-based nexus in a state where you've made almost no direct sales, simply because that's where a warehouse happened to be.

Income and franchise tax

This is the big one people miss entirely. Sales tax nexus and income/franchise tax nexus are determined by completely different rules, in completely different amounts, and marketplace facilitator laws say nothing about the second one. California is the sharpest example: its "doing business" standard triggers if your in-state sales exceed roughly $750,000 (adjusted for inflation each year) or 25% of your total revenue — whichever is lower. A seller with $650,000 in total revenue and $520,000 of it from California blows past the 25% test easily, even though $650,000 is nowhere near a headline-grabbing number. That seller likely owes California's flat $800/year minimum franchise tax plus a graduated LLC fee based on California-source income — a bill that has nothing to do with sales tax at all, and that Amazon's collection has never touched.

A quick way to think about it

Two separate questions, not one:

1. Is Amazon collecting and remitting sales tax on this sale? Almost certainly yes, if you're a marketplace-only seller.
2. Do I have a registration, filing, or income-tax obligation in this state? A completely different question, decided by nexus (economic or physical), not by who happens to be collecting the tax on any individual order.

Sellers who only ask the first question are the ones who get a surprise letter from a state tax authority two years later.

What to actually check

• Pull your FBA inventory placement report from Seller Central and see which states your stock has actually sat in over the past 12 months — not just where you've sold.
• Compare your revenue in your highest-volume state against that state's specific economic nexus and "doing business" thresholds — most states use $100,000, but California and Texas use $500,000, and the type of tax (sales vs. income/franchise) has its own separate threshold on top of that.
• Don't assume a small state with low sales is safe if your inventory has been stored there — physical presence doesn't care about revenue.

Official sources

• California Department of Tax and Fee Administration: Marketplace Facilitator Act
• New York State Department of Taxation and Finance: marketplace provider and seller requirements

This is general information based on current publicly available thresholds and marketplace facilitator rules, not personalized tax advice. Thresholds and rules shift year to year — confirm current figures with a licensed accountant before registering, deregistering, or filing anything.