FBA sellers face inventory nexus, sales tax, and income reporting
The question that starts this
“Amazon stores my inventory in warehouses across the country. Does that mean I owe sales tax in all those states?”
What this scenario is about
Amazon FBA creates nexus in every state where your inventory is stored. While Amazon collects and remits sales tax as a marketplace facilitator in most states, FBA sellers still face income tax nexus, inventory tracking, and cost-of-goods-sold complexity.
Why this matters
FBA sellers often discover they have filing obligations in dozens of states. Income tax nexus from inventory presence can create multi-state income tax returns, and cost-of-goods-sold tracking directly affects profitability.
Common mistake
Assuming Amazon handles all tax obligations. Amazon collects sales tax as a marketplace facilitator, but it does not file your income tax returns or handle state income tax nexus created by inventory placement.
Checkpoints to work through
- 1
Inventory creates physical nexus in those states
Amazon distributes your inventory across its fulfillment network. Having inventory in a state generally creates physical presence and sales tax or income tax nexus there.
- 2
Marketplace facilitator laws cover sales tax collection
Amazon collects and remits sales tax in all states with marketplace facilitator laws. But you may still need sales tax registrations for direct sales outside Amazon.
- 3
Income tax nexus is a separate issue
Even though Amazon handles sales tax, physical inventory presence can create state income tax nexus. Some states may require you to file an income tax return and apportion income.
- 4
Track cost of goods sold accurately
FBA fees, shipping to Amazon, product costs, and Amazon adjustments all affect COGS. Accurate tracking is necessary for Schedule C or your business return and for inventory-based nexus calculations.
Your next move
Map where Amazon stores your inventory, understand which states have income tax nexus from physical presence, and implement cost-of-goods-sold tracking that matches your actual Amazon settlement reports.