Amazon not only sold $2.5 billion worth of goods, it introduced Prime members to new services. How should rivals compete in 2017?
Amazon.com Inc. will collect sales taxes for Marketplace sellers and hosted sites.
Merchants who sell through Amazon.com or through an Amazon-hosted e-commerce site can now opt to pay the world’s largest online retailer to collect applicable sales tax on their sales transactions. Amazon remits those funds to the merchants and merchants are responsible for documenting and paying all taxes to the appropriate state and local tax authorities.
Beginning early next year, Amazon.com Inc., No 1 in the Internet Retailer Top 500 Guide, will start charging a fee for the service equal to 2.9% of what it collects in sales tax and any related transaction-based charges, Amazon says.
The new sales tax collection service extends what had been a far more limited service Amazon had offered for no charge to a limited number of its largest client merchants, a spokesman says. Amazon has more than 2 million active seller accounts worldwide, but it doesn’t break that figure down by type of seller or geographical area, he adds. An active seller is one that has processed one or more sales within the past year.
“This program used to be very exclusive and only for the super top-tier third-party sellers on Amazon, says Scot Wingo, CEO of ChannelAdvisor Corp., a company that helps retailers sell through online marketplaces.
In the Help section for sellers on Amazon.com, Amazon says the tax collection service is available to Marketplace Professionals and operators of Amazon Webstore e-commerce sites. A Marketplace Professional is any business or individual that sells 40 or more items a month on Amazon.com and pays Amazon a monthly selling fee of $39.99 plus other transaction fees. (Smaller sellers not classified as Marketplace Professionals pay Amazon 99 cents per sale transaction plus other fees.) Retailers that sell through their own branded Amazon-hosted Webstore e-commerce sites pay monthly fees starting at $24.99 plus transaction fees.
Amazon will start charging fees for the sales tax collection service for online retail transactions processed Feb. 1, 2012, it says.
Amazon has resisted collecting taxes in many states for its own direct sales, though it has gone on record saying that the sales tax collection issue should be settled at the federal level. In California, for instance, it recently agreed to lobby for federal legislation supporting state-mandated sales tax collection in exchange for a temporary state exemption from sales tax collection until next year.
Amazon refers to the new sales tax collection service, meanwhile, as simply a new service it’s offering to its client retailers—albeit one it expects to eventually apply to all of its own sales if and when a federally sanctioned system of collecting sales tax across multiple states goes into effect.
Many retailers have rejected collecting sales tax, contending that it’s too complicated and costly to process different tax rates across multiple state and thousands of local taxing jurisdictions. For now, federal law says states can only require sales tax collection by retailers with an in-state physical presence, such as stores or distribution centers, though federal legislation introduced earlier this year would authorize states to mandate sales tax collection by a broader number of retailers.