Have you ever wondered how to become a tax-exempt seller on Amazon? Check out our short guide on the Amazon Tax Exempt Program for sellers and buyers.
June 2, 2022
Any business that relies on the sale of goods has to deal with sales tax. As a rule of thumb, the more taxes you can avoid paying, the better! Luckily, Amazon has a program to help FBA sellers reduce the fees they pay in sales tax. Let’s unpack this together and start saving money on taxes!
A Guide to Becoming Amazon Tax Exempt
Whether you are buying or selling, taxes are an inevitable part of every transaction. As an Amazon seller, there are a few different kinds of the sales tax you may encounter.
- Taxes that you pay on items you buy for your business.
- Taxes that you collect on items that you sell, and then pay to the government.
Generally speaking, there’s not much you can do to avoid collecting and remitting sales tax on the products you are selling to your customers.
However, there are exemptions that exist for businesses buying products for resale. This is because the government only needs to tax each item once. As an FBA seller, you can receive a tax-exempt status that allows you to do two things.
- Avoid paying taxes when you purchase items for resale from another seller.
- Avoid dealing with refunds from other sellers purchasing items for resale from you.
In order to gain this status, you must enroll in the Amazon Tax Exemption Program (ATEP).
Understanding the Amazon Tax Exempt Program
Even when a business has tax-exempt status, it must show its tax-exempt certificate every time they make a qualifying purchase. This can be quite the hassle on both sides - for the party collecting continual certificates and issuing refunds, and for the party continually submitting these certificates.
The Amazon Tax Exempt Program (which we’ll refer to as ATEP from now on) offers a simple solution to this problem. Sellers can enroll in ATEP and Amazon will then directly handle any sales tax exemptions from other buyers. This makes the process of dealing with buyers who don’t need to pay sales tax to you much easier! Amazon will collect and record all tax-exempt certificates from any eligible buyers as orders come in.
Another facet of ATEP is the way it assists you in easily purchasing products from other sellers on Amazon without paying taxes. If you decide to buy your inventory from Amazon sellers with ATEP registration, you will not have to deal with constantly resubmitting your tax-exempt certificate or worrying about sales tax refunds from these sellers.
You can easily access any forms within your Seller Central account under the tax information, in case you need to access them in the future.
ATEP essentially smooths out the process for Amazon FBA sellers who either A) sell to other tax-exempt Amazon sellers or B) buy from other Amazon sellers for resale.
What ATEP cannot do:
- Keep you from collecting and remitting sales tax on your products en masse when being sold to normal customers for final sale.
- Keep you from paying sales tax on personal purchases or final purchases.
- Remove the burden of taxes from any sale in which both parties are not registered as ATEP sellers/buyers.
Enrolling in Amazon Tax Exemption Program: ATEP
Before you can enroll in ATEP, it’s important to check if you are eligible.
Not just anyone qualifies for tax exemption. Here are the main categories that are accepted into ATEP:
- Government Organizations (Federal, State, or Local)
- Educational Institutions
- Non-profit Organizations
- Direct Payment Holders
Most Amazon sellers will not fall into any category other than resellers. However, you can check out the full list of tax-exemption codes here.
When you sign up as an FBA seller on Amazon, you will likely automatically be enrolled in ATEP once your tax settings are complete. This will only assist you in processing tax exemptions from other buyers, however.
If you want to register for ATEP as a buyer (for resale items), you will need to complete the registration process. This will require you to have the following information on hand:
- Business entity details
- Personal details
- State in which you are enrolling
- Organization’s address
- Exemption numbers/forms (this may vary based on the state you are registering in)
You can find the opt-in for ATEP within your Amazon Seller Central Account. Simply visit the “Tax Settings” portion of your account, and ensure that the “Amazon Tax Exemption Program” is checked on. To register as a buyer, visit your “Account Settings” tab and click “Amazon Tax Exemption Program. Simply follow through with the easy-to-manage application!
You’ll complete the application, sign the terms and conditions, and begin making purchases free from sales tax! The whole process should take less than 30 minutes to complete. In rare occurrences, the process will take up to 24 hours while Amazon waits for the local taxing authority to approve your application.
Final Thoughts: Register For ATEP
Registering for ATEP with Amazon is a fast and easy way to simplify the process of collecting and remitting sales tax as an Amazon seller. It is also a great way to avoid paying taxes on purchases you make for resale within Amazon. Additionally, being ATEP-approved is one of the steps necessary to gain the official seller badge on Amazon. There are lots of benefits to applying for the ATEP, and it’s relatively easy!
Julia Grant is a copywriter specializing in e-commerce and small business, helping businesses expand their reach with copy that clearly communicates their message and converts. She is a certified translator and interpreter and prides herself on providing culturally relevant content in both English and Spanish.See more posts from this author