Before I get into how to get tax exempt on Amazon, let me say that this is in no way legal tax advice. I put this blog together to outline a few basic guidelines that might come in handy as an Amazon seller.
Now, let’s get into it.
As the name suggests, being tax exempt means you don’t pay tax at a federal, state, or local level. While individuals and businesses still need to report income associated with tax-free items, it is only for informational purposes.
Tax-exempt also has a second meaning. In some instances, it refers to a business or organization that has a limit on the amount of income that is taxable.
How Can a Person Become Tax Exempt?
Individuals and organizations looking to become tax exempt need to fall into one of five categories:
- Non-Profit Organizations. Section 501(c)3 of the Internal Revenue Code states that non-profit organizations don’t need to pay income tax of any kind. This includes churches and synagogues, hospitals, shelters, and educational institutions. Any organization that aims to improve society.
- Citizens Working Abroad. Any U.S. citizens earning an income in another country may not have to pay taxes. As of 2021, citizens working abroad earning $108,700 or less are tax exempt. Certain requirements need to be met, though.
- Low-Income Taxpayers. Individuals who earn less than $12,550 won’t need to file or pay taxes.
- Taxpayers with Multiple Deductions. Using personal deductions, some taxpayers can write off almost all of their taxable income.
- Taxpayers with Multiple Dependents. Child tax credits make it possible for lower-income families with multiple dependent children to be tax exempt. In certain circumstances, even taxpayers without children can qualify for a tax credit.
How To Get Tax Exempt on Amazon
Thanks to the Amazon Tax Exemption Program (ATEP), both individuals and businesses may qualify for tax-exempt purchases.
This applies to sales sold by Amazon, as well as any affiliates or participating third-party sellers.
The Amazon Tax Exemption Wizard takes you through a self-guided process and is easy to use and understand.
(Source: Second Half Dreams)
Before you enroll, however, you will need the following details:
- Organization entity type
- Organization address
- Territory or state you wish to enroll in
- Exemption numbers or form
After submitting these details, you need to accept the terms and conditions that indicate the information you’re submitting is accurate.
The good news is most exemptions are active in about 15 minutes.
Depending on the territory or state you submitted, you may need to wait for a tax authority to approve the exemption. This requires you to upload a certificate of enrolment.
You can generally expect a confirmation email within 24 hours.
There are also two additional aspects to keep in mind when applying for the ATEP program:
- Marketplace Sellers. While ATEP access is automatically granted to marketplace sellers, it is not compulsory. This means any tax exemption won’t apply to sellers who don’t participate in the program.
- Amazon and Affiliates. Sellers who list Amazon or its subsidiaries on their certificates will only be exempt from those purchases. Including Amazon.com Services Inc and any affiliates and third-party sellers, requires you to list a description of items. The documents will also need to be dated and signed.
How Does Amazon Tax Exemption ATEP Work?
In a nutshell, ATEP makes it possible for qualifying organizations to use a tax exemption status for future purchases on Amazon.
Any new orders that are placed after application will be tax-exempt.
This exemption applies to any products sold on:
- com LLC
- Amazon Digital Services, Inc.
- Warehouse Deals, Inc.
- Amazon Services LLC
- 3rd Party Sellers (vendors) participating in ATEP
If you are interested in learning more about ones of Amazons most profitable areas, you should read my article on What is Amazon Digital Services? Pretty interesting stuff
Let me take you through the steps you would follow to apply for the program:
- Once you have logged into your Amazon Seller Central account, click on Your Account and Other Programs. You will be prompted to sign up for a Business Account, but this isn’t a requirement to apply for tax exemption.
(Source: Amazon Seller Central)
- From there, Amazon will guide you through several questions to obtain the information mentioned earlier in this blog, including state and organization details.
- Next, you will be prompted to review and sign your exemption certificate.
- If everything is correct, click on Activate Certificates.
(Source: Second Half Dreams)
To check your tax exemption status, login to your account and click on Tax Exemption Program.
Here you will see your business account exemptions, the state you are registered in, and other information related to your tax as an Amazon seller.
How to Apply for an Amazon Tax Refund
If you need to apply for a tax refund, know that this won’t be possible until your shipment is delivered successfully.
From there, you would contact Amazon’s customer support using this email: [email protected]
Include as much detail as possible to ensure a timely refund, including any tax exemption documentation.
And there you have it.
Not all Amazon sellers can apply for tax exemption, but it is possible and a straightforward process too.
While we are on the subject of tax and selling on Amazon, here is another article you might be interested in.
If you have any more questions about tax and Amazon, please leave me a comment below.