How to properly account for sales tax that has been collected by Amazon, remitted to you, and for to the tax to the tax authority?
It is quite frustrating to figure out how to get it done…
So here are some sales tax tips!
Do you know how to find the report in Amazon Seller Central that tells you how much was collected for each jurisdiction during a certain period of time?
Help is here with this handy Sales Tax Workflow Guide:
Step 1: Amazon collects sales tax on your behalf from buyer.
Step 2: Amazon remits sales tax collected on your behalf to you in your payout deposit.
Step 3: Run report to determine how much sales tax was collected.
Report: Seller Central > Reports > Tax Document Library > “Generate Sales Tax Report” > Select Reporting Range (month or custom) > Generate > Download
Step 4: Extract data from xls Report:
Sort by jurisdiction, date, amount collected, etc. – whatever fields apply to your situation.
(The sorting varies based on how many jurisdictions you collect in and what the sales tax return requires. Some returns require you to report actual sales and tax collected on those sales.)
Step 5: When you record the Amazon Deposit, Gross sales – fees + Sales tax collected = Cash in Bank.
Step 6: Sales Tax collected should be recorded to “Sales Tax Payable.” (You can have a separate Sales Tax Payable account for each jurisdiction or lump into one account.)
Step 7: When tax is paid, categorize the payment to Sales Tax Payable (which brings the Sales Tax Payable account back down to $0. Because there is a fee charged by Amazon to collect the tax (and for a few other reasons,) your payment will be more than what was remitted to you. The difference is recorded to Sales Tax Expense.
The Amazon report breaks down transactions in each state by state and local jurisdiction. This means that each transaction takes up at least 3 rows on the spreadsheet, though some take up many more.
There are services that can do this for you if you would rather spend your time on something else.
Be patient and don’t try this when you are in a hurry. After you have mastered the steps, it is not that bad!
Anna Hill is the founder of Accounting We Will Go, a firm that provides accounting and bookkeeping services along with training for Amazon sellers.