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If you are a seller on Amazon, it is vital to understand the calculation of Amazon sales tax with all deductions included in it.

The only difference lies in the process. However, Amazon's FBA tax calculation for sellers is found to be more complicated than other retailers.

Here are the details to understand the sales tax levied by Amazon in a better way:

Amazon FBA Sales Tax: Definition, How to Register for a Sales Tax Permit & Important Factors

Amazon can only collect sales tax from customers in the United States, which has a sales tax nexus.

Sales tax nexus forms a vital nexus for every state. Instead of differing laws for every state, key factors include “nexus” in each state. Here is the list:

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Location

Home state

Inventory

Personnel

Third-party affiliate

Dropshipping

Generating sales temporarily

As an Amazon FBA seller, you have a sales tax nexus in every state where your items are stocked for resale. However, Virginia is an exception.

How to Register for a Sales Tax Permit

The first and foremost step is to register for a sales tax permit with the respective state.

One must not avoid this step as it can be considered an unlawful activity by the state. So, it’s significant to have your registered name.

Apart from this, you must also be a registered candidate for a sales tax permit before collecting sales on Amazon. You can efficiently complete it with the help of Seller Central.

After getting your sales tax permit, you get the due date for sales tax and filing frequency schedule in the next step.

As per the sales volume, taxes can be filed by you monthly or quarterly, or yearly.

The vital point to remember is that you will have to file your taxes more frequently if you generate higher sales in a specific state.

To collect your sales tax, first, you need to be registered with the state. The necessary steps required are:

Collect necessary information like EIN (Employer Identification Number) and other business details.

Check for a section called “Sales & Use Tax.” On State’s Revenue Department website

Important Points to Consider

If your product is in low quantities, collection of sales tax is not compulsory for you.

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Sales tax increases with time.

If your state isn’t a part of the FBA Amnesty, you can receive a bill with a clear history of tax payments after you register.

If you have high amounts of tax that are unpaid, you might be accountable to penalties. At times, it can be very severe and troublesome.

Suppose you haven’t registered yourself and unexpectedly experience some high sales for your product. In that case, it might be good to fill a VDA (Voluntary Disclosure Agreement) before registering, as this will prevent you from paying heavy back tax, interests, and penalties.

Here are the steps to download a detailed report from Amazon to know the amount of sales tax.

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1. Log in to your Amazon Seller Central account.

2. Select the option “Seller Central” and click “Reports.”

3. Select “Payments” under ‘Reports’

4. Click “Generate Date Range Report.”

5. After that, choose your filing period.

Following the above steps, you can calculate manually the tax amount accumulated by you in a specific region.

Apart from this, it can also use Amazon seller tax software to execute all the work for you in minutes.

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Learn More: Amazon FBA Fees-a Complete Guide

What is Priority Mail Cubic?

Priority Mail Cubic is a specialized service offered by the United States Postal Service (USPS) that prices packages based on their outer dimensions rather than weight. This unique pricing model can lead to significant savings, especially for small, dense packages weighing up to 20 pounds.

Key Features:

Dimension-based pricing: Rates determined by package size, not weight
Weight limit: Up to 20 pounds
Delivery timeframe: 1-3 business days
Insurance: $100 included for free
Tracking: Free package tracking included
Savings: Up to 90% off retail shipping rates

USPS Cubic Pricing Tiers

Priority Mail Cubic uses a tiered pricing system based on the package's volume. There are five tiers:

Tier 0.1: Up to 0.1 cubic feet
Tier 0.2: 0.101 to 0.2 cubic feet
Tier 0.3: 0.201 to 0.3 cubic feet
Tier 0.4: 0.301 to 0.4 cubic feet
Tier 0.5: 0.401 to 0.5 cubic feet

Calculating Your Package's Cubic Tier

For Boxes and Rigid Packages:

Measure the outer dimensions (length, width, height) in inches
Round each measurement down to the nearest quarter inch
Multiply length x width x height
Divide the result by 1728 (cubic inches in a cubic foot)
The result is your package's cubic feet measurement

Example: For a box measuring 12.3" x 9.5" x 3":

Round down to 12.25" x 9.5" x 3"
12.25 x 9.5 x 3 = 349.125
349.125 / 1728 = 0.202 cubic feet
This package falls into the 0.3 cubic feet pricing tier

Note: Maximum size for any single dimension is 18 inches

For Envelopes and Soft Packs:

Measure the length and width of the empty envelope
Round down to the nearest quarter inch
Add the length and width together
Use the total to determine the pricing tier:
- Tier 0.1: Up to 21"
- Tier 0.2: 21.01" to 27"
- Tier 0.3: 27.01" to 31"
- Tier 0.4: 31.01" to 34"
- Tier 0.5: 34.01" to 36"

Restrictions

Tubes and rolls are not eligible for Cubic pricing
Maximum combined length and girth is 84 inches

Benefits of Using Priority Mail Cubic

Cost savings: Cheaper than weight-based pricing for small, heavy items
Predictable pricing: Easy to calculate shipping costs based on box dimensions
Fast delivery: 1-3 business day delivery to any US address, including PO boxes
Free tracking: Monitor shipments at no extra cost
Included insurance: $100 of coverage with every shipment
No surcharges: Residential and fuel surcharges included in the price

Tips for Maximizing Savings

Optimize packaging: Use the smallest box possible that safely fits your items
Consider breaking up large orders: Sometimes shipping in multiple smaller boxes can be cheaper
Use cubic feet calculators: Online tools can help quickly determine your package's tier
Compare rates: Always compare Cubic rates with other shipping methods
Use Commercial Pricing: Accessing Commercial Pricing rates can lead to even more savings

2024 USPS Priority Mail Cubic Rates

[Insert current rate table here]

Accessing Priority Mail Cubic Rates

Priority Mail Cubic isn't available at regular Post Office counters. However, many online shipping platforms and 3PL providers offer access to these rates. By partnering with a fulfillment provider, you can easily access these discounted rates and streamline your shipping process. For small-scale sellers not yet ready for a 3PL, Pirate Ship offers free access to USPS Priority Mail Cubic rates with no monthly fees or minimums.

How to Calculate Amazon Sales Tax