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CPA Solutions for Amazon Sellers

Outside view of an Amazon pick up and return center.

When it comes to sheer exposure for your business, it’s hard to beat Amazon. If you’ve been using an Amazon FBA (Fulfilled by Amazon) account, then you might already be familiar with the administrative fees associated with warehousing, packing, shipping, and customer service. But there’s another need you’ll have to consider: accounting and bookkeeping.

Every business can benefit from the services of a Certified Public Accountant (CPA). But Amazon sellers can especially benefit from online CPA services that specialize in the world of eCommerce. 

In this article, we’ll cover the benefits and considerations of partnering with an online CPA when your business is conducted through Amazon.

Why Having an Experienced eCommerce Accountant is Important

Even though online businesses have become quite common, eCommerce bookkeeping remains a niche area for financial professionals. This is partly due to the specialized considerations that go into accounting for online sales.

Finding the right CPA for Amazon sellers means finding an accountant that is intimately familiar with the needs of online merchants.

When you partner with an online accounting firm, you’ll gain access to an array of financial professionals. What kinds of benefits can you hope to gain from these partnerships?

They Understand the Industry

Amazon sellers have unique considerations compared to their brick-and-mortar-based counterparts. It’s likely that your business is located in one state but has buyers in another state or even overseas. It’s also possible that your inventory is stored in another location altogether, if not distributed across a network of warehouses across the country.

These unique circumstances require tailored accounting strategies. With the right CPA for Amazon sellers, you can navigate issues such as:

  • Inventory management
  • Amazon’s fees
  • Returns
  • Data analytics and reporting

eCommerce accountants may be able to provide advice tailored not only to Amazon’s framework but also to the unique needs of your business.

They Understand the Technology

Online merchants rely on software and mobile apps to manage their inventory, handle transactions, and manage cash flow. An accountant who specializes in eCommerce will be familiar with these tools and technologies and can provide financial guidance that takes these features into consideration.

In fact, partnering with a CPA for Amazon sellers can often streamline the entire process of online sales. A knowledgeable accountant can point out areas in which automation can save you time, while also providing insight into how to manage your data and hone your business strategy.

This can also be helpful as technology shifts and changes. Modern accounting firms can help you to adopt new systems to improve your business, all while maintaining high standards of privacy and data security.

They Understand Tax Code

One of the greatest challenges facing Amazon sellers is sales tax. While Amazon’s digital infrastructure can assist you in calculating sales tax, there are some special considerations that may apply to your business. 

For example, if you use Amazon’s warehouses to ship goods, you may be required to pay Amazon sales tax in the states in which those warehouses are located. However, these regulations vary by state, which is why it’s important to understand local laws when you seek out accounting for Amazon businesses.

Partnering with a specialized CPA for Amazon sellers can ensure that you navigate these financial complexities without finding yourself in violation of federal or state tax regulations. 

The most experienced online accountants will understand the rules and regulations that impact Amazon sellers, so they can help you remit sales tax appropriately and remain in full compliance with the law.

Staying up-to-date with your books can also ensure you have enough money in your account when it’s time to file your annual business tax return. Online accountants can help you catch up on your books when you fall behind and come alongside you to ensure that you always have an accurate picture of your company’s cash flow.

They Can Help You Grow Your Business

An experienced CPA for Amazon sellers can help you grow your business. A financial professional can sift through the moving parts and pieces that make up your business and give you a comprehensive picture of your company’s financial health.

Amazon will provide some basic default reports, but these reports won’t dig into your financial data the way a trained accountant can. 

An online accountant can provide you with resources that include:

  • Cash flow statements
  • Profit/loss statements
  • Cash flow forecasts

The reports and analyses generated by an online accountant can be used to hone your business strategy so that you can effectively plan for the future.

They Can Save You Money

Perhaps most importantly, an accountant with experience in eCommerce can save you money. The services of an online accountant cost less than hiring a full-time staff member. These professionals can even add value to your company through the services they provide.

When you work with a CPA for Amazon sellers, you’ll likely discover ways that you can increase your overall efficiency. 

With more time to focus on the revenue-generating activities of your business, you’ll not only save money; you also just might find new ways of expanding your business!

Specific Considerations for Amazon Accounting

We’ve already touched on some of the features that make an Amazon FBA business unique. But being an Amazon seller will also mean you’ll need to consider a few unique factors when it comes to your accounting.

Choosing the Right Accounting Method

Modern businesses often rely on two types of accounting methods: cash-based accounting or accrual accounting. 

In cash-based accounting, transactions are documented once the transaction is complete and cash changes hands. 

In accrual accounting, revenue and expenses are recorded as they occur, which means that you’ll record these entries twice and reconcile these figures on a routine basis.

Which is the right method for your Amazon business? While cash-based accounting is simplest, many businesses find that accrual accounting works best as they grow. 

A trained CPA for Amazon sellers can help to evaluate your business and help you choose the right method for your company based on anticipated revenue and inventory.

Consolidated Deposits

One of the unique accounting features associated with Amazon sellers is the receipt of consolidated deposits. 

Amazon sellers receive payment in the form of a single deposit, which is made once every two weeks. As the name suggests, your consolidated deposit includes more than just sales. It will also reflect:

  • Chargebacks and returns
  • Administrative fees
  • Sales tax

 Having an experienced professional on your side can make quick work of sorting through this information, so you have a more precise record of your financial activities and a better grasp on your company’s cash flow.

Inventory Management

Managing your inventory can be a bit more challenging when it’s spread out through a series of Amazon-owned warehouses. And as your business expands, so do the challenges of maintaining your inventory. 

Amazon sellers find themselves faced with challenges and questions like:

  • How much inventory do I need?
  • When should I order additional inventory?
  • How long should I let excess inventory sit in the warehouse?
  • Should I eliminate excess inventory by offering a discount?
  • How do I account for shrinkage due to damage or loss?

Keeping your inventory organized into clear categories and recorded on an up-to-date balance sheet can help you make better decisions regarding your products. 

Working with a CPA for Amazon sellers can help you to integrate your inventory data into your financial reporting, which can help you better understand your overhead costs and profitability moving forward. 

If you decide that you need to restock particular items or otherwise increase your inventory, you may need a small business loan. Again, this is where an online accountant can be particularly useful, as they can help to prepare your financial records and determine the size of the loan your company can support.

Create Additional Revenue Streams

While Amazon is an industry giant, it’s never wise to put all of your eggs in one basket. What would become of your business if your Amazon account were to be frozen or suspended? Can you always rely on Amazon to prioritize your shipments? What if a competitor should emerge in the near future, knocking Amazon off its coveted eCommerce pedestal?

Tying your fortunes to the success of Amazon could ultimately limit your business and even bring it to a grinding halt if you’re not careful. 

An accountant can help you strategize new revenue streams so that you can continue conducting online business without relying exclusively on Amazon’s warehouses or digital infrastructure to support your business.

Naturally, juggling multiple revenue streams can make managing your finances all the more complex, which only underscores the need for assistance when it comes to eCommerce. 

An online CPA can help you make sense of the financial data so that you can effectively manage your income and expenses across multiple digital platforms.

Xendoo, Providing Prime Business Solutions

When you sign up for Xendoo, it’s like having a professional accountant delivered right to your door. You’ll gain access to our online bookkeeping features at a fraction of the cost of an in-house employee. 

A CPA for Amazon sellers can dramatically improve the way you do business online, helping your business to grow and scale over time. If you’re ready to take advantage of everything a CPA for Amazon-based businesses can do for you, sign up for a free trial today.

Black male business owner and white female business owner looking at a tablet, discussing business performance

3 Keys to Working Smarter, Not Harder in Business

Work Smarter, Not Harder

At SmartScout, we built our business around the idea of working “smarter”. Easy enough to say. What steps can small business owners take to work smarter? Glad you asked.

The three keys to working smarter, not harder, in business are education, technology, and delegation. In this blog post, we will show you how you can use these keys to expand your knowledge, streamline your workflow, and delegate work to your team to grow their skills.  

1. Never Stop Learning

What counts as educating yourself? It is both more and less than you might think. Reading this blog, for example, counts toward educating yourself. You either came to this blog because you were already following it, or you were searching for the answer to a specific question. It is crucial to stay informed on what is happening in your business niche so you can keep up with the competition and continue to grow your knowledge. However, this tends to keep you on surface level subjects, and when you find a topic that really interests you, you need to dive in deeper.

Watch Youtube videos, listen to podcasts, and take training courses. Even better is to learn from experts who actually walk the walk. Follow industry leaders on social media, and ask them questions when you can. Attend networking events and trade shows to connect with industry leaders and fellow life-long learners.

Most important of all, never stop learning. Self-improvement is a never-ending game, so find the way it works best for you, and keep at it!

2. Automate with Technology

Automate tedious work with technology to save time and minimize human error. One of the beauties of the modern world is that technology can steamline almost any task. There are solutions for every business function, including product research

For example, eCommerce business owners can save time by utilizing an online research tool such as SmartScout. The SmartScout database enables you to find thousands of lucrative products for arbitrage, calculate and reduce FBA fees, and increase product visibility with strategic advertising – just to name a few! Work that once took hours now takes moments with the SmartScout database. 

The goal is to balance time saved with money spent. If the task is outside of your area of expertise or simply takes up too much of your time, utilize tools that will save you time and sanity.  

3. Let Go and Delegate

Just like you need to give thoughtless tasks to technology, give thoughtful tasks to other people, so they can do their highest level thinking. This gets hard when it comes to things you are passionate about. Ask yourself, what are you holding onto that you need to let go of?

This is the reason why people who are promoted for their skills in a field often struggle as managers. They do not communicate with their team, nor do they trust them to follow through on assignments. To be a good delegator, you must become a good manager. Communicate clearly with your team and trust them with the tasks you give them, so they can help grow the business and their skillset.

What about the tasks that you do not like to do? If you lack expertise in a particular area and do not have a team member to take up the responsibility, partner with a professional. 

Many business owners spend countless hours on bookkeeping, which takes time away from running their businesses and enjoying their lives. By partnering with an online bookkeeper, they can effortlessly keep their financials up to date and stay tax-compliant, all with the support of an expert. This gives them the freedom to focus on what they love – growing their business. 

Need to improve your managerial or tech skills? Head back to the top of the list, and the cycle continues!

Always Getting Better

Successful business owners are always looking for ways to improve. The key is to work smarter, not harder! Continue to learn, automate mundane tasks with cutting-edge technology, and delegate work to save time and help your team grow in skill and knowledge. These simple practices can help you become the best business owner you can be!

What does your Amazon business need to succeed? With SmartScout, you have access to more product, brand, and seller data than anything out there. If you are ready to turbocharge your business, we are here to help!

An eCommerce seller looks at her items for sale on a tablet

Selling on Amazon vs. eBay: What you need to know

Ready to start selling your products online? Or have you already built a web presence and you’re looking to expand? From marketplaces like Etsy to building and hosting your own website on Squarespace or Shopify, small businesses have plenty of platforms to sell their products online. But eventually, most professional sellers find themselves asking: What are the pros and cons of Amazon vs. eBay?

Amazon vs. eBay: Who has the biggest market for selling potential?

By the sheer number of visitors, selling on Amazon is the winner here: 214.8 million people visit Amazon each month, compared to 106.9 million for eBay. However, both of these numbers represent huge potential audiences, so to really make the right choice about selling on Amazon vs. eBay, you’ll want to break it down. 

eBay’s audience is more international than Amazon: 57% of its revenue comes from international operations. Amazon doesn’t release these figures, but analysts estimate about 33% of its sales are international. eBay is also known for having “niche” customers searching for specialized products and second-hand goods. The real winner here depends on what you sell and who you sell it to.

Amazon vs. eBay: Which channel is more competitive? 

Amazon is much more competitive than eBay. Amazon rewards sellers with the highest-quality items at the lowest price. There are far more sellers on Amazon, and you may be competing with factory-direct prices from China or even with Amazon itself. 

On the other hand, eBay follows an auction format that will show shoppers many different options, conditions from new to used and shipping options, allowing sellers more opportunities to reach them. eBay advertising is also less competitive and therefore cheaper. 

Outside view of an Amazon pick up and return center.

Amazon vs. eBay: Which channel offers the best shipping and fulfillment?

Winner: Amazon.

When sellers opt for fulfillment by Amazon FBA, they’re able to use the retail giant’s warehouses, shipping, and customer service – for a fee, of course. They’re also eligible for Amazon Prime and the benefits that come along with it. Just remember that you may have to pay sales tax in those states if you use Amazon’s warehouses. Make sure you follow eCommerce bookkeeping tips to keep your records in order.

While domestic sellers are responsible for their own packing and shipping on eBay, the company does offer its Global Shipping Program. This allows sellers to use its “hubs” to ship internationally, with eBay taking care of the customs forms and import fees and providing tracking. This is another reason eBay is so popular with international sellers. 

Amazon vs. eBay: Whose fees reign supreme?

Overall, most sellers find that eBay’s fees are lower. But this doesn’t tell the whole story. Both platforms’ fees depend on what’s being sold, the type of account you have, and more. On Amazon, you’ll likely want a Professional Seller account, which will run you $39.99 per month. You’ll also pay a 15% commission on Amazon, plus a closing fee. If you go with Amazon FBA, you’ll pay those fees as well. 

On eBay, you’ll pay about $0.35 for each listing you create. With a $28-per-month Basic Store account, you’ll get 250 free listings. Once your item sells, eBay takes only a 10% commission. However, this doesn’t include payment processing, while Amazon does. You’ll also then need to figure out the shipping yourself. 

Once again, the answer to the age-old question of selling on Amazon vs. eBay depends on your sales volume and type of product. Here’s one point for eBay, however: One survey found that eBay was ranked number one by sellers in terms of ease of use, customer service, and profitability – while Amazon came in seventh. 

An eCommerce seller adds items to her online store.

The verdict: Amazon

Pros:

  • Reach a large audience
  • Amazon FBA is a convenient option for most sellers
  • Easy to use interface and tools

Cons:

  • Highly competitive
  •  Slightly higher fees
  • Less freedom over branding, product descriptions, and policies

Which eCommerce sellers are Amazon right for? 

  • Sellers with a high volume
  • Sellers with high-profit margins
  • Sellers of non-specialty items

The verdict: eBay

Pros:

  • Easier international sales and expansion
  • Control over branding, listings, and return policies
  • Lower fees 

Cons:

  • No domestic shipping program
  • Smaller audience
  • Less straightforward user interface

Which eCommerce sellers are eBay right for?

  • International sellers
  • Sellers of used and customized items, collectibles, and niche products
  • Sellers who desire more freedom over the selling process

You can even decide to settle the Amazon vs. eBay debate by selling on both platforms. No matter what you choose – and especially if you decide to sell on both – you’ll need expert eCommerce online bookkeeping to keep your books in order and ensure you keep up with sales tax laws. At Xendoo, we work with eCommerce sellers on both platforms to manage bookkeeping and accounting, so they can focus on what’s important: selling!

A phone with amazon logo

Pros and Cons of Putting Your Small Business on Amazon

Ecommerce is booming. Total revenue will reach nearly $4.6 billion in 2021 and grow at an annual rate of 4.6% over the next five years – reaching $5.6 billion by 2025. It’s easy to see why owners of small and medium businesses are asking themselves how they can get a piece of the eCommerce pie. One popular option—the Amazon small business marketplace. 

In the first quarter of 2021, 55 percent of the units sold on Amazon were from third-party sellers. For a company with sales of more than $300 billion, that’s more than pocket change. But what are the pros and cons? And is it worth the trouble? 

What is Amazon marketplace?

The Amazon marketplace is an eCommerce platform that allows independent vendors and sellers to sell their goods on Amazon. The platform allows Amazon to forego the typical retail model, where it sources materials, then produces and stores each of its products until shipment. Instead, third-party vendors put products on Amazon and take care of the details, while Amazon gets a cut of the profits. 

What are the pros of selling on Amazon as a small business?

There’s no question that Amazon is popular with small businesses: In 2018, nearly three-quarters of Amazon sellers had between one and five employees. And Amazon for small business does have plenty of benefits, like the following. 

You can reach a larger audience

One of the biggest benefits of selling products on Amazon is that it can connect you with a wider audience: There are more than 200 million Amazon Prime members worldwide, and that’s not counting site visitors who don’t subscribe to Prime. That’s a huge audience for Amazon small businesses

Amazon can take a lot of the work off your plate 

Getting set up with Amazon marketplace is relatively easy: Just sign up and add products to the catalog. If you want Amazon to do more work for you, you can sign up for Amazon FBA, or Fulfilled by Amazon, which allows you to use Amazon’s warehousing, packaging, shipping, and customer service. 

Amazon has tools to help you sell 

In addition to Sponsored Ads – which actually make Amazon the third-largest digital advertiser behind only Google and Facebook – Amazon small businesses have access to MerchantWords, a proprietary keyword research tool. It uses actual Amazon data to help you optimize your product names, descriptions, and ads. 

Amazon provides technical support 

Amazon Seller Central is the platform’s support team for Amazon small businesses. It’s available 24 hours a day, although most sellers will be required to submit a request and wait for a callback. Still, most sellers receive a prompt response and are happy with the support they receive 

Closeup of two Amazon labeled AA batteries.

Photo by Syed Ahmad on Unsplash

What are the cons of selling on Amazon as a small business?

Amazon Marketplace sounds pretty great, right? For many small and medium businesses, it is. But it also has a few drawbacks you should be aware of. 

It can be expensive

With charges for selling, referral fees, and Amazon sales tax, the cost of selling on the marketplace can quickly add up. Sellers without a monthly plan will pay 99 cents per item sold, while those with a Professional Plan pay $39.99 per month. If you opt for extra features, like Fulfilled by Amazon, expect to pay more fees. 

It can be time consuming 

Getting set up with Amazon Marketplace is easy – understanding how to be successful there can be more time-consuming. Diving into the tools Amazon provides and optimizing your product take time. Plus you’ll need to figure out Amazon bookkeeping and accounting, inventory management, and more. 

The competition is fierce 

There were 1.1 million active Amazon marketplace sellers in the United States alone in 2019. Amazon Marketplace is also incredibly popular with Chinese merchants, some of whom sell products at super-low, factory-direct prices. You’ll even compete with Amazon’s own private label brands. And fake reviews abound on the platform, with competitors using bots to write thousands of five-star reviews at once. 

It’s Amazon’s world, you’re just selling in it 

Some Amazon small businesses feel they don’t have much power over the selling process. There are reports of Amazon punishing businesses for selling at lower prices on other marketplaces, or pressuring them to sign up for extra services. 

Should I use Amazon for my small business?

There’s no one-size-fits-all answer to whether you should sell products on Amazon. Certain categories, like personal care, beauty, and home goods, seem to have greater success on the platform. Businesses with high margins, who can afford to give Amazon its cut, can also do well. However, success with Amazon for small business depends more on your ability to figure out what works for you than on the type of business.

Xendoo can help dive into your books and help you make a sound decision on whether to sell on Amazon Marketplace. If you’re already a seller, we can ensure your books are in order – allowing you more time to focus on selling.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

a phone with product images

eCommerce Trend Report: 2020 Recap & 2021 Forecasts

Editor’s Note: This post was originally published in March 2020 and has been updated for accuracy and comprehensiveness.

For all the challenges the economy faced in 2020, it may come as something of a surprise that overall domestic retail sales saw their highest rate of growth in over two decades during 2020. What probably isn’t much of a surprise to anyone who has been paying attention is that that strong growth was driven entirely by eCommerce trends in 2020, with online sales accounting for 101% of that growth. 

The COVID-19 pandemic drove more and more shoppers to online retailers in lieu of brick-and-mortar stores, and the good news is that that movement shows no sign of slowing down in the eCommerce trends for 2021. The bad news is that sales tax compliance continues to be a thorny issue for online retailers as they struggle to keep up with state regulations. Figures represent US domestic sales unless specifically noted as global figures.

Consumer Migration to E-commerce

Overall retail sales in 2020 topped $4.04 trillion, representing a 6.9% increase over 2019 sales of $3.78 trillion. That was driven by a massive 44% increase in online shopping, nearly three times the previous record eCommerce year-over-year growth in 2019 of 15.1%. A significant portion of that increase was due to first-time online shoppers, as well. E-commerce market penetration leaped from 15.8% in 2019 to 21.3%, representing a sharp increase from its previous trend of 1-2% growth per year. In 2020, eCommerce transformed from being a convenient alternative to brick-and-mortar stores for some consumers to an essential part of daily life in an age of pandemic.

A person checks his phone for sales during Black Friday

Holiday Shopping

Following along with the overall trend toward online shopping, domestic holiday shopping showed similar rates of year-over-year growth. Out of $861 billion spent online in 2020, over $200 billion of sales occurred during the holiday shopping months of November and December. 

  • Thanksgiving Day online sales rose 21.5% to $5.1 billion 
  • Black Friday online sales rose 21.5% to $9 billion
  • Cyber Monday online sales rose 15% to $10.8 billion
  • Total Cyber-week domestic online sales reached $60 billion 

Hottest E-commerce Segments in 2021

Fashion and online apparel remained the largest segment of online shopping globally in 2020, followed by toys and electronics. 

  • Online apparel sales rose 15% to $760 billion globally, projected to reach $1 trillion by 2025
  • Toys rose 12% to $590 billion in global online sales, projected to reach $766 billion by 2025
  • Consumer electronics saw $542 billion in global online sales, a 28% increase over 2019.
  • Food and personal care items came in fourth at $468 billion
  • Furniture and household appliances totaled $362 billion globally.

Largest Retailers

Unsurprisingly, Amazon retained its throne as the undisputed king of online retailers, with a whopping 38% of all domestic sales, down slightly from its 2019 share of 43.8% share in 2019. Other online retailers like Walmart and Target managed to chip away at Amazon’s lead, but are still behind by a wide margin. 

  • Amazon – 38%
  • Walmart – 5.3%
  • eBay – 4.7% 
  • Apple – 3.7%
  • Home Depot – 1.7%

Smartphone Sales

Smartphones continued to increase in popularity as a platform for online shopping, representing 54% of online sales in 2020 and projected to reach 73% in 2021. 79% of smartphone owners have made at least one online purchase with the device, and 80% of smartphone owners have used a smartphone to look up product information or reviews while shopping in a traditional brick-and-mortar store. It’s clear that the prevalence of smartphones will continue to be a driving force in eCommerce for the foreseeable future. 

A man pays for an item using his digital wallet on his phone

Trends to Watch

Whether you have something like a Shopify store or sell through your own website, it’s imperative to stay on top of technology and predict online consumer product trends so that you can stay one step ahead of the competition. To that end, we’ve identified some eCommerce future trends that are definitely worth keeping an eye on in 2021.

BOPIS (Buy Online, Pick-Up In-Store) and Curbside Pickup

This was the trend that dominated much of 2020 because it combined the convenience of online shopping with the immediacy of in-store shopping. While some shoppers will revert to in-store shopping, this trend is here to stay.

Augmented Reality (AR)

Augmented reality emerged as a player in eCommerce in 2020, with, for example, some furniture retailers allowing consumers to upload a photo of their living room and see how a particular piece would look in it.

Digital Wallets & One-Touch Purchase

Many consumers have been hesitant to make the move to online shopping due to concerns about fraud, while others were put off by the inconvenience of having to enter a credit card number. Digital wallets like ApplePay and GooglePay have alleviated many of those concerns by making secure one-touch purchases from smartphones. However, most security concerns are pushed to the wayside for convenience, and this eCommerce trend is probably here to stay. 

Cryptocurrencies

Although controversial and not widely adopted currently, cryptocurrencies are poised to become a force in eCommerce in the not-too-distant future. Because Bitcoin is both a currency and a payment processor, it can facilitate secure transactions across borders at transaction fees of 1%, as opposed to the typical 2-3% merchant fees charged by credit card processors. Some large online retailers like Overstock.com already accept Bitcoin.

More Sales Tax Headaches

In response to declining state sales tax revenues from the move to online shopping, the US Supreme Court ruled in South Dakota v. Wayfair (2018) that each state had the power to individually tax online retailers to create a replacement revenue stream. Online retailers must now monitor and comply with 50 different sets of sales tax laws, creating an enormous amount of accounting overhead. 

This is yet one more reason to outsource your bookkeeping service and accounting to a professional firm like Xendoo as a cost-effective solution to this regulatory nightmare. Sales tax processing is just one of the many affordable services available in Xendoo’s suite of small business offerings. Xendoo can also make sure that you are getting all the eCommerce tax deductions that you are entitled to as an online retailer.

It’s clear that eCommerce will only continue to grow by leaps and bounds in the years to come. Consumers were already growing accustomed to the convenience of online shopping, and the COVID-19 pandemic was the impetus that pushed many holdouts to take the plunge. Many retailers struggle to understand emerging technologies and keep pace. The retailers that don’t will be left behind in the wake of those who do. Staying on top of technology and eCommerce trends is critical to success in retail in 2021. 

Experience the Xendoo difference with a one-month free trial.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

California Demands Seller Sales Tax Info from Amazon

In November 2018, Amazon announced that it will comply with the State of California Department of Tax and Fee Administration’s demand to provide third-party seller data. How will this action affect you as an FBA seller?

States Are Getting Serious About Sales Tax

We believe it’s yet another sign of things to come. More and more states will be tracking down the sales tax they believe they’re missing out on through eCommerce.
This isn’t the first time it’s happened. Last year Amazon released seller info to Massachusetts, Rhode Island, New York and Pennsylvania. Some states, such as New York, apparently only wanted to verify that all the tax being collected by registered sellers was being remitted to the tax authority. But California’s demand sets a precedent for a state to contact ALL sellers directly, whether they’re registered to collect sales tax or not, for information about sales they’ve made in the state.

Another such sign happened last June, when the United States Supreme Court ruled in favor of South Dakota (in the case of South Dakota v. Wayfair), that physical presence in a state is no longer required as part of the tax nexus. In other words, you should be collecting and remitting sales tax for any state where you have customers — no matter what U.S. state or country you’re based in.

The handwriting is on the wall, and undoubtedly all states will have some such policy in place sooner or later.

More Hassles for Non-Registered Amazon Sellers

Amazon has not provided sales or warehouse data to California, as some other states have done. All they’ve sent is contact info and federal employer identification numbers.

Apparently California is using that data to send questionnaires to sellers on the list. So far, the questionnaires favor those already registered to collect sales tax, in that you can simply provide your tax ID and leave the rest of it blank. So it appears that the state is really targeting non-registered sellers.

Don’t Ignore State Requests for Info

Many Amazon sellers who’ve already received the California questionnaire have put it aside, assuming the state would be slow to act. That may be true, but sooner or later, it WILL act.

And you really won’t like their next step, which is to turn you over to an auditor who will make an “estimated assessment” of the sales tax you owe. In fact, the auditor will just be guessing, not calculating based on the data you provided. Those guesses are often much higher than reality.

The state will then enforce collection of that assessment; and yes, they have the power to do so.

Don’t Expect Amazon to Hold Your Hand

You may have been expecting that Amazon would collect sales tax for FBA sellers. In fact, it’s already doing so in some states like Washington — usually with the result of more complications for registered sellers and more risk for non-registered ones.

Anyway, you are still liable for the tax in the years before Amazon started doing it. The state can hold you accountable for up to 7 years of back taxes, plus penalties and interest.

States will probably find it easier to pursue the third party sellers directly, rather than Amazon. That’s why we don’t believe it’s smart to rely on Amazon to make this sales tax issue go away.

There’s Still Time to Make a Plan

While it’s true that government agencies can take months to get moving after a policy decision is announced, the trend seems to be toward more fast and aggressive action in the case of eCommerce sales tax collection.  Xendoo helps customers navigate complex sales tax laws by keeping them compliant and leveraging other 3rd parties for tax calculations.   For more about our sales tax services, click here.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

Selling on Amazon: To FBA or Not to FBA?

Unless you’re living under a rock on the moon, you’re well aware that Amazon is the eCommerce success story of the century — not only for Amazon itself but for thousands of independent sellers who take advantage of its marketing reach and customer confidence. Amazon’s FBA (Fulfillment By Amazon) program goes a step further: it gives smaller eCommerce businesses the clout and convenience of its warehousing, shipping, and customer service facilities.

So if you use FBA, you do less than half the work of the transaction: listing your product on Amazon and getting your merchandise shipped to an Amazon fulfillment center. They take care of the rest: merchandise storage, order processing, picking, packing, shipping, and shipment tracking.

A fundamental decision any third-party seller on Amazon must make is whether to use FBA or its fulfillment facility. Here are some things to consider:

Comparative costs.

Which will be more profitable: paying for your warehousing, packaging materials, and staff to do the picking, packing, and delivery to the shipper; or paying the FBA fee to have Amazon do all that for you?

Amazon makes it easy for you to compare the numbers with this Fulfillment by Amazon Revenue Calculator. Fill in the item price and your costs, then click “Calculate” to see the FBA costs for the same item, and which is your best option in terms of net profit and net margin.

Time investment.

The more you sell, the more time fulfillment takes out of your day. The time that should be spent on management and development, not putting items inboxes. This is often a major roadblock to scaling your business.

Sales tax obligations.

When some or all of your inventory is stored in and shipped from Amazon warehouses, you may be required to collect and remit sales tax in the states where those warehouses are located.

Amazon Prime eligibility.

Only third-party sellers who use FBA are Prime eligible, and many say that this is their number one reason for doing so. When customers see “Fulfilled by Amazon” on the product page, they have confidence that:

  • Their purchase will be delivered in just 2 days
  • They are getting a better deal because shipping is free
  • They will receive excellent shipment tracking and customer service

Even Amazon shoppers who are not Prime members often choose to buy from a seller who is Prime eligible rather than one who isn’t. This gives FBA sellers a huge advantage over those who do their fulfillment.

Each business must weigh the pros and cons of Amazon FBA concerning its needs and goals. But we think that in 99 cases out of 100, the advantages far outweigh the costs. It’s certainly worth a try.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.