Does Amazon collect US sales tax for Canadian FBA sellers?

Amazon collects because every sales-tax state now has a marketplace facilitator law

A marketplace facilitator law shifts the duty to collect and remit sales tax from the individual seller to the platform that processes the order. Amazon qualifies as a facilitator everywhere, so on every order shipped to a US address it works out the rate for the delivery address, charges the buyer, and sends the tax to the state. As at the time of writing, all 45 states with a statewide sales tax, plus the District of Columbia, have such a law in force.

You can watch this happen in Seller Central. Each order shows the tax collected, and the settlement report lists it as tax withheld by Amazon rather than paid out to you. The money never reaches your account, and it is not your revenue.

What remains in your hands on marketplace orders is the accuracy of your product tax codes. Amazon applies the code assigned to each listing to decide whether an item is fully taxable, exempt or taxed at a reduced rate in a given state, so an item of clothing coded as general merchandise can be over-taxed in a state that exempts clothing. Wrong codes do not create a liability for you, but they can cost you sales.

FBA inventory still creates physical nexus, and some states still expect a permit

Marketplace facilitator laws changed who collects the tax; they did not change the rules on nexus. Inventory stored in a state has always created physical nexus there, and Amazon routinely moves FBA stock between fulfillment centres without asking you. The Inventory Event Detail report in Seller Central shows which states your units have passed through.

What each state does with that fact varies, and as at the time of writing there is no uniform answer. Some states have said plainly that a seller whose only in-state sales run through a registered marketplace does not need its own permit. Others still expect a registration and a periodic return, even when every line on it reads zero because Amazon collected everything. A few pursued FBA sellers for periods before their facilitator law took effect. The safe course is to check each state where you hold inventory rather than treat Amazon's collection as closing the file.

Sales outside Amazon are yours, and your Amazon sales may push you over the line

If you also sell through Shopify, WooCommerce or your own checkout, Amazon collects nothing on those orders. You are the seller of record and must register, collect and file in every state where you have nexus, whether that nexus comes from inventory or from crossing the state's economic nexus threshold. Most states set that threshold at US$100,000 of annual sales; we explain the details in what is US economic nexus for Canadian online sellers.

The trap is that many states add marketplace and direct sales together when testing the threshold. A seller with US$150,000 of Amazon sales into a state and US$5,000 of Shopify sales there can owe registration and collection on the US$5,000. Nexus-tracking software such as TaxJar or Avalara needs every channel connected, Amazon included, to show the true picture.

Sales tax is not income tax: the federal and state income questions are separate

Nothing Amazon does for sales tax touches income tax. At the federal level, the Canada-US tax treaty generally protects a Canadian seller from US income tax unless the business has a permanent establishment in the US, and a Canadian corporation normally files a protective Form 1120-F each year to keep that protection and its right to deductions intact. We cover that in do Canadian Amazon FBA sellers owe US income tax.

State income and franchise taxes are a different matter, because the treaty does not bind the states. Several states treat inventory or a sales threshold as enough to require a corporate income or gross-receipts filing. The exposure is usually modest for a small seller, but it is real and it is separate from anything Amazon remits.

What this means for your books and for GST/HST

In your accounting, the tax Amazon collects should never appear as sales. Settlement tools such as A2X post it to a clearing line that nets to zero within the same settlement, which keeps revenue equal to what customers paid for the goods. Our page on recording Amazon settlements in QuickBooks shows the entry.

On the Canadian side, goods shipped from Canada to US customers are zero-rated exports, so no GST/HST applies, and moving your own stock to a US fulfillment centre is not a sale at all. Orders on Amazon.ca to Canadian buyers carry GST/HST at the buyer's provincial rate; if you are registered, that tax is yours to collect and remit, and if you are not, Amazon may collect it under Canada's platform rules for goods shipped from Canadian warehouses. Our Amazon seller accountant page covers the full Canadian picture, and our US sales tax guide covers registration and filing when you do need a permit.

How we handle US sales tax for Amazon sellers

We pull the inventory location and settlement reports, map where stock has been held, and compare that with your direct-channel sales by state to decide where a permit is needed today. For clients with a Shopify or website channel, we set up the collection and filing calendar; for pure Amazon sellers we usually find little to file, but we confirm it state by state instead of guessing. We also keep the income tax file, including the protective 1120-F, in the same annual cycle so the sales tax and income tax answers never drift apart.