Marketplace Facilitator Tax - what is it, where did it come from and how do you account for it?
You may have noticed that Amazon has started to charge and collect Sales Tax on behalf of all sellers in certain states of the US. Washington was the first state to enact the marketplace facilitator legislation however as per the below article provided by Amazon, it is now up to 4 states (Washington, Minnesota, Oklahoma, Pennsylvania). This number could change at anytime as Marketplace Facilitator and/or Marketplace collection legislation is enacted in more states throughout the US.
Please review Amazon's help article titled: Marketplace Tax Collection
What this all means is you may see some new transaction lines coming through to your Amazon settlements such as: MarketplaceFacilitatorTax-Principal and MarketplaceFacilitatorTax-Shipping.
These settlement lines will offset any ItemPrice Tax and/or ShippingTax that Amazon has charged the customer so that it results in a total of 0 to your overall settlement.
These are the new lines appearing in settlements:
To account for this recent change our suggestion is that you create a new account in your accounting system chart of accounts to be used for the allocation of the new Tax amounts. These can then be used to offset whatever Amazon Sales Tax accounts you have. This will either completely offset the other if this is the only state you collect sales tax or it will be a partial offset if you collect sales tax in other states.
For A2X to see the new account/s you have just created you will need to refresh the connection to your accounting software as shown below:
Once you have created accounts, refresh your Cache in A2X.
Once you have created the necessary accounts in your accounting software (Xero or QBO) you can then map the new line items from within the Accounts and Taxes screen of A2X.
The Accounts and Taxes tab can be found at the top of any A2X page, as seen in the screenshot below:
A2X will have picked up the new settlement line items but it won't know where to allocate them so you will need to map the lines to the account you have created..
Once you have mapped the new line items you can finalize the Accounts by clicking "Save Mapping" as in the screenshot below:
The end result is that you can track how much tax has been held back by Amazon for under the Marketplace Facilitator Tax system.
Please note: We highly recommend speaking to your accountant or tax adviser about this new tax handling as it may impact on your sales tax returns for Marketplace Tax Collection States, and your general sales tax processes.
The following blog posts were completed with Mike Fleming of Michael J Fleming & Associates Sales Tax and More. Both contain valuable, insightful information from one of the industry's leading sales tax professionals!