US Sales Tax for Amazon Sellers - A Foreign Seller's Guide
US sales tax for Amazon sellers sounds scary but comes down to a few clear rules. The complete US tax stack for foreign-owned Amazon sellers. Marketplace Facilitator laws (Amazon collects in 45 states - but you still file). Economic nexus thresholds. Form 5472 and the $25K penalty. BOI report. State franchise taxes. Done plain, in plain language.
Amazon collects sales tax in 45+ states for you under Marketplace Facilitator laws. You still need to:
1. Register in nexus states (where you have inventory)
2. File periodic returns (often $0 owed but still required)
3. File Form 5472 + 1120 federally by April 15 ($25,000 penalty for missing)
4. File BOI with FinCEN within 30 days of any change ($500/day penalty)
5. File Texas Public Information Report annually
What's in this guide
Sales tax basics for Amazon sellers
US sales tax is state-level, not federal. 45 states + Washington D.C. charge sales tax. Rates range from 4% (Hawaii) to 7.25% (California base). Cities and counties add their own - total combined rate can hit 11% in some places.
Five states (NH, OR, MT, AK, DE) have no sales tax.
You owe sales tax in any state where you have "nexus" - a sufficient business connection. For Amazon sellers, nexus typically comes from: (1) inventory stored in an Amazon FC in that state, or (2) economic nexus from sales volume.
What "Marketplace Facilitator" means
This is the most important law to understand. Starting around 2019, almost every state passed Marketplace Facilitator (MPF) laws requiring platforms like Amazon to collect and remit sales tax on behalf of third-party sellers.
What this means for you:
- Amazon automatically collects sales tax from buyers at checkout in 45+ states
- Amazon automatically remits that money to each state
- You see this on your Seller Central reports as "Marketplace Facilitator Tax"
You don't physically handle the tax money. But you're not done - see next sections.
Economic nexus thresholds
Once you cross a state's threshold (usually $100K in sales OR 200 transactions per year), you must register for a sales tax permit in that state - even if Amazon is the one collecting and remitting.
Why? Several reasons:
- Some states require sellers to file "zero returns" showing $0 collected (because Amazon collected it)
- If you ever sell off-Amazon (Shopify, eBay, your own site) in that state, you need the permit
- States can audit and assess penalties for non-registration even if Amazon paid the tax
Common state thresholds:
| State | Threshold |
|---|---|
| California, NY, Texas, Florida | $500K sales |
| Illinois, Pennsylvania, Ohio | $100K sales |
| Most others | $100K sales OR 200 transactions |
| Kansas | $0 (technically immediate nexus) |
Form 5472 - the $25K penalty
This is the single most expensive mistake foreign-owned LLCs make. Every year, your single-member LLC owned by a foreign person (you in India) must file:
- Form 5472 - Information return about reportable transactions between the LLC and its foreign owner
- Form 1120 pro-forma - Attached as a cover sheet (you don't actually owe corporate tax usually, but the form is required)
Penalty for not filing: $25,000 per year. The IRS has been actively enforcing this since 2017.
What's reported on Form 5472:
- Any money you contributed to the LLC (capital contributions)
- Any money you took out (distributions)
- Inter-company sales/services between your Indian entity and the US LLC
- Loans either direction
Due date: April 15 (or June 15 if you file the LLC extension Form 7004).
Form 1120 pro-forma
Single-member LLCs are "disregarded entities" for US tax purposes - meaning the LLC doesn't file a corporate tax return normally. But for foreign-owned LLCs, the IRS requires a pro-forma Form 1120 as the cover document for Form 5472.
What "pro-forma" means here: you fill out only your name, address, EIN, and a few identifying lines. You don't calculate corporate tax. Just enough info to file 5472.
Most CPAs charge $350-$600 for the combined 5472 + 1120 filing. We include it in our Sales Tax + IRS service.
BOI (FinCEN) annual updates
Under the Corporate Transparency Act (effective 2024), every US LLC must file a Beneficial Ownership Information report with FinCEN.
- Initial filing: within 30 days of LLC formation
- Update: within 30 days of any change (address, ownership, control)
- Penalty: $500/day for non-filing
Filed free at boiefiling.fincen.gov. Takes 20 minutes. Bookmark the URL and set a calendar reminder if anything changes.
Texas franchise tax
If you formed your LLC in Texas (most Indian sellers do), you have an annual obligation:
- Public Information Report (PIR) - due May 15. Free. One page. Lists members.
- Franchise Tax Report - due May 15. $0 owed if revenue under $1.23M ("No Tax Due" report).
Filed at comptroller.texas.gov. Skip these and your LLC goes into "forfeited" status - bad for banks and Amazon.
State-by-state cheat sheet for Amazon sellers
States where Amazon FCs typically house Indian sellers' inventory (creating physical nexus):
| State | Has Amazon FBA? | MPF law? | Need to register? |
|---|---|---|---|
| California | Yes (many FCs) | Yes | Yes if > $500K |
| Texas | Yes | Yes | Yes if > $500K (and home state) |
| Florida | Yes | Yes | Yes if > $100K |
| New York | Yes | Yes | Yes if > $500K |
| Pennsylvania | Yes | Yes | Yes if > $100K |
| Illinois | Yes | Yes | Yes if > $100K |
| Arizona, NJ, Indiana, Ohio | Yes | Yes | Yes if > $100K |
Common mistakes
- Thinking Amazon Marketplace Facilitator collection means you don't need to register. You usually still need a permit in nexus states; you just don't physically remit.
- Missing Form 5472. $25,000/year. Single biggest financial mistake foreign-owned LLCs make.
- Not filing BOI within 30 days of formation. $500/day adds up fast.
- Forgetting Texas Public Information Report. Free, one page, but skip it and your LLC goes into forfeited status. Banks notice.
- Trying to handle multi-state filings yourself. Each state has its own portal, login, payment schedule, deadlines. Pay a CPA or service. The fees ($25-$50/state/filing) are way less than penalties.
The US tax stack for an Indian-owned LLC is well-defined and predictable. Most sellers fail not because it's hard, but because they forget. Use calendar reminders or hire someone whose job is to remember.
Our Sales Tax + IRS service handles all of this for $299/month base + $25/state for filings. Or use our US LLC Cost Calculator to estimate your specific compliance cost.
The cost of over-complying
Most articles about US sales tax are written to alarm, and the result is that many Indian sellers over-react, registering for sales tax in many states they never needed to, creating ongoing filing obligations and costs that the marketplace-facilitator laws had already eliminated. This is a real and avoidable expense. Because nearly every state now requires Amazon, as the marketplace facilitator, to collect and remit sales tax on sales made through its platform, the typical FBA seller's direct registration burden is far smaller than the raw nexus rules suggest. Registering everywhere "just to be safe" is not safe, it is a self-inflicted administrative and financial burden, because every registration creates a recurring obligation to file returns, even zero-dollar ones, in that state.
The correct posture is neither to ignore sales tax nor to over-register, but to assess accurately where you genuinely have a direct obligation, register only there, and let the marketplace-facilitator framework handle the rest. For most FBA-only sellers, that genuine list is short. The anxiety the topic generates is usually out of all proportion to the actual obligation once it is assessed properly.
Do not confuse sales tax with your federal filings
One of the most common and consequential confusions is conflating sales tax with federal income tax filings. They are entirely separate systems with separate rules. Sales tax is a state-level transaction tax, largely handled by Amazon for FBA sellers through marketplace-facilitator laws. Federal filings are a different matter: a single-member foreign-owned LLC must file Form 1120 together with Form 5472 with the IRS every year, regardless of sales tax, regardless of profit, and regardless of whether any tax is owed. The penalty for missing Form 5472 starts at $25,000. A seller who carefully manages sales tax but overlooks the federal filing, assuming "Amazon handles my taxes," is exposed to a far larger penalty than sales tax ever threatened.
Keeping these two straight is essential: Amazon's marketplace-facilitator role addresses much of your sales tax, but it does nothing about your federal information return, which remains entirely your responsibility. The clear-headed approach is to assess your sales-tax obligations accurately and modestly, and to treat the annual federal 1120/5472 filing as a fixed, non-negotiable obligation handled on time every year. Done this way, the whole subject moves from a source of dread to a settled, correctly managed part of the business, with no over-registration draining money and no overlooked federal filing creating a five-figure landmine.
Want this handled for you? See our tax compliance and MIS service.