Sales Tax for Amazon Sellers: Nexus and Compliance in California

If you sell on Amazon and ship to California buyers, Amazon generally collects and pays California sales or use tax on those marketplace sales. That does not close every obligation. Your sales outside Amazon, your records, where your inventory sits, and any letter from CDTFA or another state are still yours to handle.

This article is educational only. It is not tax advice or legal advice, and reading it does not create an attorney-client relationship. LA Law Group, APLC is a law firm, not a CPA firm or tax preparer. Confirm your own obligations with a qualified tax professional and, where needed, counsel. Attorney Advertising.

Everything below is framed for California sellers and California agencies: the California Department of Tax and Fee Administration (CDTFA) for sales and use tax, and the Franchise Tax Board (FTB) for income and franchise tax. Other states are mentioned only in general terms.

What Amazon collects in California as a marketplace facilitator

California’s Marketplace Facilitator Act took effect October 1, 2019. Under it, a marketplace facilitator that is registered, or required to register, with CDTFA is the retailer for the sales it facilitates for marketplace sellers (Revenue and Taxation Code section 6043). In plain terms, Amazon is generally the party responsible for paying the sales tax or collecting and paying the use tax on facilitated sales delivered to California buyers.

CDTFA adds two points sellers should know:

• A marketplace seller is generally not required to register for a seller’s permit or a Certificate of Registration for use tax if all of its retail sales are facilitated by a marketplace facilitator registered with CDTFA.
• CDTFA says it will not hold a marketplace seller liable for tax on a facilitated sale if it can verify that the facilitator collected the correct amount and paid it to CDTFA.

There is a catch in the statute. Under section 6046, a facilitator can be relieved of liability if it shows the error came from incorrect or incomplete information supplied by an unrelated seller. When that happens, the seller is the retailer for that sale. So the product and tax information you give Amazon is not a formality.

What is still on the seller

Amazon’s collection covers Amazon’s facilitated sales. It does not cover the rest of your business. Here is what usually stays with you:

• Sales outside a registered marketplace. Your own website, a Shopify store, wholesale orders, trade show sales, or a marketplace that is not a registered facilitator. CDTFA says direct sales to California customers can create a registration requirement.
• Your permit status. If you hold a seller’s permit, CDTFA expects you to keep filing. Registered marketplace sellers report total sales, including marketplace sales, and then claim a deduction for sales facilitated by marketplace facilitators, according to CDTFA’s guide.
• Proof that Amazon is collecting. CDTFA suggests keeping documentation that the facilitator is registered and responsible for the tax, such as your agreement and the facilitator’s permit or account number, which you can verify on CDTFA’s site.
• Records. CDTFA Publication 116 says to keep required records for at least four years, and longer if you are being audited or have a dispute pending.
• Resale certificates. If you buy inventory for resale and are not registered, CDTFA’s guide explains how to state on the certificate why you do not hold a permit.

If none of your sales happen outside Amazon, a lot of this is light. If some do, it is real work.

Economic nexus after Wayfair: California’s $500,000 rule

On June 21, 2018, the U.S. Supreme Court decided South Dakota v. Wayfair and dropped the old rule that a state could require collection only from sellers with a physical presence there. California responded with Assembly Bill 147, passed April 25, 2019. According to CDTFA’s Wayfair guidance, retailers located outside California must register and collect use tax if, in the preceding or current calendar year, their total combined sales of tangible personal property for delivery in California, together with related persons, exceed $500,000. The rule applies to sales on and after April 1, 2019. The statute is Revenue and Taxation Code section 6203, subdivision (c)(4).

A few details matter for Amazon sellers:

• It is a calendar year test. The statute looks at the preceding or current calendar year. It is a dollar test, not a transaction count.
• Marketplace sales count toward the total. CDTFA says to include sales facilitated through a marketplace. But it also says registration is not required if all of your California sales are facilitated by marketplace facilitators that are the retailers for those sales.
• Related businesses are combined. “Related” follows Internal Revenue Code section 267(b), as CDTFA explains.
• Physical presence is separate. CDTFA lists maintaining inventory in California as physical presence. Publication 109 says this includes inventory at a California fulfillment center run by a third party.

Other states set their own thresholds, their own measurement periods, and their own rules on whether marketplace sales count. We are not listing them here. If you sell into another state, read that state’s revenue department guidance or ask a tax professional.

I only sell on Amazon. Why did I still get a notice?

This is the question many sellers ask, and it has a few usual answers.

First, you may still hold a seller’s permit. Some sellers registered years ago, before marketplace rules existed. An open permit generally comes with filing duties, even if every sale now runs through Amazon.

Second, the notice may cover older periods. California’s marketplace rules began October 1, 2019. Earlier periods follow earlier rules.

Third, you may have sales you forgot about. A few Shopify orders, a wholesale account, or sales on a smaller platform can count.

Fourth, inventory. Amazon may store your units in fulfillment centers in several states. Some states treat that as physical presence.

Fifth, it may not be a sales tax notice at all. An FTB letter about income or franchise tax is a different agency applying a different test.

CDTFA’s Publication 76 also notes that CDTFA may begin an audit based on information it receives from outside sources. A letter is not proof you owe anything. It is a request to explain.

Before you respond, gather:

• The full notice, envelope, and any enclosures
• Your CDTFA account or permit number, if you have one
• Seller Central tax reports for the periods named
• Your FBA inventory ledger for the same periods
• Settlement or payments reports and order reports showing ship-to state
• Sales records from every channel outside Amazon
• Proof that Amazon is registered and collecting in California

A CDTFA letter walkthrough

Letters vary, and titles change. Read the header, the form number, and the response date before anything else. The common types sellers describe are:

• Registration inquiry. CDTFA asks whether you should hold a permit or account.
• Nexus or business activity questionnaire. Questions about where you sell, where inventory sits, and what channels you use.
• Audit contact or records request. Publication 76 says CDTFA rarely starts an audit without prior notice, the first contact is usually by phone, and the audit period is usually three years.
• Notice of Determination. A billing for an amount CDTFA says is due.

Here is a practical order of work:

1. Calendar the date printed on the notice. Treat it as a hard deadline. If you need more time, ask in writing before it passes.
2. Pull your Amazon reports. Report names and menus change, so search Seller Central help if these move. In the Tax Document Library, look for the sales tax or marketplace tax collection reports. In inventory reports, look for the Inventory Ledger, which has taken the place of the older Inventory Event Detail report on many accounts (if your account still shows the older report, pull it too). From Payments, download settlement or date range reports. From order reports, filter by ship-to state.
3. Pull everything outside Amazon. Website and Shopify exports, wholesale invoices, and any other marketplace statements.
4. Reconcile before you answer. Separate California sales Amazon facilitated from California sales you made directly, period by period. That split usually answers most of the letter.
5. Do not guess on a questionnaire. Answers become part of the record. If you are unsure, say so, and get help.
6. Bring in the right people. A CPA or enrolled agent handles returns and calculations. Counsel makes sense when there is a determination you want to dispute, a large amount, several states, or a question about whether Amazon or you bear liability for certain sales. Publication 76 notes you can have an authorized representative handle an audit.

If you receive a Notice of Determination and disagree, the appeal is a petition for redetermination. CDTFA Publication 17 says it generally must be filed within 30 days from the date the notice was mailed, and Regulation 35007 says the same. If the deadline passes, Publication 17 says the liability becomes final, and the remaining route is generally to pay and file a timely claim for refund. CDTFA offers form CDTFA-416 for petitions. That is the high-level path. The details are a job for your representative.

FBA inventory nexus: sales tax versus FTB income tax

Amazon decides where to place FBA inventory, and it can move units between states. That creates two separate questions.

Sales tax nexus. Inventory stored in a state can be physical presence there. California’s position is stated in CDTFA’s Wayfair guidance and Publication 109, quoted above. Other states decide for themselves, and they have their own marketplace facilitator laws, which may shift collection on marketplace sales to the marketplace, but registration questions can remain, especially if you also sell outside Amazon. Your Inventory Ledger (or whichever inventory report your account currently shows) is a good place to see where units sat and when.

Income and franchise tax nexus. This is the FTB, not CDTFA. Under Revenue and Taxation Code section 23101, a taxpayer is doing business in California if it is organized or commercially domiciled here, or if its California sales, property, or payroll exceed set amounts, which the FTB revises every year. The FTB’s doing business page, when we reviewed it in October 2026, listed figures through 2025, including $757,070 for California sales and $75,707 for California property for 2025 (or 25 percent of the total, if that is less, under the statute). Check that page for the year you are reviewing. Inventory is tangible personal property, so how FBA inventory in California counts is a question to work through with your tax professional.

The FTB page also mentions Public Law 86-272, a federal law that can protect out-of-state companies whose only in-state activity is soliciting orders. Whether it applies to a seller with inventory stored in California is not a do-it-yourself call.

Voluntary disclosure. Both agencies have programs for businesses that come forward before being contacted. CDTFA’s Publication 178 says its programs can limit the look-back to three years instead of eight and allow penalty relief. CDTFA’s out-of-state program requires, among other things, that you have not already been contacted by CDTFA. The FTB’s program has its own rules, including that you have not received a notice to file. Treat these as topics to discuss with a professional, not as a form to fill out tonight.

When a tax professional or a lawyer makes sense

Most sales tax questions start with a CPA or enrolled agent. They file returns, run the numbers, and handle routine correspondence.

A lawyer is more useful when a notice turns into a dispute: a Notice of Determination you want to challenge, an audit with a large proposed amount, letters from several states at once, or a question about whether Amazon’s collection covered a sale. A lawyer can also help when tax trouble overlaps with account problems. For related cash-flow issues, see our guides on Amazon seller account fees, disbursement holds and the reserve, and withheld funds and frozen balances.

No one can promise how CDTFA, the FTB, or another state will resolve a matter. What you can control is a clean record and a timely response.

LA Law Group, APLC is a California firm. Aryan Amid, Founding Attorney, works with Amazon sellers on marketplace disputes. To see how we help sellers, visit our Amazon seller lawyer page, or call (866) 625-2529 for a free, confidential consultation.

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This article is educational only and is not tax or legal advice. It does not create an attorney-client relationship. LA Law Group, APLC is a law firm, not a CPA firm or tax preparer; confirm your obligations with a qualified tax professional and/or counsel. Tax laws, thresholds, and agency guidance change, and every situation is different. Prior results do not guarantee a similar outcome. Attorney Advertising.