When you signed up for Amazon FBA, the pitch was simple: send your inventory to Amazon, and they handle the rest. Storage, picking, packing, shipping, and yes, sales tax collection too. Amazon collects and remits sales tax on your behalf in every state that requires it. The returns, the remittances, all of it. Done.
So why does a growing number of FBA sellers get letters from state tax authorities they’ve never registered in?
Because “Amazon collects sales tax on your sales” and “you have no sales tax obligations” are not the same thing. Amazon’s marketplace facilitator status covers the transaction. It doesn’t cover the fact that your inventory is sitting in a warehouse in Pennsylvania or Texas or New Jersey. A warehouse you never chose, in a state you may have never sold to directly. That inventory is creating physical nexus. And physical nexus creates obligations Amazon doesn’t handle for you.
This article explains exactly how FBA inventory nexus works, what it means for your business, and what to do about it. You’ll learn how to find out which states your inventory has touched, what compliance obligations that creates, and how to address any historical exposure before a state reaches out to you first.
Amazon Handles the Tax Collection. It Doesn’t Handle Your Nexus.
Amazon is a marketplace facilitator. Under laws now in effect in all 45 sales tax states, Amazon is required to collect and remit sales tax on sales made through its platform. That means for every order a customer places on Amazon.com, Amazon calculates the correct rate, collects it at checkout, and sends it to the state. You don’t do any of that. It happens automatically.
This is genuinely useful. It eliminates the collection and filing burden for your Amazon channel sales in most states.
But here’s what marketplace facilitator laws do not do:
They don’t register you in any state. They don’t eliminate your nexus in states where Amazon stores your inventory. They don’t cover sales you make through any channel other than Amazon, including your Shopify store, your own website, wholesale orders, or any other platform. And in many states, they don’t eliminate your obligation to file returns, even returns showing zero tax due.
Amazon handles the transaction. Your nexus footprint is your problem.
| What Amazon Handles | What You Still Own |
| Calculating sales tax at checkout for Amazon orders | Determining where you have nexus |
| Collecting the correct combined state and local rate | Registering for sales tax permits in nexus states |
| Remitting collected tax to state authorities | Filing returns in registered states (including zero-dollar returns many states require) |
| Keeping records of Amazon-facilitated tax transactions | Sales tax compliance on all non-Amazon channels (Shopify, own website, wholesale) |
| Nothing about income or franchise tax | Income and franchise tax obligations in states where inventory creates nexus |
Your Inventory Is in States You Never Chose. That’s the Problem.
When you enroll in FBA, you ship your products to Amazon. Amazon then distributes that inventory across its fulfillment network, placing units in warehouses across multiple states to optimize delivery speed to customers. You don’t decide where your inventory goes. Amazon’s algorithms do.
That’s fine for logistics. It’s a problem for sales tax.
Physical nexus is the connection between your business and a state that’s created by physical presence. Inventory sitting in a warehouse is physical presence. In most states, having your products stored in an Amazon fulfillment center, even temporarily, even in small quantities, is enough to establish physical nexus for your business in that state.
A 2025 California ruling confirmed that even minimal FBA inventory constitutes ‘doing business’ in California — triggering the state’s $800 annual LLC franchise tax even for businesses well below California’s economic nexus thresholds.
Amazon operates more than 175 fulfillment centers across the United States. Sellers using FBA typically find their inventory distributed across anywhere from 8 to 20+ states at any given time. Those states shift as Amazon rebalances its network, often without notifying individual sellers.
The key implication: Every state where Amazon has ever stored your inventory is a state where you likely have, or have had, physical nexus. That means registration obligations, return filing obligations, and in some states, income and franchise tax obligations. None of which Amazon handles on your behalf.
Step One: Figure Out Where Your Inventory Actually Is
Amazon provides the data you need. You just have to know where to look.
Log In to Amazon Seller Central
Start by signing into your Seller Central account. All the inventory location data lives in your reports dashboard.
Navigate to Reports and Fulfillment
From the main menu, go to Reports, then select Fulfillment. This is where Amazon stores all your FBA-related data.
Download the FBA Inventory Ledger Report
Download the FBA Inventory Ledger report using the Detail View. This was formerly called the Inventory Event Detail report. Select a date range that goes back to when you first started selling on FBA, not just the current period.
Locate the Fulfillment Center ID Column
Open the file and find the “fulfillment-center-id” column. Each code corresponds to a specific Amazon warehouse location.
Filter or Pivot by State
Map each fulfillment center ID to its state location. Filter or create a pivot table to see every state where Amazon has stored your inventory, and for how long.
The fulfillment center ID codes map to specific warehouse locations. Amazon fulfillment centers in states with major footprints include California, Texas, Pennsylvania, New Jersey, Illinois, Michigan, Georgia, Ohio, and Washington, among others. If your inventory has touched any of those warehouses, you likely have physical nexus there.
Important: Pull this report back to when you first started selling on FBA, not just the current period. Nexus obligations don’t start from when you discovered them. They start from when the inventory arrived.
A note on the moving target: Amazon rebalances inventory regularly. A state that shows zero inventory today may have stored your products last quarter. And new states can appear without warning as Amazon opens new facilities or redistributes stock. This is an ongoing monitoring task, not a one-time check.
Having Nexus Means Having Obligations. Here’s What They Are.
Once you establish that Amazon has stored your inventory in a state, the obligations in that state typically include:
Registration: You need a sales tax permit in that state. Amazon collecting tax on your Amazon sales doesn’t substitute for registration. Many states require sellers with nexus to be registered regardless of whether a marketplace facilitator is collecting on their behalf.
Return filing: Most states where you’re registered require you to file returns, even if Amazon remitted all the tax and your own return shows zero dollars due. These “zero-dollar returns” are not optional. Missing them generates penalties the same way missing a return with tax due does.
Non-Amazon channel compliance: If you sell through your own website, Shopify store, or any other channel into a state where you have nexus, you are responsible for collecting and remitting sales tax on those sales yourself. Amazon’s marketplace facilitator status covers only Amazon. Your Shopify store is entirely your responsibility.
Income and franchise tax: This is the obligation most FBA sellers don’t know about at all. Marketplace facilitator laws cover sales tax only. Physical nexus created by inventory in a state can also create income tax and franchise tax obligations in that state. California’s $800 minimum franchise tax applies to any business with nexus there, regardless of profitability.
Property tax: Some states tax business personal property, including inventory. If your products are sitting in a warehouse in a state with inventory property tax rules, that inventory may be taxable.
The Harder Question: What About the States You’ve Already Been In?
Most FBA sellers who discover the inventory nexus problem aren’t discovering it as a new business. They’re discovering it two or three years into selling, after their inventory has already touched 10 or 15 states they never registered in.
That creates a historical exposure question: what do you owe for the periods before you knew?
A few things to understand:
Sales tax is a gross revenue tax. It’s calculated on what you sell, not what you profit. Exposure compounds across every transaction in every unregistered state for however long inventory was sitting there.
Non-filers face unlimited look-back in most states. If you were never registered and never filed, the state’s statute of limitations clock never started. In states like California, the non-filer look-back is capped at 8 years. In others, it’s genuinely open-ended.
There is also the question of what you owe vs. what Amazon already collected. Amazon collected and remitted sales tax on your Amazon transactions, but you weren’t registered in those states, so you didn’t file returns showing that collection. Some states will still expect filings, even retroactively, showing the transactions and the amounts Amazon handled.
The good news: Voluntary Disclosure Agreements (VDAs) exist specifically for this situation. A VDA lets you come forward proactively, pay back taxes and interest, get penalties waived entirely, and limit the look-back period to 3-4 years rather than indefinitely. They can often be filed anonymously before your identity is disclosed to the state. For an FBA seller with exposure across multiple states, working through VDAs in parallel is almost always the right path.
Learn more about how VDAs and registrations work.
If You Also Sell Outside Amazon, It Gets More Complex
If Amazon is your only channel, the compliance picture, while still requiring registration and return filing, is at least contained. Amazon is collecting the tax on your transactions. Your job is getting registered, filing the required returns (including zero-dollar ones), and managing non-sales-tax obligations like income tax.
If you also sell through your own website or another non-marketplace channel, the picture changes. Now you’re operating two compliance regimes simultaneously:
Amazon orders: Tax collected and remitted by Amazon, but registration and filing still your responsibility in nexus states.
Non-Amazon orders: Entirely your responsibility. Nexus monitoring, collection configuration, registration, and remittance. The physical nexus you established through FBA applies to your entire business, not just your Amazon channel. If you have nexus in Pennsylvania because Amazon stored inventory there, you’re responsible for collecting and remitting sales tax on your Shopify sales to Pennsylvania customers too.
This is the most common compliance gap among growing FBA sellers: Amazon is handling the Amazon side cleanly, while the Shopify store is quietly accumulating uncollected liability in the same states.
For a broader look at how sales tax compliance works across multiple selling channels, see our guide to e-commerce sales tax compliance.
The Right Order of Operations
Pull Your FBA Inventory Ledger Report
Go back to when you first started selling. Map every fulfillment center to its state. That’s your nexus footprint.
Check Economic Nexus Too
Even in states where Amazon hasn’t stored your inventory, you may have crossed economic nexus thresholds through sales volume. Run your sales history through our nexus calculator to identify any additional exposure.
Quantify Historical Exposure
For states where you’ve had inventory but never registered, get an estimate of the liability, including penalties and interest, before deciding on next steps. You need to know the number before you can address it.
Evaluate VDA Eligibility
If historical exposure is material, VDAs are almost always the right path. They limit look-back, waive penalties, and give you a clean starting point. Critically, the window to file a VDA closes once a state contacts you directly. If you’ve already received a letter from a state, that changes the situation. Get advice before you respond.
Register in Your Current Nexus States
Going forward, you need to be registered in every state where Amazon is currently storing your inventory. Set a reminder to re-check your inventory report quarterly. Your nexus footprint changes as Amazon rebalances its network.
Audit Your Non-Amazon Channels
If you have a Shopify store or sell through any other channel, make sure you’re collecting correctly in every state where you have nexus. The FBA nexus that Amazon created applies to your whole business.
Amazon Did a Lot of the Work. You Still Have to Know What It Didn’t Do.
Amazon’s marketplace facilitator system genuinely simplified something that used to be very complicated. Most of your sales tax collection and remittance for Amazon orders is handled automatically. That’s real, and it matters.
But the inventory nexus problem doesn’t care about what Amazon collects. It cares about where your products are. And if you’ve been selling on FBA for more than a year without looking at your inventory ledger, you probably have nexus in states you’ve never thought about.
Here’s what we know from working with FBA sellers every day: the businesses that address this proactively almost always come out ahead. VDAs limit look-back periods. Penalties get waived. Registration gets you compliant going forward. The math works in your favor when you move first.
The businesses that wait for a state letter? They lose the VDA option. They face full look-back periods. And they pay penalties that could have been avoided entirely.
You now have the information you need to pull your inventory report, map your nexus footprint, and understand what obligations that creates. The question is what you do with it.
If you’re looking at a list of states and wondering where to start, or if you’ve already received correspondence from a state and aren’t sure how to respond, a conversation with someone who does this every day can save you significant time and money. Our What’s Next consultation is free, and it’s designed for exactly this situation. No pressure, no commitment. Just clarity on your specific nexus footprint and the best path forward for your business.
The window to solve this on your own terms is open right now. Schedule your free What’s Next call and find out exactly where you stand.
The post Amazon FBA and Sales Tax Nexus: What Happens When Amazon Moves Your Inventory appeared first on The Sales Tax People.