Fulfillment by Amazon (FBA) is one of the hottest business models right now, and for good reason. Amazon has made it easier than ever to sell physical products online. Despite the ease with which products can be sold, some difficult areas of running a business remain.
An FBA business not only has to pay its own income taxes, but is often required to collect sales tax not just for customers located in the same state as the seller, but often in other states in which Amazon has stored the sellers product. As a result good bookkeeping is required.
Registering to collect sales taxes in many states can be a very time consuming tax, but there area lot of services out there to help you. With the help of these services, and a qualified professional, it does not have to be that difficult.
There are many gray areas in taxation of almost all internet businesses. You will find web sites and accountants that disagree with my advice. Many will say you only need to collect in the state you live in. I am simply passing on what I have learned and what I believe to be the smart course of action for FBA businesses.