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Amazon Setup - Tax Collection Methods

Amazon employs two tax collection methodologies: MTC and TCS

When a sale is placed, Amazon first identifies whether the transaction is taxable. If so, Amazon then makes a determination as to how these taxes will be collected:

  • Marketplace Tax Collection (MTC): Amazon will calculate, collect, and remit tax to the relevant tax authority on your behalf.
  • Tax Calculation Services (TCS): Amazon will calculate tax and disperse this calculated amount. You are then responsible for remitting these taxes to the proper tax authority.

To illustrate the differences between these tax collection methods, consider a simple scenario where you have a sales transaction of $100 and a calculated sales tax of $15:

  • MTC: Amazon would remit the $15 on your behalf.  You would receive a payment of $100, which represents your sales revenue.
  • TCS: Amazon would include the calculated tax in your payment.  This payment would total $115, comprised of $100 in sales revenue and $15 of tax liability that you will be responsible for managing.

The determination as to which method will be employed for a given sale is based on Amazon’s tax collection rules for the state in which the transaction occurred. For more information on Amazon’s tax collection methods and policies, see here.

 

 

Although MTC amounts are handled by Amazon and not a liability, it is still recommended to record these amounts for reporting and auditing activities. For this reason, CSM allows you to assign separate accounts for the MTC and TCS tax amounts.

This activity is performed on the Order Management FastTab of the Sales Channel You can assign a dedicated G/L account, item, resource, fixed asset, or item charge to MTC and TCS tax activities that occur within that Sales Channel.

When Amazon employs the MTC methodology for tax collection, it automatically assigns a value of MarketplaceFacilitator to the transaction. This value is present is entered in the Tax Collection Model field on the CSM Channel Order line that is created when the Order is retrieved from Amazon.

 

When a Sales Order is generated from the Channel Order, CSM creates sales lines for tax amounts using the following process:

  • What is the assigned sales channel’s sales tax behavior?
    • If the sales tax behavior is None, no sales tax will be added to the sales and the process ends.
    • If the sales tax behavior is Line, dedicated sales tax lines will be added to the sales and the processing continues.
      • Does the Channel line have an assigned item tax, shipping tax, or gift wrap tax value?
        • If these values are all zero, no sales tax will be added to the sales and the process ends.
        • If any of these values is greater than zero, the sum of these tax amounts will be added to the Sales Order as a dedicated sales tax line and the processing continues.
          • What is the Channel line’s assigned tax collection model?
            • If the tax collection model is MarketplaceFacilitator, the Sales Channel’s defined MTC account will be assigned on the sales line that is created for sales tax.
            • If the tax collection model is not MarketplaceFacilitator the Sales Channel’s defined TCS account will be assigned on the sales line that is created for sales tax.