Amazon FBA Sellers: Inventory Nexus in 20+ States

What to know

• Inventory nexus ≠ income-tax nexus everywhere, but several states assert both.
• Receipts-based fees (CA $6,000 at $1.2M) cost thin-margin sellers the most.
• Consider S-election + inventory-light models once past $250k CA receipts.

Inventory is physical presence

Amazon moves FBA inventory among its warehouses, so a seller can have goods in 20 or more states. Stored inventory is physical presence in each of those states. For sales tax, marketplace-facilitator laws in every state with a sales tax make Amazon collect and remit on Amazon sales, which removes most of that burden.

Income and franchise tax

Income-tax nexus is different: some states assert it from inventory alone, and gross-receipts taxes such as California's LLC fee, Washington's B&O, and Texas's franchise tax apply based on receipts sourced to those states. Sellers with significant volume should review which states their inventory and sales reach each year.

Margins and receipts taxes

Thin-margin FBA sellers are hit hardest by receipts-based taxes. At $1.2 million of California receipts, a California LLC pays $6,800 regardless of profit. Electing S-corp status replaces that with 1.5% of profit.