Why Is There Tax On Amazon Prime?

amazon prime delivery

When you purchase an Amazon Prime subscription, by paying either a yearly or monthly fee, you might discover that you’re also paying a sales tax on top of that amount. 

Does Amazon mention that they tax Prime memberships?

Amazon does state that your Prime subscription costs $12.99 monthly or $119 yearly and that these amounts include tax.

However, the amount of tax that you will pay isn’t specified – and there are good reasons for that. Here’s what you need to know about Amazon tax. 

Is There Tax On All Amazon Prime Memberships? 

amazon chargre taxes

Here’s where things become a bit more complicated: some Amazon customers don’t need to pay tax on their Prime memberships.

You might be one of the people who have been shocked to discover that your Prime membership was being billed for a higher amount than what you had expected to pay. If so, you’re not alone.

This was seen in Washington, where Amazon Prime memberships cost $99 per year, but were bumped up to $10.20 as a result of tax

The reason why some Amazon customers have to pay tax on their membership while others don’t boils down to where they live. Basically, some U.S. states have to pay tax. These are:  

  • Alabama
  • Arizona
  • Arkansas
  • California
  • Colorado
  • District of Columbia
  • Florida
  • Hawaii
  • Idaho
  • Iowa
  • Kentucky
  • Louisiana
  • Michigan
  • Minnesota
  • Mississippi
  • Missouri
  • Nebraska
  • New Jersey
  • New Mexico
  • New York
  • North Carolina
  • Ohio
  • Pennsylvania
  • Puerto Rico
  • Rhode Island
  • South Carolina
  • South Dakota
  • Tennessee
  • Texas
  • Utah
  • Vermont
  • Washington
  • West Virginia
  • Wisconsin
  • Wyoming

The other U.S. states don’t have to pay tax on their Amazon Prime membership. So, if you want to avoid being taxed on your Prime subscription, you should consider moving to them! 

How Much Does Amazon Prime Tax Cost? 

tax on membership review

There’s no standard tax that’s placed on all Amazon Prime memberships.

The amount that Amazon customers need to pay depends on the state in which they live, and this is probably why Amazon doesn’t openly state how much tax you can expect to pay on your Prime membership.

Any U.S. state that follows sales tax rules in the region will also charge Amazon Prime members in their territories a certain tax.  

What Is A Sales Tax? 

There are some important things to know about Amazon and why it charges tax.

It’s not just your membership amount that is taxed. In case you didn’t know, Amazon adds sales taxes to the total sale price when you checkout your items. It calculates and collects taxes in states that have a sales tax. 

So, what is a sales tax? A sales tax is otherwise known as a consumption tax, which is set by the government on the sale of goods and services. A conventional sales tax is applied at the point of sale. It’s collected by the retailer and then passed on to the government. 

There are some important things that you need to know about how Amazon handles sales taxes. 

  • If you reside in a U.S. state that doesn’t have a sales tax, you might still see that tax was calculated on your order if you’re shipping it to a different state.
  • The amount of tax that’s applied to your order can vary depending on a variety of factors, such as if you’re shipping it to a business address or residential location.
  • Bear in mind that the total selling price of an item you’re purchasing will usually include item-level handling and shipping fees.
  • In the Terms and Conditions on Amazon’s website, it states that the Amazon Prime membership fee is non-refundable and may also apply to either or both the membership fee you have to pay and the reduced shipping charges for Amazon Prime.
  • Interestingly, memberships such as those for Amazon do get taxed because they are part of the categories of tangible goods and discounted sales. However, if the annual membership you’re paying is for less than $60, you won’t be taxed on it. Bear in mind, again, that your sales tax will vary from one state to another. 

Why Has Your Amazon Prime Subscription Increased? 

amazon prime box

If you’re wondering if Amazon’s tax is anything new, it’s not.

Back in 2014, the cost of an Amazon Prime membership jumped from $79 to $99, and Amazon claimed that it was a necessary increase to cover the transportation and fuel costs that are required to deliver millions of items to customers within two days.

Bear in mind that an Amazon Prime membership comes with many delivery perks, such as two-day delivery and even one-hour delivery in some states, so their reasoning makes sense. The membership cost then increased again in 2018, from $99 to $119. 

Still, these flat costs are what you expect to pay for your Prime membership – not the extra tax that’s included. 

How To View What Tax You’re Being Charged

Perhaps the issue of being taxed for your Prime membership wouldn’t be so disappointing if you actually knew exactly how much you were going to pay.

Unfortunately, this isn’t always the case. Some Amazon Prime customers see that they’re being billed extra and aren’t sure why. Luckily, you can check just how much you’re being charged for the service and its added tax.

Here’s how:

  • Go to Amazon Prime settings and click on “update payment method.” 
  • Click on “View printable receipt.” This will display an invoice that shows you how much tax has been collected for your membership. If you find that the subtotal on your invoice isn’t the same as what you were charged on your credit card bill you might be dealing with an unauthorized charge.  

What To Know About Amazon’s Unknown Charges 

hidden pricing for prime membership

The Amazon website provides reasons why you could be dealing with an unknown charge on your account, other than your yearly subscription to Prime being renewed.

It’s good to read through these suggestions for why you’re seeing hidden charges because they might not have anything to do with sales tax that’s being added to your Prime membership fee. 

  • Your bank could have put an authorization hold for a changed or cancelled order. When you place an order, what happens is that Amazon will contact the bank to confirm the payment method is valid but the bank will hold the funds until the transaction processes or until the period of authorization expires. This, however, isn’t the actual charge. If you cancelled your order, the authorization will then be taken away from your account.
  • Someone else purchased an order from your account.
  • Your credit or debit card is linked to other cards.
  • An item that was pre-ordered or back-ordered was shipped to you.
  • A gift order was shipped to you.
  • An order was placed outside of Amazon with the use of Amazon Pay. Whenever you’ve completed an order with Amazon Pay, the order will start with P01 and will have 14 digits.
  • One of your Amazon orders has been separated into different shipments or it was sent to multiple addresses.

Related Questions 

What if the above-mentioned reasons for hidden charges on your Amazon account don’t apply to you? 

You’ll have to get in touch with Amazon to find out what the charge is about. Make sure you have important information at hand, such as the charge amount and the charge ID. This is a nine-digit number that appears on the charge so that it can be tracked.

What states have the highest combined state and local sales tax rates? 

The states with the most state and local sales tax are Tennessee (with 9.53%), Louisiana (with 9.52%), Arkansas (with 9.47%), Washington (with 9.21%), and Alabama (with 9.22%).  

Why do sales taxes vary so much from one state to another? 

Since states use sales taxes to budget for local items, such as schools and roads, they’re invested in ensuring that merchants collect the correct amount of sales tax from buyers. 

Conclusion 

If you’ve ever noticed that your Amazon Prime membership was being subject to tax, you might have been surprised or even angered.

After reading this article, you now have a better idea about why Amazon charges tax on its Prime services.

You also know more about sales tax in general and how it works. If you want to avoid sales tax, you might want to consider packing it up and moving to one of the U.S. states that don’t enforce these taxes. If not, then you’ll have to accept that Amazon is going to charge you an extra fee for using Prime services.

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