A US Merch on Demand designer pays no VAT and, in almost every state, no tax at all on Amazon ads. The one exception is Washington State: since October 1, 2025, Amazon adds Washington sales tax to the ad invoice of any advertiser billed at a Washington address, from 7.6% to 10.7% depending on the city. You cannot reclaim it like a VAT. But because your ads on amazon.com reach shoppers across the US, you can legally give Amazon a "multiple points of use" certificate and pay the tax only on the Washington share.
For designers living in the United States who sell through Amazon Merch on Demand, from Amazon's Merch and Ads pages, Washington's laws and its Department of Revenue, checked in October 2026.
Check your own figures with our free Amazon Ads tax calculator
Who pays tax on Amazon ads in the US?
| Where you are billed | Tax Amazon adds | Can you get it back? |
|---|---|---|
| Washington | 7.6% to 10.7% | No |
| Any other state | None | Nothing to get back |
The United States has no VAT and no federal sales tax. Amazon Ads' help center has a tax page for one state only, Washington: "This applies to Amazon Ads customers with billing addresses in Washington."
Outside Washington, your ad cost is the amount you bid and spend, no more.
How Merch designers advertise, and who bills them
- By invitation, Sponsored Products only. Merch invites designers "on an ongoing basis"; the Merch advertising account runs campaigns "for your Merch products" only.
- On six marketplaces: "US, UK, Germany (DE), FR, IT, and Spain (ES)", in one advertising account.
- amazon.com ads are billed by Amazon Advertising LLC. The Amazon Advertising Agreement names Amazon.com Services LLC only for sellers under Amazon's Business Solutions Agreement; a Merch designer is not one.
- No VAT on the foreign marketplaces either. Amazon charges VAT on ads to advertisers in the countries on its list of "Countries that collect tax on Electronically Supplied Services". The United States is not on it.
Your royalties carry no sales tax
Amazon sells the shirts; you license the designs. The Merch on Demand agreement: "Amazon will be the seller of record for the Products", and Amazon is "responsible for collecting and remitting any taxes imposed on its sales of Products to customers".
Your royalties are income, reported on Form 1099-MISC when they pass the IRS threshold (Merch FAQ). They change nothing on the sales tax side: there is no credit to claim against the tax on your ads.
Why Washington taxes your Amazon ads
A 2025 law made advertising a taxable retail sale. Washington's ESSB 5814 took effect on October 1, 2025. The definition it wrote into RCW 82.04.050 covers "online referrals, search engine marketing" and "the acquisition of advertising space in the internet media". Sponsored Products ads are exactly that.
Amazon applies it to "all Display and Sponsored Ads products" for advertisers with a Washington billing address. The tax shows as a line item on your PDF invoice.
The rate is 6.5% for the state plus a local rate. In the Department of Revenue's table for October to December 2026:
| Location | Combined rate |
|---|---|
| Klickitat County (unincorporated) | 7.6% (the lowest) |
| Seattle | 10.55% |
| Edmonds, Lynnwood | 10.7% (the highest) |
At Seattle's 10.55%:
| Ads per month | Tax per month | Tax per year |
|---|---|---|
| $300 | $31.65 | $379.80 |
| $1,000 | $105.50 | $1,266 |
| $3,000 | $316.50 | $3,798 |
How a Washington designer pays it on far less
Washington's sales tax is not a VAT: no return gives it back. The only question is how much of your ad spend has to be taxed. Amazon names two exemption certificates it accepts for advertising.
A reseller certificate: not for designers
Amazon accepts it only if "you are an agency or reseller that purchases advertising services from Amazon for the purpose of resale to advertisers". You buy ads for your own designs, so you resell nothing.
A "multiple points of use" certificate: yes
This one fits a designer whose ads run on amazon.com. RCW 82.08.0208(6) says sales tax "does not apply to the sale of advertising services" when the buyer gives the seller a multiple points of use (MPU) certificate.
- You buy as a business. Ads for the designs that earn you royalties are a business purchase.
- Your ads are seen inside and outside Washington. For online ads, the Department of Revenue "will presume there is concurrent use".
- Your ads are a digital automated service. The Department requires it for the MPU exemption; Sponsored Products, set up in Amazon's console and served by Amazon's software, are one.
You then pay use tax on the Washington share yourself. Buyers claiming the MPU exemption "must apportion and report use tax directly to the department". When you cannot know where your ads are seen, the Department accepts "a reasonable estimation method using internet usage statistics or other information".
Example. You spend $1,000 a month and are billed in Seattle. Say 2% of the shoppers who see your ads are in Washington (our assumption, for the example):
| Per month | Without MPU | With MPU |
|---|---|---|
| Tax base | $1,000 | $20 |
| Tax at 10.55% | $105.50 | $2.11 |
| Per year | $1,266 | $25.32 |
The cost is paperwork: the certificate on file with Amazon (its Washington tax page links to the exemption portal), records of how you split the spend, and use tax returns. Keep your figures: if the Department rejects your split, you owe the difference with interest, and its binding ruling service gives a written answer before you file.
Do not move your billing address out of Washington to avoid the tax. The Department accepts a billing address only when it is "not determined in bad faith", and use tax stays due on ads you use in Washington.
Spend less on clicks that never sell
Whatever your state, the lever you control is the ad spend itself. In Seattle, every dollar wasted on a click that never sells costs you $1.1055.
- Add negative keywords on search terms that spend without selling: how negative keywords work.
- Move spend from automatic to manual targeting once you know which searches sell: automatic vs manual targeting.
- Know what a click costs before you raise a bid: what Sponsored Products cost.
Your ads also feed your royalty rate. In the US store, Merch pays the Plus group 2x and the Premium group 2.16x the standard rates, for designers who drive at least 15% and 35% of their unit sales with "non-organic traffic", ads included.
Frequently asked questions
Do I pay VAT on my amazon.co.uk or amazon.de Merch ads?
No. Amazon charges VAT on ads to advertisers in the countries on its ESS list, and the United States is not on it.
Is Washington's tax on advertising going away?
No. The 2026 changes that start on January 1, 2029 keep advertising in the taxable services of RCW 82.04.050.
Which Washington rate applies to me?
The rate of the address on your Amazon Ads billing profile. Amazon: "the address associated with that billing profile will be used to determine the tax location".
Check your figures
Work out what tax adds to your Amazon ads with our free calculator, then take the figure to your accountant before you file an exemption certificate.
If you also publish on KDP, the same rules apply to your book ads: US KDP authors and tax on Amazon ads.
Sources
- Washington State Sales Tax Requirements for Amazon Ads, Amazon Ads help
- Countries that collect tax on Electronically Supplied Services, Amazon Ads help
- Amazon Advertising Agreement ("Amazon Contracting Party"), Amazon Ads
- Amazon Merch on Demand Services Agreement (seller of record, taxes), Amazon
- Promote Your Merch, FAQs (advertising, 1099-MISC) and Royalties (royalty groups), Amazon Merch on Demand
- Interim guidance statement on ESSB 5814 advertising services, Washington Department of Revenue
- Local sales and use tax rates, October to December 2026, Washington Department of Revenue
- Binding rulings, Washington Department of Revenue
- RCW 82.04.050 (advertising services as a retail sale), Washington State Legislature
- RCW 82.08.0208 (multiple points of use, subsection 6), Washington State Legislature
- SB 6113 (2026), chapter 250, Laws of 2026, Washington State Legislature
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