We learned on Monday January 22, 2018 that Amazon sent an email to it’s sellers informing them that Amazon was going to turn over seller information to the state of Massachusetts. This information will at the very least contain contact information about account owners and how much inventory they have in the state. Amazon did not do this willingly. They were sued by the state in September of 2017. A judge ruled in favor of the state and told Amazon they had to turn over back the information back then. After resisting, Amazon has finally been legally forced to capitulate and turnover the information.
This has created a panic amongst FBA seller who believe Massachusetts will use this information to pursue them for back taxes, penalty and interest. We agree, however most Amazon sellers will have little or manageable exposure if any. While this may not create huge exposure for most sellers, it should serve as a major wake up call. Will MA share this information with other states or even worse will other states follow the lead of MA and sue Amazon themselves. While we don’t have a crystal ball, we believe that it is only a matter of time before other states get their hand on information like this. In some of these states, like a CA the potential for exposure may be much higher.
This should also serve as a wakeup call that not all states believe that Amazon should be collecting the tax rather than FBA sellers, as many sellers currently believe. States have limited budgets. Why would you spend any money suing Amazon for seller information, unless you planned on pursuing sellers rather than Amazon. If you planned on pursuing Amazon for taxes, past or future, then skip the lawsuit against Amazon.
Waiting for Amazon to collect and remit sales tax is not a panacea either, as many sellers are now learning with WA. WA still says sellers have nexus, so sales through any other platforms into the state require tax collection. And While Amazon may be collecting and remitting the sales tax, they are not paying the business and occupation tax known as the B&O. The B&O is actually remitted on the sales tax form.
With Amazon collecting sales tax it has just created an extra step for Amazon sellers. WA states that sellers must be registered in WA and that 100% of all sales must be reported on the sales tax form. The B&O tax is calculated on all sales and then sales tax is calculated at which point a credit can taken for the Amazon sales. Does this sound simpler to you? WA has also announced they will still pursue FBA sellers for past exposure.
In addition to these developments, there is a new trend impacting all remote sellers (eCommerce, Catalog, Telephone, etc.) called notice and reporting requirements. States like WA and PA say that if you have sales greater than $10,000 into their state even if you have no connection or nexus then you are required to provide a notice to the customer at the point of sale saying the customer must pay the state a use tax directly. Then they must send each customer an annual notice, preferably by first class mail, showing a transaction history and again saying that the customer pay the use tax directly to the state. Finally a customer list must be turned over to the state by March. In WA the minimum penalty is $20,000 and it can escalate to over $100,000. If you have sales of only $10,000 into the state the minimum fine can be twice what your actual sales are.
We will be holding a number of free webinars discussing all of the above plus other vital topics that eCommerce sellers must know in 2018 and beyond.
For a link to a free webinar you may contact Regan Vaughn at (972) 220-1392
Other recent “Sales Tax Basics” posts by Michael J. Fleming:
- Amazon Turns Over Third-Party Seller Tax Data to Massachusetts
- Are Amazon FBA Sellers Responsible for Collecting Their Own Tax?
- Additional Amazon FBA Tax Amnesty Information
- Amazon FBA Tax: New Amnesty Can Protect Delinquent Sellers
- Sales Tax Filing Basics