One of the big questions raging right now is, who is responsible for collecting sales tax when it comes to Amazon third-party FBA sellers. Some say it should be Amazon and most sellers would like that, but unfortunately that is not currently what most states believe. South Carolina is trying to take this approach, but Amazon has vowed to vigorously defend themselves.
Most states currently believe third-party sellers are responsible for collecting the tax and the states are pursuing those sellers who do not. In fact two states have passed recent legislation that many are stating prove their point that Amazon should collect. However, contrary to what is being said about these statutes, sellers are not relieved of their responsibility to collect and remit tax.
MN actually says that the marketplace is responsible for collecting the tax, unless the retailer is registered, and that the marketplace can require the retailer to be registered as a condition of doing business. WA says that marketplaces have to collect tax for sellers except those who have a physical presence in WA. Since WA considers having inventory in an Amazon warehouse to be nexus creating, most FBA sellers will have a physical presence in WA and will therefore be required to collect the tax in WA.
When the United Kingdom passed a law similar to the one in MN, Amazon sent letters to all of it’s third-party sellers saying if they did not submit proof that they were registered to collect the UK value added tax (VAT) by October 27th 2017, then those sellers would be prohibited shipping inventory to the EU markets.
One of the reasons these questions are timely is because there is currently a tax amnesty going on for online sellers. Some believe that sellers should not participate, because they have no liability. However, we take a pragmatic view and try to limit our client’s exposure by using the tools at hand such as the amnesty. Like it or not states are finding sellers in ever growing numbers. Trying to change the system may be laudable, but it can be a very long and expensive process with only the attorneys, and not you, a guaranteed winner.
Theories and opinions will not protect you from these states, but the amnesty program, if used correctly can.
If you would like to read a more in-depth Article you may find it on our website for online sellers at;
Other recent “Sales Tax Basics” posts by Michael J. Fleming:
- 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
- Taxability: Sales Tax HotSpot #2