Rather than collecting tax for you, we believe it more likely that Amazon will begin forcing sellers to prove they are registered to collect tax in either certain states or all states. This is the policy Amazon adopted when the United Kingdom passed laws stating that if the marketplace sellers do not collect taxes then the marketplace is responsible for collecting the taxes. So rather than begin collecting taxes on behalf of FBA sellers in the UK, Amazon sent a letter 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.
The states of MN and WA have passed recent legislation concerning marketplaces. 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. Rather than collecting the tax in MN we believe Amazon will require registration of their sellers as they have done in the UK.
In WA we see a different twist that allows Amazon not to collect the tax for FBA sellers. Amazon does not have to collect the tax for sellers 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.
Although we don’t have a crystal ball, we expect to see more states follow the MN & WA model rather than taking the approach that SC has. It is the path of least resistance for the states and states are more likely to get the revenue they believe they are losing without having protracted legal battles.
As a firm, we have focused exclusively on state taxes, primarily sales tax since our founding 25 years ago. During that time, we have helped thousands of companies from all around the world with their US sales taxes. We learned long ago that the time to be aggressive is when you are being audited. The time to be conservative is when you are doing tax planning. The risk of taking a position contrary to the state’s position is much too expensive as many FBA sellers are currently finding out to their dismay. The amnesty is a tool for planning how to move forward.
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.