Sales Tax & Amazon Sellers - Prepare for the inevitable!

Government has taken notice (read: it “wants in” on the cash cow – sales tax!) and is going to get its pound of flesh from you if you’re an Amazon seller.

State governments are targeting Amazon, more specifically Amazon sellers who are not collecting and/or remitting sales tax from sales made into states where they do not reside.

Sales tax is one of those expensive administrative burdens that the small online retailer has to incur. Of course this is a total pain when you’re starting out or have just a small online operation with you as chief cook and bottle washer.

Used to be that you only had to worry about collecting tax for sales made in your own state. However, this may change very soon and you’ll have to comply if you don’t want to attract the wrath of Big Brother. Expect more government fees to pay, mind-numbing paperwork to file, larger accounting bills, additional software, etc. In other words bye bye profits!

Here’s the latest on the situation where states want to collect sales taxes from out-of-state sellers:

First from Oyez.org, a law project from Cornell’s Legal Information Institute, et al.

This article gives a clear and concise view of what’s at stake for Amazon sellers who do not have a place of business where their sales are being taxed.

The so-called Dormant Commerce Clause of the US Constitution prohibits states from imposing excessive burdens on interstate commerce without congressional approval. Consistent with this doctrine, the US Supreme Court held, in 1967, that a state cannot require an out-of-state seller with no physical presence within that state to collect and remit taxes for goods sold or shipped into the state. The Court affirmed this holding in 1992…

And from CPA Practice Advisor

As we provided in previous sections of this article, these economic nexus standards are the most draconian measures taken by states to seize upon the interstate commerce activities of remote sellers. One such state is South Dakota, which, in direct conflict with the Quill physical presence standard, out-of-state sellers to collect its sales tax if a seller’s annual sales volume to South Dakota purchasers meets or exceeds $100,000, or consists of 200 or more separate transactions.

We are a borderless, global economy. As such, upholding boundaries that govern state’s ability to impose sales tax collection obligations on a remote seller seems rather arbitrary when such boundaries do not govern other tax or legal obligations. Then there’s the money…

According to CNBC Amazon won’t suffer if the Supreme Court reverses internet sales tax law—here’s who will

A ruling for South Dakota to remove protections and reverse over 60 years of precedent will devastate small businesses from Topeka to Toledo.

Those seeking to overturn Quill – including President Donald Trump – think this is a way to force large internet retailers like Amazon to pay more sales taxes. They are gravely mistaken. Amazon has physical presence across all states and therefore is already required to remit sales tax. Nineteen of the 20 largest e-retailers do the same.

Rather, the debate over Quill is about small internet retailers, often operating out of the owner’s home. Laws like South Dakota’s will stifle these small retailers trying to make ends meet, squashing Amazon’s next competitor before it gets off the ground…

So everybody wants in on the action, and Amazon is giving you up to NY, and MA, and…

Amazon to Release Third-Party Seller Data to New York State Tax Department

According to Amazon’s email, Amazon plans to release the following information to New York regarding its third-party sellers by June 1, 2018:

Contact information (name, address, and federal tax ID number);
Total amount of Amazon.com sales made during the 2014 calendar year; and
Total amount of Amazon.com sales made to New York customers during the 2014 calendar year.
Amazon plans to provide the requested information for all third-party sellers who have not elected to use Amazon’s tax calculation services for sales to customers in New York.

Amazon has received similar requests from other states (including a recent request by the Massachusetts Department of Revenue), and there are several reasons why New York State may be looking to get its hands on Amazon’s third-party seller data…

The Motley Fool figures that Online Sales Tax Would Benefit Amazon More Than Anyone Else: It would only serve to hurt smaller retailers and Amazon’s biggest competition.

Retailers without a physical presence in a state aren’t currently required to collect sales tax and remit it to the government. That rule allows many online retailers to easily undercut prices charged by brick-and-mortar retailers since customers don’t have to pay sales tax.

Amazon benefited from that rule for a long time, but it eventually expanded its fulfillment center network to the point where it now collects sales tax in every state. Requiring other online retailers to collect sales tax — including third-party sellers on marketplaces like Amazon’s, eBay , or even Walmart’s website — would actually put Amazon back on equal footing with its biggest competition. What’s more, it could make smaller retailers more reliant on Amazon or other services to provide tax collection services, putting them at a further disadvantage…

You know it’s all about the money, right?

Interesting note here in Wikipedia’s article on South Dakota v. Wayfair, Inc.

Since the decision of Quill in 1992, the volume of interstate sales via electronic channels, particularly purchases from Internet vendors, has grown rapidly, and the Government Accounting Officehas estimated that in 2017 states had lost over US$13 billion in taxes they could not collect. Following a statement made in a concurrence opinion by Justice Anthony Kennedy in a 2015 related case which suggested that it was time to review the decision of Quill in the wake of modern technology, more than 20 states passed “kill Quill” legislation intending to collect sales tax from out-of-state vendors, purposely to provide the necessary legal vehicle to take to the Supreme Court; South Dakota’s was the first to make it through lower courts to the Supreme Court…

Expect to have to collect & remit sales tax in 45 states…

$13 billion lost!! Oh yeah!! That’s alotta coin… you can bet that a new Internet Sales Tax Law will go through. Money talks!

So that’s pretty much where it’s at. I would recommend that if you are an Amazon seller that isn’t yet collecting taxes that you educate yourself on what’s coming so that you don’t suffer sticker shock when it does.

Stay tuned for the final say from The Supreme Court…

Marie

Marie Watkins is the creator & author of FreedomLab, a resource site where we do the research for you and find the best tools and methods for you to grow your online business.

This is where you’ll find advice on the following:

Solopreneur Home Business
Online Marketing tools & strategies
Software to automate processes & streamline your work to free up your time
Courses to guide you in applying the above so you can increase your customer base.

So everybody wants in on the action, and Amazon is giving you up to NY, and MA, and…

You know it’s all about the money, right?

Expect to have to collect & remit sales tax in 45 states…

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