This article from Internet Retailer caught our eye, “Online sales tax laws are generating far more revenue than expected.” It shows the Herculean task of keeping up with the ever-changing requirements imposed by states on online sellers who ship to, but don’t operate in, their borders.
For example, California changed its threshold for when out-of-state merchants are required to collect and remit sales tax to $500,000 in California-based revenue in the previous 12 months, up from $100,000 – but Massachusetts is considering lowering its threshold from $500,000 to $100,000. The article takes a closer look at six of the states currently considering bills to change their sales-tax requirements.
Raising the threshold in California is welcome news for small sellers – along with passage of a marketplace facilitator law, which places the burden of collection on marketplaces like eBay instead of their individual sellers. (Interestingly, the article points out that Pennsylvania’s marketplace facilitator law is expected to generate about four times its initial estimate.)
But there’s a dark side to California’s requirements, as the LA Times points out. The newspaper’s editorial board published a piece calling for the state’s revenue department to reconsider its approach to back taxes, calling it a “gotcha” approach to tax collection.
“The California Department of Tax and Fee Administration has been seeking years of back taxes, with penalties and interest, from small out-of-state businesses that sold products through Amazon’s “Fulfilled by Amazon” program to shoppers in California. For example, a 12-person company in Michigan that sells comfort shoes and orthotic inserts online is facing a $200,000 bill for three years of back taxes, penalties and interest. A mom-and-pop kitchenware supplier is facing a bill for more than $100,000.”
These are not taxes that the retailer owed – California residents were supposed to pay the state’s sales tax. Sadly, Amazon, which benefited from sellers’ participation in Fulfillment By Amazon, has been unable or unwilling to help those sellers, some of whom have already bitten the bullet and paid enormous sums to the state.