The owner of a California-based camera shop sued the state’s sales tax division over what the LA Times referred to as its “gotcha” approach to tax collection. The newspaper explained in an editorial in May why some merchants who sold through Amazon’s FBA fulfillment service now face enormous bills.
FBA merchants say the state should be looking to Amazon for uncollected sales tax. The new lawsuit cites California Regulation 1569, which it says makes clear Amazon was acting as a retailer when selling FBA goods stored in its warehouses.
Press release follows:
Yesterday, Stan Grosz, Fresno resident and President of the Fresno-based Horn Photo camera shop filed a lawsuit against California’s sales tax division (“CDTFA”), calling out the state tax organization’s failure to make Amazon pay the state billions in uncollected sales taxes.
According to the complaint filed in Los Angeles County Superior Court late Tuesday, Grosz, a California taxpayer, brings the case under California’s government waste laws, citing CDTFA’s failure to make Amazon collect sales tax on Amazon’s marketplace sales for the last 3 to 8 years as a violation of their CDTFA’s obligations to enforce the law.
By filing the lawsuit, Grosz is asking the court to require the CDTFA to assess Amazon for billions in back taxes related to uncollected sales tax from Amazon’s Fulfillment by Amazon program.
Grosz states that the CDTFA, was, and still is, required to make Amazon pay billions in back taxes from sales that Amazon claims are exempt because Amazon is merely a marketplace with respect to those sales, not a retailer under state law.
According to Grosz:
“Amazon is responsible for collecting and paying these taxes to the state, but instead of following the law and playing by the rules, Amazon tried to work-around them so they could sell stuff cheaper than local businesses, falsely labeling themselves as a marketplace, not a retailer. This has cost California taxpayers billions, and it’s all because, when it came to Amazon, CDTFA refused to enforce the law.
To support his position, Grosz’s complaint argues that Amazon had an obligation to collect sales tax on its marketplace sales based on well-established tax laws, such as California’s sales tax law on consignment sales – California Regulation 1569 – which states:
“A person who has possession of property owned by another, and also the power to cause title to that property to be transferred to a third person without any further action on the part of its owner, and who exercises such power, is a retailer when the party to whom title is transferred is a consumer. Tax applies to his gross receipts from such a sale.”
Paul Rafelson, one of the attorneys representing Grosz noted that:
“Despite numerous attempts to explain the situation, CDTFA refuses to do what’s right and is now putting Californians at risk of losing out on billions. Therefore, we are bringing this action to hold CDTFA and Amazon accountable.”
Grosz is represented by the following attorneys/firms:
Mark A. Ozzello; Robert Friedl; Tarek Zohdy; Cody Padgett and Trisha Monesi of Capstone Law, APC
Marty Dakessian and Ruben Sislyan of Dakessian Law, Ltd; and
Paul Rafelson of Francissen Rafelson Schick, LLP.