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Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). She is a member of the Online News Association (Sep 2005 - present) and Investigative Reporters and Editors (Mar 2006 - present). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.
This could set a precedent throughout the sales-tax-collecting states. I’ve argued that a marketplace does not own my products or business and, therefore, has no business collecting sales tax on my sales when I do not individually meet a state’s threshold. It’s unclear if the business in this case meets California’s threshold, but, even if it does, I would think it would be the responsibility of the business to collect and remit sales tax due.
However, this is a different situation where Amazon actually possesses the products in various warehouses that sellers have no control over. Under California Regulation 1569, Amazon would be held responsible and that law has been in effect since 1933. So the plaintiff stands a very good chance of winning the case.
That brings to question who’s responsible when a seller is selling third-party products directly on their site? I’m beginning to sell affiliate products and, while Amazon is the only affiliate I’m currently set up with, I will become affiliated with a number of sites. So, if my sales within a state reach that state’s threshold, who’s going to be responsible for collecting and remitting the sales tax? Which state should get the tax? The state where it was sold, the state it was sold from, or the state where the products were stored? It sure as heck can’t be all three as that would be triple taxation.
This is definitely something that needs to be handled by the federal government because all these states could have laws that result in customers being taxed by multiple states. However, in this case, it’s clearly California’s fault for not enforcing its own laws. I think they should be made to eat it rather than going after back taxes.
It’s just like all the states that had use tax laws they didn’t enforce. Now they’re trying to make merchants responsible for that, too. Don’t get me wrong, I get that states are losing sales tax revenue and things need to change so they aren’t. However, states need to enforce existing laws if they want that money and, if they don’t, then that’s on them.
For a law that’s been in effect since 1933, there’s absolutely no reason California shouldn’t have been holding Amazon responsible from the beginning. The same goes for all those use tax laws they never enforced and are now whining about and trying to hold those not responsible accountable for it. You can’t have laws in place, not enforce them, and then expect others to clean up your mess later.