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Lawyer Tells Federal Judge Amazon Sellers Rely on Lore for Information

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Lawyer Tells Federal Judge Amazon Sellers Rely on Lore

A Federal judge will rule this week on a request for a Temporary Restraining Order (TRO) by an Amazon seller located in Illinois against the California agency (CDTFA) that oversees the collection of sales and use taxes.

The CDTFA froze Isabel Rubinas’s bank account just days before Christmas and took over $2,000 from her business account – and it says she owes much more money.

In a telephone hearing on Tuesday, one of the seller’s lawyers, Aaron Block, and California Deputy Attorney General Michael Sapoznikow squared off.

The state agency told the court it had no immediate plans to issue another notice of levy, and it agreed to provide 14 days’ notice before serving another.

But the CDTFA was not willing to give back the money it had seized last month.

The situation is dire since Amazon will be debiting Rubinas’s bank account on Friday, January 15, for FBA fees owed- and she told the court on Tuesday the account balance is below the estimated $1400 – $1500 Amazon will attempt to deduct.

Rubinas’s attorney Paul Rafelson, who also volunteers as Executive Director of the Online Merchants Guild, has said California is seeking back sales taxes from his client that he believes Amazon was responsible for collecting and remitting to the state.

The plaintiffs argue that the Internet Tax Freedom Act prohibits CDTFA from imposing the alleged tax-collection obligation in question, which is why they filed the lawsuit in federal court.

Judge Chang tried to get a sense of whether the January 15th date was a hard deadline. He asked if there was a time period after the obligation became past due (in this case January 15) in which there was an “opportunity to cure” (a chance to fix problems), or more time built in?

Rubinas’s lawyer said it was at Amazon’s discretion – it’s is a big enterprise, and trying to get someone on the phone is difficult.

In fact, he explained to the judge, a lot of FBA operation is lore spread among merchants who share anecdotal information on a discussion board hosted by Amazon. It’s hard to know exactly how things are going to work, Block told the judge. While he took pains not to sound judgmental, the fact even a lawyer specializing in complex litigation can’t figure out how Amazon will enforce its policies is damning.

As Judge Chang sought information to help him make a decision with regard to the TRO, the hearing offered a preview of the arguments each side will make as the case proceeds.

Note: Law360 covered the hearing in this article, which is behind a paywall.

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Ina Steiner
Ina Steiner
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). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.

3 thoughts on “Lawyer Tells Federal Judge Amazon Sellers Rely on Lore for Information”

  1. I was aghast when I read this. In theory, California can go after every little seller outside of California and seize their accounts and make tax payment demands going back 6 years. And I don’t think the Internet tax act was passed until 2-3 years ago. The owner shouldn’t fight it, but declare bankruptcy. Get out from under and start anew on Shopify.

  2. Let’s see…were the laws in effect during the time they are collecting for? If not, then why is this even an issue? They cannot legally collect taxes if they did not have laws in place at that time which make a seller obligated to pay them.

    Now, IF the laws WERE in effect, then why didn’t the agency go after violators then? In that case, I would say it’s California who dropped the ball. If you’re not going to enforce your own laws in or near the year the taxes were due, then that’s your problem. You can’t tell me that they can come after me 5 years down the road, out of the blue, and just start taking money from me without ever knowing that taxes were due.

    Even if the lady had been notified via mail, she had no prior knowledge of any tax being due.

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