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.