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Tue Nov 5 2019 22:58:08

Amazon Seller Faces Million Dollar Sales Tax Liability

By: Ina Steiner

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Amazon sellers are buzzing about an article in the Philadelphia Inquirer today about a seller who faces liability of $1.6 million from California for uncollected back sales tax. The seller is based in Pennsylvania but sent inventory to Amazon through its FBA fulfillment service.

As we noted in August, FBA merchants say the state should be looking to Amazon for uncollected sales tax, since they didn't know where Amazon was storing their goods.

The Inquirer quoted Jared Walczak, director of state tax policy at the Tax Foundation in Washington, who said the pursuit of Amazon's third-party merchants is extreme and violates protections under the U.S. Constitution, even though states a have significant leeway in how they impose taxes:

""Retroactivity is always bad policy, but in this case, it raises serious constitutional due process concerns, because due process requires that you have notice and can anticipate a policy. Here the retailers lacked notice to collect. No one believed they were supposed to be collecting this tax for all of these years," Walczak said."

A seller who posted a link to the article on Reddit said he had been successful in getting California to stop pursuing him, though as of yet he doesn't seem to have revealed his strategy.

The LA Times has called the state's activities with regard to sales-tax collection a "gotcha" approach. 

Ironically, the notice that the Inquirer included in the article points out that as of October 1st, Amazon will be the party required to collect California's sales tax going forward thanks to the state's new marketplace facilitator law.

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by: purpleiris This user has validated their user name.
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Wed Nov 6 01:13:59 2019

Here's a good article that helps explain the marketplace facilitator laws as a whole and by state: https://quaderno.io/blog/us-marketplace-facilitator-sales-tax-laws-eve
rything-you-need-to-know/

This
law is unconstitutional and even illegal because they are making a business responsible for another business's transactions. That is NOT how sales tax works -- or was ever intended to work.

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by: I Must be Crazy This user has validated their user name.

Wed Nov 6 09:56:41 2019

Of course it's the state of California.

California is one of, if not THE MOST aggressive tax collector in the country. If you owe them anything, they WILL collect, quickly. They make the IRS look like school children.

I would be suspicious of anyone who says they got out of paying California their tax liability. Either they didn't owe them in the first place, are hiding their assets, or they are full of hot air.  

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by: Chicago48 This user has validated their user name.

Thu Nov 7 02:09:28 2019

The collection of State taxes has been a disaster since it started.  Congress needs to step in.  Or some brave seller(s) need to start a class action lawsuit against AMZ.

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by: Tiffee Jasso This user has validated their user name.

Thu Nov 7 02:42:22 2019

California's tax people constantly pull unethical  tricks to get money citizens do not owe. They sent out ten of thousands of tax due notices to senior citizens threatening them to pay or face liens. The problem was the people did not owe California any money. It took a court action to stop the theft. That I know of, no one that paid the tax got a rebate. Last year they sent me a bill $34.00 for tire tax as I hold a State Tax number as required by California law. I paid it, but I imagine these carpet baggers were abusing their authority again by charging taxes that were not owed. They know small sellers like me cannot take them to court.

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by: angryllama This user has validated their user name.

Thu Nov 7 05:46:00 2019

Tiffee....   What the HAIL is "Tire Tax" ?

Round and Rubber for autos?

Totally Worn Down and TIRE'D of taxation?

Typo?

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by: purpleiris This user has validated their user name.
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Thu Nov 7 06:04:52 2019

@Chicago, actually, I think the states are the ones who need to be held accountable. The marketplaces are only trying to abide by their laws.

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by: Mark4 This user has validated their user name.

Thu Nov 7 11:18:29 2019

California is a third world failed country. Nothing should be a surprise coming out of that mess.  I imagine CA is going to go after alot of people based on this unconstitutional money grab.  

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by: Knottybay This user has validated their user name.

Thu Nov 7 14:43:41 2019

Correct me if I'm incorrect.
Scenario #1: I have a brick & mortar store in NJ. Someone visiting from Texas purchases an item and I charge them NJ sales tax. They return to Texas with that item. Sensible.
Scenario #2: I have an online store, I live in NJ.I sell and ship item to someone in Texas. I have to charge them Texas sales tax (not NJ) and remit it to Texas?
Is my interpretation correct?  

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by: purpleiris This user has validated their user name.
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Thu Nov 7 14:57:21 2019

@Knottybay, backwards, isn't it? LOL So, unfortunately, you are interpreting it correctly. That second scenario SHOULD be you charging your Texas customer the NJ sales tax and remitting it to your own state. At least that's how a five year old would interpret it should be done based on how they've been doing sales tax all these years.

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by: Tiffee Jasso This user has validated their user name.

Thu Nov 7 20:36:50 2019

I don't know what the Tire Tax is. The bill from the State Board of Franchise and connected with my seller number for sales tax stated TIRE TAX owed $34.00, I basically sell collectibles, books, clothing etc. I do not sell tires nor have I ever sold a tire.

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by: railady This user has validated their user name.

Thu Nov 7 21:17:41 2019

@Knottybay -

Scenario #1: You are correct charging Tex the NJ tax you are supposed to collect selling in your state. However, when Tex goes back home he owes Texas the "USE Tax" on what he purchased, despite having forked over tax money in New Jersey.

Scenario #2: The answer is "Maybe but probably not." If your operation is in NJ you MAY owe tax to the state of Texas, IF you are a large enough seller who meets the thresholds Texas requires of how many sales/how much dollar value you sell to Texans. Usually small sellers don't have enough impact to have to collect/remit sales taxes for other states.  

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by: purpleiris This user has validated their user name.

Fri Nov 8 09:21:37 2019

Tex only owes a use tax if he didn't pay the sales tax at the time of purchase, no matter which state collected it.

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by: Geetar This user has validated their user name.

Sun Nov 10 12:20:20 2019

I have wondered if I had my own website I would do well since I would not have to charge tax based on most of the states thresholds. And I wonder if my websites sales added into my ebay sales would be the threshold, or only my website since ebay remits for their sales.

It's pretty rotten what CA is dong to this guy/Girl. I would bet if it went to court CA would loose. But I also bet they are just looking for some crumbs, and an out of court settlement. Bet they would take 100k. Since that seller is doing that kind of volume, they know he could probably fork over 100k, and may be willing to just to avoid the time lost / paying a lawyer, and all other fee's associated.

It's too bad its most likely a large operation. I would just close the biz, open another corporation, resume biz, and tell CA to pound sand. You incorporate in your home state, not CA, or the fed. POUND SAND! I'm sure a good lawyer could fix all this up without interrupting his biz.

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by: Whatever This user has validated their user name.

Sun Nov 10 12:59:39 2019

Knottybay - how about this - the buyer wanders into your shop and just buys the item - you charge him the sales tax and off he goes.  He never tells you where he lives - you have no knowledge.  He goes back to texas and the tax gestapo somehow spy his widget and demands to know where he got it - he tells them then they demand he pay the use tax.  Sound too bizarre? Big brother is watching you know - here's the bottom line - our government it teaching all of us how to screw them back.  I get it do you? And when the total collapse finally comes what's next?

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by: purpleiris This user has validated their user name.

Mon Nov 11 20:33:51 2019

Geetar said, "I wonder if my websites sales added into my ebay sales would be the threshold, or only my website since ebay remits for their sales."

That's a really good question. The way I would interpret the marketplace facilitator law is that the marketplace is being considered the merchant selling the product. That is how the states are getting passed the threshold limit for small sellers on marketplaces.

That said, you would only need to account for the sales that YOU would be collecting on because your marketplace sales to participating states are already being accounted for by a business that never even sees your product.



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