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Mon Dec 12 2011 00:29:40

Sales Tax Fears Could Drive Sellers away from Amazon FBA

By: Ina Steiner

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If you store inventory in an Amazon FBA fulfillment center in Pennsylvania, do you have to collect sales tax for orders shipped to Pennsylvania residents, even if your business is not located in the state? That's what sellers are worrying about after Pennsylvania's Department of Revenue issued a Tax Bulletin earlier this month explaining existing sales tax nexus law for remote sellers.

Janet Novack wrote in her column in Forbes last week that state officials confirmed to her that third-party merchants who send inventory to an Amazon Pennsylvania fulfillment warehouse would be  liable to collect Pennsylvania sales tax.

Sellers who use Amazon FBA and wish to avoid the problem by moving their inventory out of Pennsylvania have one problem. They have no control over where their FBA inventory is stored - an issue we wrote about in October in an interview with Cynthia Lizana, proprietor of TexCynGoods, a retail business in Texas. Sellers must enter their FBA shipment into Amazon's system, and only then does Amazon indicate which warehouse the order should be sent - and sellers have no way of requesting a different destination.

Compounding sellers' concerns is that Amazon can move all or part of a seller's stored inventory to a warehouse in different state at any time, according to Keith Yockey of South Carolina, who sells on eBay, Amazon and his own website, TheDumbDog, and who used Amazon FBA from 2008 to early 2011. That means there's no guarantee that your inventory is "safe" even if it is currently sitting in a warehouse outside of Pennsylvania.

Sellers discussing the issue on the Amazon Seller Soapbox boards wondered how Pennsylvania's Department of Revenue would enforce the law, and worried that Amazon.com could hand over their records to the states.

Keith Yockey said he complies with South Carolina's sales tax collection requirements, and said to go through the paperwork for each state with sales tax would be burdensome for a business of his size, not to mention having to remit to each state the money due.

Keith blogs about the sales tax issue and watched representatives from Amazon, eBay and Overstock.com testify before Congress recently. He says state and local sales tax laws are too complicated - is cotton candy a food, entertainment, or sugar, he asks. "Depending one where you live, you may be taxed for one, none, or all three."

Keith also questioned who was the seller of record in FBA transactions - follow the chain of possession, he said, and added that he believes states should do a better job of educating their constituents about sales and use tax. Some states include a line item on income tax returns where taxpayers are asked to report transactions for which they have not paid state sales tax, such as online purchases.

He also noted that several years ago, New Hampshire, which has no sales tax, enacted a law that prohibits other states from imposing sales tax requirements on New Hampshire businesses - an interesting read, found on this page.

For the moment, merchants who use FBA say they are concerned about nexus issues, but many appear to be waiting for further developments. One seller we spoke with said she was upset about the issue but was too busy shipping to think about it until the end of the year. "I assume Amazon is going to fight this Nexus issue much as it has the others."

Pennsylvania is giving merchants with nexus until February 1, 2012, to become licensed and start collecting sales tax, otherwise face audit, assessment, lien and/or referral of the case to a collection agency or the Office of Attorney General.




Comments (19) | Permalink

Readers Comments

Sales Tax Fears Could Drive Sellers away from Amazon FBA   Sales Tax Fears Could Drive Sellers away from Amazon FBA

This user has validated their user name. by: Philip Cohen

Mon Dec 12 02:50:18 2011

"Some states include a line item on income tax returns where taxpayers are asked to report transactions for which they have not paid state sales tax, such as online purchases."

I'd love to know just how many people tick that line item.

Sales Tax Fears Could Drive Sellers away from Amazon FBA   Sales Tax Fears Could Drive Sellers away from Amazon FBA

This user has validated their user name. by: silent anarchy
Web Site

Mon Dec 12 07:36:50 2011

If the states feel this will help them in making more revenue then they are completely wrong and Delusional. I have spoken to a few different small sellers i know about this and if it gets too complicated and/or has fines penalties, they might go out of business . I know i would. The government better relize this will NOT help in getting tax but reduce the amount of taxes received.

Sales Tax Fears Could Drive Sellers away from Amazon FBA   Sales Tax Fears Could Drive Sellers away from Amazon FBA

by: xcergy
Web Site

Mon Dec 12 10:49:40 2011

Philip,
States are now collecting ~5%.

I pay my Use Tax ... do you?  Every online seller should.  Not to do so is an audit flag as State DORs are getting more aggressive.

Sales Tax Fears Could Drive Sellers away from Amazon FBA   Sales Tax Fears Could Drive Sellers away from Amazon FBA

by: Rich

Mon Dec 12 11:28:49 2011

This article reflects the current state of America and why things really suck here lately. GE paid $0 in tax last year despite over $10 billion in earnings.  Google paid just 2% tax on their enormous revenues.  So the treasury is tapped out and the government goes after the middle class to make up for the lack of taxes paid by the mega corporations. This hits every online seller and every online buyer with higher costs.  America has become a scam

Sales Tax Fears Could Drive Sellers away from Amazon FBA   Sales Tax Fears Could Drive Sellers away from Amazon FBA

by: Rich

Mon Dec 12 11:32:31 2011

xcergy; do GE, Google and others who pay next to nothing raise any audit flags?  

Sales Tax Fears Could Drive Sellers away from Amazon FBA   Sales Tax Fears Could Drive Sellers away from Amazon FBA

by: JR

Mon Dec 12 11:38:38 2011

State and local sales taxes are for LOCAL and INTRA-STATE commerce and should NOT be applied to INTER-STATE commerce.  This is a shameless money grab by state politicians who don't have a clue about living within their means.

Be prepared to see a slew of states attempting to change their definitions of seller NEXUS in an attempt to impose taxes they have no right to collect.  Online sellers large and small need to band together and fight this with everything they've got.

Sales Tax Fears Could Drive Sellers away from Amazon FBA   Sales Tax Fears Could Drive Sellers away from Amazon FBA

by: Judi

Mon Dec 12 12:54:59 2011

If you are selling items for profit you pay taxes.  It is pretty simple.  If you have not been claiming your online income and paying taxes then you have been stealing from the rest of us who do pay our taxes.
Grow up or only work jobs where your employer can pay your taxes for you.
This is like people who claim they don't have enough money to leave a tip at a restaurant....eat at home.  Easy.

Sales Tax Fears Could Drive Sellers away from Amazon FBA   Sales Tax Fears Could Drive Sellers away from Amazon FBA

This user has validated their user name. by: Philip Cohen
Web Site

Mon Dec 12 13:18:33 2011

“[On the forthcoming ‘V.me’ payments gateway] eBay, for its part, was non-committal. ‘While we always consider enhancing the experience on eBay, at this time we have nothing to announce with regard to other payment options,’ company spokeswoman Johnna Hoff said.”

http://www.auctionbytes.com/cab/abn/y11/m12/i12/s03

You bet eBay has “nothing to announce” regarding Visa’s coming new payments gateway, “V.me”. It would have been more honest for Ms Hoff to say that there is absolutely no chance that the eBafia will “enhance the experience on eBay” by allowing V.me.

For to allow V.me would undoubtedly cut the clunky PreyPal out of most of its slice of the eBay pie. No, on-eBay merchants are going to have to put up with the clunky PreyPal for ever, or at least until the rusting old hulk, eBay, finally slips below the waves.

But, undoubtedly, most of those off-eBay merchants that have been offering the convenience of PreyPal will flock to V.me for a smoother, more professional, and certainly less “clunky” payments experience for the merchant.

eBay / PayPal / Donahoe: Dead Men Walking.

Sales Tax Fears Could Drive Sellers away from Amazon FBA   Sales Tax Fears Could Drive Sellers away from Amazon FBA

by: xcergy
Web Site

Mon Dec 12 14:46:22 2011

@ Rich
Add eBay to that list.  They paid no corporate tax either.  That said, look at the thousands of people GE, BofA, Exxon/Moble, and other giants hired to to do nothing but research tax law.  Those are J.O.B.s that drive the economy too.  I hate it too (paper pushers) but it is a reality.

Apples and Oranges. Corporate Tax and Sales Tax are separate issues.  If your RANT is about BS politics (and I agree, it's all BS) goto getmoneyout.com if you wish to make a difference.

Sales Tax Fears Could Drive Sellers away from Amazon FBA   Sales Tax Fears Could Drive Sellers away from Amazon FBA

by: comet This user has validated their user name.

Mon Dec 12 23:13:38 2011

In NY a few years ago we had a check box for "Taxes you owe but did not pay" ie for things we bought out of state or on line.  I am pretty sure that NO ONE checked that box.  The next year NY came out with a new tack on this---we had to again check the box BUT you were FORCED to pay some amount under the theory that EVERY ONE has bought something on the Net or out of state that we FAILED to pay for.  That actually was on the forms for one year.  Every one claimed that they had paid something like $5 and the thing did not reappear in that form the next year.  

I am not sure what form this will take next year.  IT does seem stupid to me tho---I live on the border of NY and Vermont and we shop in Vermont ALL THE TIME and we PAY VERMONT SALES TAX all the time.  If I venture "home" to NJ---I pay their tax when I shop or pay a hotel bill.  However!  If I go to CANADA--I can get ANY TAX PAID back just by filling out a form you get at the border or at an info station.  Why?  Because we do not BENEFIT from CANADAS taxes!!!!

Now if I buy something from say California---do I pay THEIR TAXES?  Um---no.  Why?  Presumably I DO NOT  BENEFIT from those taxes.  

I guess it just irritates me that the ridiculous things the pols spend their time on could be better spent finding ways to save and spend the money they DO have rather than by trying to wrench it out of the hands of sellers such as myself who MAYBE sell $2500 a YEAR on ebay.  

There really should be a firm level beyond which a dedicated internet merchant might be reasonably expected to pay a tax IF they sell over a certain amount with in that state.  Or---here's an idea---make it a Federal Tax.  And then spread it around.  Wanna bet some pol will come along and scream FOUL over an idea like that?  Because he will feel slighted if HIS state gets less than a bigger state?  How would you apportion that?  

And yeah it very much burns my butt when GE gets off scott free---they along with Donowhore and a few other CEOS and Bankers should be tarred and feathered.  

To the person who pointed out that the legions of tax dodger researchers for GE etc are ALSO tax payers---well,  the MAFIA drives the economy TOO.  As do drug dealers.  And other unsavory charectors.  We are not out there trying to tax THEM now are we????

Wasn't Al Capone caught over tax evasion?

Sales Tax Fears Could Drive Sellers away from Amazon FBA   Sales Tax Fears Could Drive Sellers away from Amazon FBA

by: buck efay

Tue Dec 13 11:56:35 2011

Why make this a hassle & a ripoff for small sellers who Amazon plans on Illegally charging a fee to collect this tax? Wouldn't it make loads more sense to FORCE Amazon & Ebay to collect & pay the taxes like Antique Malls do before giving you your money? Wouldn't it be much more effective to have one huge multi state entity you can easily pursue rather than a bunch of little goofballs that owe a few cents to each state?

Sales Tax Fears Could Drive Sellers away from Amazon FBA   Sales Tax Fears Could Drive Sellers away from Amazon FBA

by: xcergy
Web Site

Tue Dec 13 14:32:29 2011

@ buck efay
Just how would you get eBay to collect/remit tax?  How can you charge Sales Tax on something you (eBay) do not sell?

Sales Tax Fears Could Drive Sellers away from Amazon FBA   Sales Tax Fears Could Drive Sellers away from Amazon FBA

by: Calm Down

Tue Dec 13 17:22:56 2011

To buck efay:

It is not illegal for them to collect sales tax and charge a fee.  Credit card companies charge a fee on the whole of an order and nobody complains about that.

My accountant charges me money to put all that together quarterly so is he breaking the law.

God, people I get you aren't happy with the way things are but honestly?  You keep voting in retards to run the country and allow companies to GOUGE customers.  Amazon is GOUGING us for a simple tweak to their system.  They aren't breaking any laws.

Sales Tax Fears Could Drive Sellers away from Amazon FBA   Sales Tax Fears Could Drive Sellers away from Amazon FBA

by: buck efay

Tue Dec 13 21:55:26 2011

Amazon & paypal collect for the sales, they can simply deduct the tax. Other payment providers too.

Sales Tax Fears Could Drive Sellers away from Amazon FBA   Sales Tax Fears Could Drive Sellers away from Amazon FBA

by: Anon Please

Wed Dec 14 02:10:34 2011

There are a few things that I'd like to see happen as respects the Pennsylvania announcements regarding its sales tax.

1) Amazon sets up functionality which would allow FBA sellers to turn off shipping to PA addresses, for their goods stored in the PA warehouses. Those buyers would just get a message, sorry, this item cannot be shipped to a PA address. Amazon already has similar technology in place. For example, UK buyers cannot purchase goods in certain categories on the US site. PA-based sellers not affected, they would leave it on. For the rest of us, our choice to get rid of the exposure.

2) Amazon should consider suing the state and/or moving the warehouses. Perhaps already in discussion. In my former Corporate life, the company sued more than one state government over regulatory compliance issues and WON. Just because the bureaucrats rattle the sabers, doesn't mean their views will stand up to scrutiny by their own judges and courts.

3) Pennsylvania voters should be outraged by this, because its an assumption that it will result in a net gain to the state treasury. Expanded bureaucracy, more like. How much does it cost to process each return, and when you have to process thousands of them, for a few dollars apiece in taxes (not to mention the zero returns, required even though no tax is due), it will end up costing them more than they take in.

IMO, the PA regulator's pronouncement regarding nexus is exactly what the 1992 Supreme Court ruling was trying to avoid...a patchwork of tedious and conflicting regulations, stretched to the point of hampering commerce.

Sales Tax Fears Could Drive Sellers away from Amazon FBA   Sales Tax Fears Could Drive Sellers away from Amazon FBA

This user has validated their user name. by: Tula

Wed Dec 14 12:00:46 2011

@Rich:
The "GE paid no taxes" thing is really a straw man argument. They did have a tax liability, but owed no tax money because they had enormous losses (from their financial units) that they were carrying forward from a previous year. It's the same tax strategy available to individuals for some types of deductions when the loss amount is greater than the tax liability. And really, the corporate tax issue is very misleading. Sure, it sounds great and gets people riled up that those big evil corporations don't pay taxes, but in reality, no business entity actually pays income taxes. Taxes are a business expense and, as such, are part of the cost of goods or services sold. Like all other costs, they get rolled into the price of the item or service. You don't sell your products for less than what they cost you (outside of "loss leader" style promotions) do you? That means that we the consumers are the ones paying those taxes. So advocating for higher corporate taxes does nothing but increase prices and make it even more difficult for US companies to compete on the global stage.

Think about it from the POV of a small business selling on eBay. Many of them already have a difficult time competing with the goods from lower-cost regions like China. Increasing their costs through higher corporate taxes (both on their own income or via cost hikes from their corporate suppliers)is not going to help them compete or hire employees.

@Philip Cohen:
Massachusetts has a box on its income tax forms where you can declare wither the amount of sales/use tax you haven't paid on goods purchased or you can simply choose a percentage of your income and pay that amount. The latter is what I usually do, since I buy too much online to keep track of each individual purchase and the percentage is usually a minimal amount.

Online sales taxes are going to continue to be a thorny issue. About the only thing that seems clear is that small businesses will suffer if forced to deal with the huge number of tax jurisdictions and rules for tax collection and reporting. People should be paying their sales/use taxes, but they aren't. IMHO, the best solution would be a single online rate and reporting entity who would be responsible for collecting and distributing the tax monies to the states who participate. Anything else will simply be too unwieldy and costly to manage for states and businesses alike.

Sales Tax Fears Could Drive Sellers away from Amazon FBA   Sales Tax Fears Could Drive Sellers away from Amazon FBA

This user has validated their user name. by: Philip Cohen

Wed Dec 14 15:23:54 2011

And that's why I say that the Feds should assume the responsibility for collecting a single uniform GST/VAT on goods and services from everyone, as is the case in the UK and Australia. Is the simplicity and efficiency of such a tax on purchases too hard for anyone in the US to comprehend?

Sales Tax Fears Could Drive Sellers away from Amazon FBA   Sales Tax Fears Could Drive Sellers away from Amazon FBA

by: xcergy

Wed Dec 14 17:52:49 2011

@ Cohen

A GST/VAT would be a direct increase in inflation.  Would your plan eliminate Sales Tax?  I doubt it.
And just what of a voter approved local sales tax to pay for a new firehouse, community center, or statue in town square to celebrate Earth Day.  Fine for them, and great to collect for a single store w one location and one tax rate, but ask me to know local law when I'm clueless where they are located, and I don't think your VAT solution will cover that.
I got 3 emails yesterday from international customers asking me to lie on custom forms, as they can't afford the 20% VAT.  I agree, that rate is too high.  Too bad that those in VAT affected countries did not vote such a high rate down.  Hades will freeze before I will allow that kind of tax here.

Sales Tax Fears Could Drive Sellers away from Amazon FBA   Sales Tax Fears Could Drive Sellers away from Amazon FBA

This user has validated their user name. by: Philip Cohen
Web Site

Wed Dec 14 21:34:04 2011

The GST in Australia replaced the old sales taxes which were already a federal tax on sole of goods only and paid at the wholesale level. The GST is only collected federally; it is returned to the States.

In Australia we don't pay GST on imports until they are valued $1000 or over. Don't know what the level is in the UK but obviously there is a low point at which collection “costs” more that the tax collected; at the UK’s 20% VAT that point could be half that for the 10% GST we pay in Australia.

At the retail level in Australia the tax is included in the quoted price, not additional as is the case in the US; we don’t even notice it. Surely that is a better system than the hotch potch of different sales/use taxes that exist in the US?



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