|Mon Dec 12 2011 00:29:40|
Sales Tax Fears Could Drive Sellers away from Amazon FBA
By: Ina Steiner
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.