Sellers who use Amazon's FBA service to store their inventory and fulfill orders are worried after the marketplace sent them a notice on Monday that it would provide detailed information about their selling activities to Massachusetts by January 26, including names, contact information, and the estimated value of their inventory in the state's fulfillment centers.
Pressuring Amazon in this way is latest ploy on the part of states who are trying to force out-of-state sellers to collect and remit sales and use tax on sales made to in-state buyers.
Avalara executive Scott Peterson said it was the first known instance of Amazon disclosing information about its third-party sellers to state taxing authorities. Avalara
provides compliance solutions to online merchants.
Should sellers panic if they use FBA but don't collect and remit sales tax? Panic is a strong word, Peterson said, but they should talk to their accounting partners right away.
A spokesperson for the Massachusetts Department of Revenue told EcommerceBytes today that the Commissioner and Amazon were continuing to work amicably toward a resolution of the matter.
We are awaiting clarification from the state DOR since Amazon's letter seemed to indicate the matter was resolved. Could it be a ploy on Amazon's part to get media attention to the issue before complying with the demands? Probably not. But it is possible the agency had agreed to wait for Amazon to comply until after the busy holiday shopping season when it would have been more difficult to handle any requests from sellers who wished to make changes to their FBA accounts as a result of the disclosure.
If Amazon does release seller data to Massachusetts by Friday, the information could wind up in the hands of other state tax agencies. Peterson said it was not unusual for states to share information with other states.
"In other words," he said, "this local case could lead to a step change in sales tax enforcement in late 2017 and right through 2018. With more information, states will have the ammunition they need to go after third-party vendors for sales tax. Ecommerce vendors will have to redouble their efforts (and spending) to ensure tax compliance, because they will be facing more scrutiny than ever."
However, Peterson said even if Massachusetts has this information, the state must still prove that these sellers have sufficient physical presence in the state before it can force sellers to register and collect. He believes the courts will have the final say about whether selling through FBA creates physical presence and pointed to the recent decision by the Supreme Court to grant cert in the South Dakota v Wayfair
Some additional points Peterson made that sellers may find interesting: In the legal brief Massachusetts filed in the case, it asked for a list of sellers that store property in the state and also make sales in the state. He also said that once a business has physical presence in a state, all its sales are taxable regardless of where those products are shipped from.
The notification Amazon sent sellers follows; note that Amazon did not respond to our inquiry before publication.
Amazon has received a valid and binding legal demand from the Massachusetts Department of Revenue (DOR) requiring that Amazon disclose the following information about sellers to the DOR:
- Contact information (name, address, federal tax ID number, and phone number)
- Estimated value of the seller's inventory in our Massachusetts fulfillment centers, calculated based on the seller's selling prices in late 2016 and in 2017
To comply with our obligations under the law, we plan to provide your information to the DOR by January 26, 2018. Because each seller's business and tax needs are unique, we encourage you to consult with a tax advisor to answer any questions you may have.
You also may refer to the following resources in Seller Central:
- Solution Provider Network: a directory with information about several experienced tax advisors
- Tax calculation services: optional services for calculating U.S. sales and use taxes
- Monthly inventory reports: a tool showing the quantity, location, and disposition of your inventory in our U.S. fulfillment centers
Thank you for selling on Amazon.
The Fulfillment by Amazon team
As a reminder to readers, Amazon and Etsy began collecting Washington sales tax
on behalf of third-party merchants beginning January 1, 2018.