Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...
By Ryan Prete
Massachusetts will soon have data on Amazon’s third-party marketplace sellers conducting in-state business as the state continues its efforts to capture uncollected taxes from digital sales.
In a memo from the “Fulfillment by Amazon team,” the e-commerce behemoth announced it would hand over the following information to the Massachusetts Department of Revenue by Jan. 26:
In a September 2017 order, Massachusetts Superior Court Judge Linda E. Giles directed Amazon Technologies Inc. to turn over the third-party vendor information to the state’s DOR. The DOR had issued a summons for information on any third-party vendor “who stores, or who has stored, any tangible personal property in any location in Massachusetts that is, or was, owned or leased by Amazon Retail LLC or any other affiliated entity after January 1, 2012.”
Amazon.com Inc. is currently collecting sales taxes on direct Amazon sales in all 45 states that have a sales tax, but generally not on sales facilitated on behalf of third-party vendors, which make up approximately half of the company’s sales. However, Amazon has agreed to collect and remit Washington state sales tax on third-party marketplace sales. Washington, along with Minnesota and Rhode Island, in 2017 became one of the first states to enact laws requiring Amazon-type providers to collect tax on third-party marketplace transactions.
Peterson told Bloomberg Tax that while there aren’t other states currently pursuing the same effort as the Bay State, there “soon will be many more.”
“There’s no question about it,” Peterson said. “It was only a matter of time before a state was going to do this, and more will soon replicate what Massachusetts has done.”
Massachusetts notably released a first-of-its-kind digital sales tax regime based on internet “cookies” in 2017, which practitioners expect other states will also copy. Regulation 830 CMR 64H.1.7, which took effect Oct. 1, 2017, requires online vendors to collect sales tax if they have property interests in or use in-state apps and “cookies.” Online vendors also must collect sales tax if they make 100 or more individual transactions and exceed $500,000 worth of in-state sales in a year.
Crutchfield Corp., a Virginia-based online car parts and accessories retailer, has sued Massachusetts over the regulation in a Virginia court, alleging in part that it violates the U.S. Supreme Court’s 1992 decision in Quill Corp. v. North Dakota, which prohibits states from imposing sales and use tax collection obligations on vendors lacking an in-state physical presence.
Peterson said all sellers who received the Amazon memo should expect to receive a letter asking exactly what they either store or sell into the state. He noted that the state could pursue back taxes from sellers.
“If the state asks a seller how long they’ve been doing business in their jurisdiction, a smart person will always tell the truth. Regardless of the possibility of back taxes, you don’t want to lie,” he said.
Peterson further said that Massachusetts’ request is very hard to contest because of state requirements that business records be maintained.
Richard Cram, director of the Multistate Tax Commission’s National Nexus Program, told Bloomberg Tax that Amazon’s announcement could encourage sellers to push for, or participate in, a sales tax amnesty program.
“This could encourage internet sellers to come forward if an amnesty program were offered and could boost voluntary compliance,” Cram said. “Sellers will always want to come forward versus getting caught.”
The MTC held an amnesty program last year for third-party marketplace sellers who use platforms such as Amazon, Etsy, Inc., and eBay, Inc. The program received over 850 applications.
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