Amazon Sellers Armed With New Tax Compliance Information

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By Ryan Prete

A tax software company will offer a new tool to assist Fulfillment by Amazon sellers with remote sales tax compliance.

Avalara Inc.—a tax compliance software company— announced March 13 a new “inventory report,” which will allow FBA sellers to:

  •   view exact inventory locations within the network for FBA fulfillment centers, including the date of when inventory first appeared in a center and address of each center;
  •   view the dollar value of monthly sales fulfilled from each center;
  •   view state-level summaries to support nexus determinations;
  •   determine if they meet thresholds that would require registration and compliance in each state; and
  •   view ongoing monthly updates as Amazon.com Inc. adds new fulfillment centers.
Kellie Zimmerman, vice president of sales at Avalara, told Bloomberg Tax that sellers are “playing a game of chess right now, against the states,” and sellers are increasingly facing a changing landscape as states continue to push for sales and use tax collections.

“It’s important that sellers have a snapshot of where they should and shouldn’t collect,” Zimmerman said. The report will be free of charge to existing Avalara customers, and a free-trial is offered to new sellers, according to Zimmerman.

GAO Report

Scott Peterson, vice president of U.S. Tax Policy and Government Relations for Avalara, told Bloomberg Tax that Avalara was developing the new report at the same time that the U.S. Government Accountability Office was conducting interviews and research for a December 2017 report on state revenue shortfalls. Those stem from digital sales tax limitations under the 1992 U.S. Supreme Court decision in Quill Corp. v. North Dakota. That ruling prohibits states from imposing sales tax collection obligations on vendors without an in-state physical presence.

State could soon a shift in those limitations, however, as the Supreme Court is set to hear oral arguments April 17 in South Dakota v. Wayfair, Inc.—a direct challenge to Quill.

The GAO report estimated “that state and local governments could gain from about $8 billion to about $13 billion in 2017 if states were given authority to require sales tax collection from all remote sellers.” However, some tax practitioners were wary of the accuracy in the GAO report’s estimates.

Revenue Debate

“Every study that has previously been conducted on the issue has delivered results that overshot what actual collections looked like once states began enforcing or large operators like Amazon began collecting,” Andrew Moylan, executive vice president for the National Taxpayers Union Foundation, told Bloomberg Tax when the GAO study was released.

“But even if we assume the numbers are 100 percent on target, we’re looking at a drop in the bucket of state budgets,” Moylan said. “Heck, it’s more like a drop in the ocean.”

Many “kill- Quill” proponents have previously cited to a 2009 study from the University of Tennessee, which projected that states’ 2012 revenue shortfall from e-commerce would be $11.4 billion. The National Conference of State Legislatures combined the Tennessee findings with another Washington state study to report that states lost an estimated $23.3 billion in sales and use tax on all 2012 cross-border transactions—digital and otherwise. Those numbers were updated to an estimated loss of $26 billion in 2015.

But some accounts of state-specific revenue reports have suggested the Tennessee study overstated the numbers.

There has been a frenzy of state activity this year, and in recent years, to adopt varying regimes to expand state tax collection authority over online sales, whether through notice-and-reporting laws, revised nexus thresholds based on sales figures, or the newest: laws placing collection duties on Amazon-like marketplace providers on behalf of the third-party sellers on their platforms. Online marketplace schemes were enacted by four states in 2017: Pennsylvania, Minnesota, Washington, and Rhode Island.

To contact the reporter on this story: Ryan Prete in Washington at rprete@bloombergtax.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bloombergtax.com

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