Sales Tax Slice: What’s Next for States Seeking Revenue from Amazon Fulfillment Sales?

Amazon Sorting

The period for applying to the Multistate Tax Commission’s Online Marketplace Seller Voluntary Disclosure Initiative closed yesterday. The program, which sought to incentivize noncompliant online marketplace sellers to begin collecting and remitting sales and use tax, was most obviously aimed at Amazon Fulfillment sellers. With the program’s application period closed, states will be weighing their options for addressing Amazon Fulfillment sellers that remain out of compliance. 

Non-compliant sellers that eschewed the program may still qualify for other voluntary disclosure programs. There are approximately 2 million third-party sellers listing products on Amazon, according to Bloomberg Technology’s Spencer Soper. Rather than struggling to sort through these sellers, it is possible that we will see a rising trend of states going after Amazon to recoup lost revenue from Amazon Fulfillment sales.

Many states recently have been focused on efforts to attract Amazon’s much anticipated second headquarters, offering huge tax breaks and other incentives to the company. But once the winning city is announced, might states change tack? A handful of states have seen no need to wait.

Massachusetts, considered a frontrunner for Amazon’s HQ2, has brought suit against Amazon, seeking a list of Amazon Fulfillment sellers with inventory in the state. Gov. Charlie Baker (R) has dismissed the notion that this would affect the state’s chances of landing HQ2.

Washington, already home to Amazon’s first headquarters and not in the running for a second, has passed legislation, effective Jan. 1, 2018, requiring marketplace facilitators making retail sales of $10,000 or more to either collect and remit tax or satisfy certain reporting and notification requirements. Minnesota has enacted legislation under which marketplace facilitators will be required to collect and remit tax beginning July 1, 2019.

South Carolina has assessed Amazon approximately $12.5 million in tax, penalties, and interest on Amazon Fulfillment sales under the state’s existing definitions and consignment sale rules. The vast majority of states already have definitions and consignment sale rules similar to South Carolina’s and could make similar arguments. 

Will more states seek to impose collection obligations on Amazon for sales made by Amazon Fulfillment sellers? Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn.

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