2018 is bringing significant changes to sales tax legislation. As marketplace sellers continue to dominate the online and retail sales space, taxing authorities are researching ways to collect sales tax on these transactions when sales tax is not being collected.
Various states are attempting to enact law to force online sellers to start collecting sales tax without physical presence, which is being called “cookie nexus” or “click-thru nexus”. Additionally, they are trying to impose the collection burden on marketplace platforms for third party sellers (some have succeeded) and are even going as far to request seller information from Amazon so that jurisdictions can contact the 3rd party sellers directly.
For instance, Massachusetts requested Amazon to provide a list of 3rd party sellers who have inventory in their warehouses, and after protest, Amazon relented and provided the list to Massachusetts.
Other states, like Washington, are requiring marketplace sellers to collect sales tax on behalf of the 3rd party sellers to retrieve the additional revenue. Since Washington passed the law, other jurisdictions have followed suit, and we predict this will continue to be the norm if tax law is not changed from the US Supreme Court Ruling (refer to our previous blog post).
Although this may impact the way marketplace companies, like Amazon, do business, this can ultimately effect smaller companies significantly who sell through various programs, like FBA. It is common for FBA sellers to have limited sales in a specific jurisdiction and have no control over where their product is being stored or sold (due to Amazon moving products from warehouse to warehouse). This may cause an administrative burden to FBA sellers who do business with marketplace companies if their FBA revenue and staff cannot support filing sales tax returns in all 47 tax jurisdictions due to cost, expertise, and time. Additionally, since selling through FBA gives your company nexus where your products are stored, you now will have to start collecting sales tax on other selling platforms like eBay, Etsy, and Shopify if you’re selling to the same states where your Amazon/FBA products are stored.
We receive multiple calls a week from various FBA sellers looking for guidance since sales tax collection and remittance is confusing to navigate especially when the assumption to most online sellers is that if it’s sold online, you don’t have to collect tax.
If you are selling online and are trying to navigate through the various laws, please reach out to us, we can help guide and educate you regarding sales tax changes.