- Cory Checketts
- On September 15, 2017
- 2 Comments
Are you confused about what to make of the upcoming Sales Tax Amnesty? You’re not alone. Seller Labs hosted a special event with four sales tax experts to present you with a diversity of opinions and to answer your toughest question: should I participate in the program or not?
Webinar Show Notes
4:30 – What is the Multistate Tax Commission (MTC) and why is it beneficial for sellers?
- When a state fines a seller, that’s the time to take an aggressive position.
- When tax planning, take a conservative position.
- Michael doesn’t think states will pursue FBA sellers.
7:15 – How are states finding sellers?
- States like California and Washington are acting like a customer.
- They place an order and if there’s a tax that’s being collected then they move on. If a seller is not collecting a tax, then states start tracking that seller down.
11:00 – An explanation of the Sales Tax Amnesty
- Not every state is offering the same kind of amnesty.
- The amnesty is a tool to help sellers with exposure; it’s all in how sellers use it.
- Even if you don’t think you should be collecting the sales tax, what happens if you’re wrong?
14:00 – (Paul) The biggest problem with the Sales Tax Amnesty program is it doesn’t understand the facts of what FBA is and how it works.
- Sellers are viewed like Craigslist sellers in the eyes of the MTC.
- Sellers are being accused of civil tax evasion and are being offered a pass for something they didn’t actually do.
- Sellers will end up filing as many tax returns as Microsoft and Google if they enroll.
- People need to look at the law and the facts. Why is nexus relevant in this discussion?
- Who are the real resellers of the products?
Learn even more about the Sales Tax Amnesty
- The Multistate Tax Commission Voluntary Disclosure Agreement Program: Take It or Else
- Sales Tax Amnesty—What Do I Need to Know?
- Amazon FBA Sellers Can Take Advantage of a New Sales Tax Amnesty
16:00 – (Jordan) Is physical presence necessary to impose a sales tax?
- In order for a state to impose use-case sales tax, a company must have a physical presence.
- Do FBA sellers have a physical presence in a state where their goods are stored and shipped?
- Who is responsible for products stored and sold from an Amazon fulfillment center? Amazon or 3rd party sellers?
- Does all of this create nexus for a seller?
- Every state has its own common laws. There’s no absolute answer. Who owns the inventory?
19:50 – (Paul) Are FBA sellers suppliers?
- If I sell my product to Amazon and it sells my product, it becomes the seller. But if I sell my product on the Marketplace, I am the seller on record. Does everyone agree?
- You may be a seller. You may be a seller-consignor.
- Amazon collects the tax and takes possession of it for two weeks before it is released.
- Amazon tends to label sellers different things at different stages of a sales process.
- States aren’t savvy.
- Sellers don’t have the autonomy to dictate their own returns policy.
24:40 – (Jordan) Sellers have a choice.
- Sellers can use 3PL or FBA. One is slow and one is fast, which almost makes a seller’s fulfillment choice unreasonable.
- What’s a seller, what’s a retailer, what’s a wholesaler and what’s a marketplace?
- States are not bound by anything between the seller and the marketplace.
26:40 – (Michael) Each state is going to tackle this problem differently but what should sellers do in the meantime?
- Taking advantage of this amnesty takes away risk. What do sellers have to lose?
- Filing returns in those states is a pain.
- Spending money to defend yourself from a state that’s pursuing you is much more expensive than enrolling in the amnesty and filing the paperwork.
29:30 – (Paul) How does commingling work with how a state identifies who owns it?
- The MTC wasn’t aware of commingling when they brought it up to them.
- This is a policy problem or there is an agenda or both?
30: 36 – (Jeff) There’s more here than meets the eye.
- There are bigger issues that need to be resolved.
- Sellers have this amnesty and they should take advantage of it. Sellers had the same opportunity in Washington and they didn’t take it. Now they have a tax bill to pay or fight.
- The fundamental decision is to join the amnesty and take the conservative approach or face litigation with a state and pay to defend yourself.
33:20 – (Jordan) What happens if sellers go along with the tax amnesty and comply?
- Smaller sellers may not have to remit taxes because of their size.
- If you have a tax liability, this amnesty is a great way to take care of it.
- Don’t’ forget about ongoing compliance costs.
- Who owns the inventory?
36:00 – (Michael) There is a cost to compliance but look at it as insurance.
- The cost to enroll in the program is much smaller than the cost of litigation if a state comes after you.
- If you’re a big seller, it pays to defend yourself. But take as many states off or your plate just in case things change.
40:00 – (Chris) Are sellers adequately being represented? Are people educated about the MTC and the Sales Tax Amnesty and is the October 17, 2017, deadline too short?
- Petition against the program.
- Who represents sellers? There’s no trade union like in other industries.
- Is Amazon just a platform or just a marketplace?
- Amazon’s legal positions on IP issues is that it is only the marketplace and they take care of their liability.
- Amazon created other departments because they had other liabilities, like the notice dispute team.
- Amazon’s TOS hasn’t been disputed in courts. So what do sellers know about who’s responsible and who is the retailer?
48:00 – (Paul) This is not an appropriate amnesty for Amazon sellers.
- Sellers shouldn’t participate in the amnesty and the 60-day deadline is a bully tactic.
- All of the rights of sellers have not been considered.
- If a seller has a liability, should they absolve themselves of the risk?
- If you want to protect yourself, you should hire counsel and do it yourself.
50:00 – (Michael) The greatest risk is doing nothing and waiting for a state to pursue you.
- States shouldn’t be able to do this but sellers should hedge their bets from potential exposure.
- Many companies register voluntarily for sales tax to prevent states from coming after them.
52:00 – (Jordan) Do you have to do something voluntarily without understanding the game?
- The amnesty program is based on assumptions, assumptions that sellers owe sales tax.
- And if sellers don’t, then voluntary filing isn’t necessary.
- Sellers should do nothing. They should group together.
54:00 – What are sellers giving up if the capitulate with the sales tax amnesty?
- There’s an obligation to collect sales tax and pay it going forward.
- It will never end and then sellers will be filing dozens of tax returns.
- Amazon wants to put the sales tax burden on the 3P sellers.
- It’s a strategy to maintain a competitive advantage.
56:00 – What can sellers actually do?
- They can join the petition and join together with attorneys to protect them.
- Sellers need a common interest and get people to fight on their behalf.
59:00 – Is there a revenue threshold for Amazon sellers?
- If sales are below $3,000 a year in a given state, that’s a low threshold.
- Even if a state asserts that taxes need to be paid on the $3,000, it still doesn’t make very good business sense because of the low threshold.
- What are your risk tolerances?
1:02:00 – (Jordan) Some sellers may have a low threshold in many states but they could have $900,000 in revenue in one state, that makes them vulnerable to a tax liability.
- Can this seller afford to litigate? If so then they should sign up.
- International treaties are hard to uphold on a state level.
1:04:40 – Can states force marketplaces like Amazon to give up seller information?
- Amazon probably wouldn’t put up a fight.
- Amazon would have to think about the negative consequences. Amazon wouldn’t want to hurt business relationships.
- If push comes to shove, Amazon will give up the seller.
- If it’s between Amazon, the brand and you—you lose.
Contact the Presenters
Paul Rafelson – legal matters and tax expertise
Chris McCabe – media, seller Q&A, continuing the discussion
Michael Fleming – oversight on nexus, exemption certificates, business licensing, amnesties and voluntary disclosure agreements
Jordan Goodman – state and local taxes, sales and use taxes, single business taxes, nexus, apportionment
Sellers can petition to place the burden of sales tax collection on Amazon with Chris McCabe and Paul Rafelson.