- Chris McCabe
- On October 25, 2017
- 1 Comments
In the weeks since the Seller Labs webinar and even more so in recent days, we’ve all seen an uptick in interest in the Amazon state sales tax saga. I hoped that the degree of seller interest in action would increase as we approached the deadline but if nothing else, the news coverage has improved. As we get closer to the end of the month, I’ve referred numerous concerned and anxious sellers over to reporters for Bloomberg, the New York Times, and CNBC, as well as CBS News/Moneywatch. We had numerous questions after the webinar, but things have changed remarkably since then. The deadline for the amnesty was extended and articles on the search for Amazon’s new HQ more often than not led to discussions around tax breaks they’d receive as part of the overall sweetheart deal packages. As a local resident of Boston, I can assure you that the Boston Globe does numerous stories touting its city’s proposal for the second Amazon headquarters.
We spoke with a retail reporter at the Boston Globe about the sales tax amnesty program background, and all of our attempts to shed more light on this process. Most states and their respective tax officials don’t understand the ins and outs of FBA, let alone how commingling works, and we’re catching up a lot of media players on these details now, too.
Read More: Sales Tax Amnesty—What Do I Need to Know?
One part is clear to us now, if it wasn’t before: the media outlets need to hear from sellers about this story, and a lot more often because they are still trying to determine “consumer angles” and how the average American is affected by this. We’ve communicated how much of a devastating effect it will have on small business in America, but they need to hear directly from sellers at this point. That will make it, to some of them, “newsworthy” and something they can pitch to editors with strict ideas of what should make the news, and what should be left out.
On October 20, Paul Rafelson and I met in Boston with some Amazon sellers to talk strategy around the varying efforts by different states to take taxes out of marketplace sales. We spoke in person with incredibly concerned sellers of all shapes and sizes, based in the northeast but with FBA inventory in multiple states.
If you weren’t able to join us last Friday in Boston, you may now be asking, “What can I do if I get these nasty letters in the mail from one state or another?” What legal action can sellers now execute to turn the tide? We addressed these and other questions Friday night.
After taking time to digest some of what we all discussed, I emailed Paul about this following our event. I haven’t changed a word of his reply, so it’s straight from a lawyer’s mouth. I think it’s important for every seller dealing with this ongoing nightmare to read this word for word, and more than once.
Over the past few months, we have encountered so many sellers who are now being forced to take legal action to protect their constitutional rights. It is important to remember that none of the sellers we’ve represented have opposed the tax itself but only the burden of states unconstitutionally asking hundreds of thousands of sellers like the mother-daughter operating in rural California to have to file as many tax returns as Walmart at a cost that will end their ability to sustain a living without depending on the welfare of the state.
Had the states simply followed their law, like South Carolina and required Amazon to collect and remit the tax that ultimately owed, or at the very least collaborated to develop a simplified compliance method for the sellers, rather than conspiring to destroy them, we would not be in this situation via this shamnesty we would not be in this situation. Nor would local retailers in the state be in the situation where they have to face off against Amazon for one more holiday season at an illegal competitive disadvantage facilitated by the state’s unwillingness to place the collection burden where it belongs.
Unfortunately, the burden to bring legal action in itself is another part of the tax compliance burden most sellers simply cannot afford. This has forced us to evaluate potential legal options that can be taken on behalf of all of these sellers and the sellers whose letters are potentially “in the mail.” The options we are considering are at the individual state level and even potentially at the federal level, although that poses some additional challenges given that state tax actions are typically barred from being brought in federal court. We are also considering bringing suit against these states for their aggressive and illegal tax collection practices in the home jurisdiction of the sellers whose livelihoods they are needlessly destroying.
No matter which option or options we pursue, we believe an organized effort would be most effective and therefore are also in the process of exploring the possibility of a seller trade association that would exist not only for addressing the immediate tax burdens unlawfully being placed on these sellers but also for addressing other challenges facing the community such as unfair trade laws that allow Chinese based sellers to ship products to destinations in this country at a much lower cost than their domestic counterparts.
I had a busy day on Friday (October 20), in fact. I spoke Friday with Jonathan Berr, the author of “For Amazon sellers, a big tax bill is looming”, which can be found on the CBS News website. Now many or most of us know that this isn’t exactly news The question is, what do Amazon sellers need to do about it?
Read Another Opinion: How FBA Sellers Can Take Advantage of the Sales Tax Amnesty
An important piece to this story, not mentioned in the CBS article, was the many marketplace participants who are asking pertinent questions about how the amnesty came together. What are your legal obligations to collect sales tax? Part of the campaign to represent online merchants’ interests is to answer that key question: Should this amnesty even be focused on you, or should it be offered to the actual retailer, Amazon?
I brought Mr. Berr up to date on the actions sellers have considered in relation to the sales tax mess. He had the prior impression that sellers are either accepting the amnesty or doing nothing, apparently, and hoping to avoid getting letters from states. I explained that sellers are disputing the notion that they are the retailer for Amazon transactions, or that they have proven nexus in these states, or that they must own the obligation to collect the actual tax. I dove into the “undue burden” of such administrative and legal costs on all marketplace sellers who would be required to collect sales and income tax in multiple states if they accept the amnesty. Mr. Berr informed me that he’s willing to write a follow-up once he understands the legal actions and issues at play, so we’ve put him in touch with Paul. We’re looking for an indication that he understands the petition and the tax campaign sellers have conducted in the wake of the amnesty announcement, and we’d like to see it soon, given the deadline’s nearness.
Mr. Berr is planning a follow-up piece that includes more discussion or investigation around Amazon seller actions to dispute the notions of nexus or their supposed status as retailers.