Rumors suggest that some Amazon sellers could soon hear from Massachusetts state officials, asking them to settle their unpaid sales taxes.
This Tuesday Amazon notified its sellers that they will be handing over important and confidential merchant information to the State. This will include the marketplace sellers Federal Tax ID number, the estimated value of their inventory currently secured in Amazon warehouses in Massachusetts.
This is the first time Amazon will be handing over seller’s information and data to state officials for a tax overview. This will help the state of Massachusetts identify exactly which Amazon sellers are not paying taxes.
This is going to be a great headache for third party sellers who hardly comply with state laws, and sales tax payments. If more states decided to follow Massachusetts and demand unpaid taxes, then many sellers will find themselves in hot waters.
Currently, Amazon only collects sales tax on items they sell directly, while leaving it up to sellers to handle their own tax collection and payments. Making the sellers accountable for charging sales tax, where they have physical presence. This includes the states they store their products in.
Initially Amazon refused to hand over any seller information back in September, but had to bite the bullet when filed with a valid and binding legal demand notice. Included in the announcement was a suggestion for sellers to consult with tax advisers, keeping their respective businesses in mind.
The case suggests that more than $13 billion is lost in annual tax collection, as remote sellers are skipping out on tax payments.
James Thomson, a Partner at BuyBox Experts says it’s a game where the sellers are being targeted by the state. He provided advice to sellers on Amazon, and confessed than less than 10% sellers are complaint to pay sales tax. So naturally every state will push to get the information and audit sellers who have not been collecting sales taxes.
Amazon vs. Sellers
VP at U.S. Tax Policy & Government Relations at Avalara; Scott Peterson is a tax software developer, and feels the case is being closely watched. As it puts the states in action, and encourages others to collect sales taxes rather than sitting around and waiting for laws to change.
Peterson Added, that departments of revenue has stated to take action rather than waiting from the laws to be modified and implemented. This is one of the many enforcements on the rise, and certainly creates a unique situation.
However, what makes the situation more complex is the fact that states have different sales tax laws, and different ways of collection. For instance, states such as Minnesota, Rhode Island, & Washington have recently passed a law that requires online marketplaces such as Amazon to collect sales taxes on behalf of their sellers. While South Carolina filed a complaint arguing that existing laws will hold Amazon accountable for third party tax collection.
On the other hand Massachusetts does not have any existing law requirements that push Amazon to take any action. If successful, other states will wish to follow suit. As it is much easier to focus on a large corporation such as Amazon, then running after small sellers. Peterson also added that he feels other states should be paying close attention.
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