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FULFILLMENT BY AMAZON

As a business owner with inventory in several states through Amazon’s Fulfillment By Amazon (FBA) services, you may be at risk. Your inventory is stored in warehouses across the country, at Amazon’s will. But many states assert that a business has nexus, or a connection, to their state merely by having inventory present in the state. You may have no employees, contractors, or office locations in the state, but are expected to collect sales tax on sales to customers located there.

Nexus is a legal concept that determines whether a seller must collect sales tax on a taxable transaction. In one ruling, the United States Supreme Court (SCOTUS) indicated that a state could only force a seller to collect sales tax in certain instances, based off of whether the seller has salespeople or an office in the state. None of the current rulings by SCOTUS have defined the present situation where a third party brings your inventory into the state. Yet states are still forcing you to collect sales tax.

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So what are your options? You can choose whether to register with the state and voluntarily collect and remit sales tax or opt out of registering. 

If you register, not only are there administrative burdens, you’ll be at risk of being audited and assessed. It may not be worth it for a seller to register if he or she would only collect a few hundred dollars of tax, as the tax could be paid out of pocket instead of incurring the increased administrative costs. If the tax is collected but not fully remitted, the state could charge you with a felony for theft of state funds. If you’re audited, it could be determined that more taxes are owed than what was collected and there could be added interest and penalties, leaving you to pay from your business’ bottom line.

If you opt out of registering, you still may be audited, with taxes, penalty, and interest due. If this weren’t appealed in a timely manner, then the seller would be paying all of this out-of-pocket. 

Call our offices today for a free initial consultation to confidentially discuss how we can help you navigate these sales tax problems.  

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