Sellers using fulfilled by Amazon (“FBA”) services have unique issues with respect to charging, collecting, and remitting sales and use taxes across the country.  Often unaware of potential issues, FBA users are regularly blindsided by receiving a nexus letter from a state, which often is an indirect way of the state asserting that you have nexus in their state.  Due, in part, to the recent Wayfair case, many states have enacted different variations of economic nexus statutes making sales tax compliance more burdensome than ever.  Whether economic sales tax nexus exists in a state or not, the issuance nexus questionnaire can often be the start of a long, tedious, and expensive fight to either explain that your company does not have nexus, or pay years of taxes that were never collected.

In the United States, forty-five states and Washington D.C. impose a state sales tax and within those states some 15,000 local jurisdictions have some version of a sales tax. Since their inception, merchants that are physically present in those states had an obligation to charge, collect, and remit the sales tax. In a post internet economy, however, many states have taken the position that the physical location of inventory is enough to establish physical presence and requires the company to collect its state sales tax. This concept is referred to as nexus and once nexus is established, your company has an obligation to collect sales tax.

From an FBA user, this can be a serious problem. Imagine you are an FBA seller with your primary location in North Carolina. As part of the FBA Amazon program, your inventory is housed in California. Suddenly you now have to collect tax on all sales made into California.

On top of the complexity of just knowing where to collect, each state has its own nuances when it comes to sales tax rules. Some states tax identical goods completely different. Some states tax shipping and others do not. Some states, like Alaska, do not even charge a state sales tax, yet some localities in Alaska do. It would be an understatement to say, you have to become a sales tax expert or hire a professional just to have a chance to comply with the rules in each state.

As if the general rules were not complicated enough, the Supreme Court recently held in a case called Wayfair that South Dakota’s economic nexus statute is acceptable. In short, South Dakota enacted a law that if a seller had more than $100,000 in sales or over 200 transactions, they were treated as if they had physical presence and required to collect its state tax. Although completely contrary to the long standing physical presence rule, the Supreme Court allowed the law due to the ever-changing economy. Since the Wayfair decision, about half of the states have enacted similar legislation. This means that if your business sells across state lines and you have over $100,000 of sales or over 200 transactions, you may have nexus even if you do not have physical presence or inventory using FBA services.

Given the complexities facing a business using fulfilled by Amazon services, it is incredibly burdensome to comply or even become aware of sales tax issues across the country. Our firm is well versed in the areas of fulfilled by Amazon sales tax law and multi-state sales tax compliance. Our team can efficiently do a comprehensive sales tax nexus study to prevent you from getting the dreaded nexus letter from a state. Even if you have already received the nexus letter, our team of sales tax lawyers can assist in getting it resolved.

About the author: Gerald “Jerry” Donnini II is a shareholder of the Law Offices of Moffa, Sutton, & Donnini, P.A. Mr. Donnini concentrates in the area of state and Federal tax matters, with a heavy emphasis on the tobacco, alcohol, motor fuel and related industries. He also handles a myriad of multi-state state and local tax issues. Mr. Donnini is a co-author for CCH’s Expert Treatise Library: State Sales and Use Tax and writes extensively on multi-state tax issues for SalesTaxSupport.com.  For more information please call us at 888-966-8216.