Amazon vendors have received thousands of dollars in charges due to states including Washington, California, Minnesota, Wisconsin and Massachusetts for not remitting sales taxes for their transactions. Not having collected them upfront when selling items like books, they are left to paying these out of pocket.
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The first states to request back taxes from the giant’s sellers were California and Washington, in 2016; Massachusetts followed the next year. Minnesota and Wisconsin usually include penalties and interest on the demands.
The Supreme Court ruled in South Dakota v. Wayfair that states could begin taxing online businesses from other states that sell to consumers in the states.
As other states consider implementing the same law, Amazon vendors could face ever-increasing charges, cutting deeply into their margins.
The law in most states that apply sales taxes says that a product has physical presence there (and is therefore to be taxed) if even just stored in an Amazone warehouse while it awaits to be sold. However, the vendors do not have control over Amazon’s storing decisions.
Amazon avoids paying taxes by not doing both, owning and transferring the title of products that move through their California warehouses. A retailer in California, who would have to pay taxes, has to apply on both of these. Two subsidiaries of the company, Amazon Fulfillment Services, Inc., and Amazon Services LLC, perform these separately. It is currently in a pending lawsuit in the Superior Court of California.
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Reference: Bloomberg Law
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