Amazon Sales Tax Amnesty Alert!
…the clock is ticking
There is a temporary sales tax amnesty program that certain Amazon sellers may qualify for. The Multi-state Tax Commission is in the process of rolling out a new amnesty program that would allow online sellers to waive any potential tax liabilities they may be facing.
Thirteen states have now joined this program with at least eight more considering participation. Amazon sellers who use the Fulfillment by Amazon program have roughly $2 Billion in unpaid tax liabilities according to the MTC.
These tax liabilities are based on an estimated $2 Billion in uncollected sales taxes that sellers failed to collect on digital marketplace consumer purchases. This opportunity is a chance to waive those obligations as a part of this new multi-state agreement.
A Baker’s Dozen…
This past Wednesday, thirteen States announced a new sales tax amnesty program for online merchants who sell on Amazon as well as other digital marketplace sites. For three months starting August 17th, sellers with potential outstanding tax liabilities will be able to sign up with the Multi-state Tax Commission (MTC) thus enabling them to become compliant and pay their sales taxes …only on future sales.
This is a tremendous opportunity to reset the sales tax collection process for literally thousands of online sellers. It is possible that this type program will never be offered again by the participating States working with the MTC. For that reason it is worthy of thoughtful consideration by those companies that may have such tax liabilities facing them.
Currently, the States that are participating in the program are Alabama, Arkansas, Colorado, Connecticut, Kansas, Kentucky, Louisiana, Nebraska, New Jersey, Oklahoma, Texas, Utah and Vermont. The MTC has said that there are currently eight additional States considering participation in the program.
The Bottom Line
Many States do not require digital merchants to collect sales tax on online sales if the seller does not have a physical presence in a particular State. On top of that Amazon also inadvertently complicates matters through some of its Fulfillment by Amazon (FBA) logistical operations.
The FBA program lets Sellers pay a fee to use Amazon’s substantial warehousing capabilities as well as its massive logistics operations. For an online Seller that uses FBA, it is highly possible that inventory could get shipped to warehouses in certain States that require sales tax to be captured and paid by the Seller. However, not all Sellers are aware of where this warehousing takes place by Amazon, unknowingly creating tax liabilities.
In fact, Amazon sometimes makes it difficult to know where a Sellers inventory may be stored, leaving Sellers liable for sales tax without their knowledge. “It’s a huge area of non-compliance,” says Richard Cram, Director of the MTC’s nexus program.
Mosaica would recommend that a digital Seller consider the following suggestions;
- If you are knowingly selling online and your fulfillment originates in one of the thirteen States that are participating in the MTC amnesty program, and you have not been collecting sales tax in those States, you should review the amnesty program to see if it would apply to your situation.
- If you use FBA for your online sales, you should contact your Amazon portal service center and find out if any of your products are inventoried in those thirteen States for fulfillment purposes.
Our goal is to help protect your profits and while our main focus is to do this by helping manage your foreign exchange transactions…the information contained in this article may also help with regards to sales tax liabilities you may be obligated for.
Make an appointment to speak with one of our Executive Account Managers to further explore what Mosaica can do for your company to protect your profits and help chart a successful course through these turbulent waters.