Many Amazon 3rd party sellers received the below notification that Amazon would share their information with Rhode Island taxing authorities by February 15, 2018. While this notice struck many sellers as similar to January’s notification that Amazon would share sellers’ identifying information with Massachusetts taxing authorities, this round of information sharing is a bit different. For one, this is not about fulfillment centers.
Let’s dig in. First, here’s a copy of the notice that sellers received:
Why is Amazon sharing seller information with Rhode Island?
In 2017, Rhode Island passed and implemented a “notice and report” sales tax law. Several states have laws like this, and these laws are technically not tax laws but “reporting laws.” (That distinction is important, and we’ll go over it in the “Doesn’t this contradict the precedent set by Quill v. North Dakota?” section below.)
In Rhode Island’s notice and report law, sellers with no sales tax nexus in Rhode Island who are not collecting Rhode Island sales tax are required to notify customers that the customer owes use tax on a purchase. Rhode Island sellers who make more than $100,000 or over 200 transactions in Rhode Island sales in a calendar year are also required to annually report customer information to the Rhode Island taxing authority. See the section below on “What are a ‘non-collecting retailer’s’ responsibilities under Rhode Island’s notice and report law?“ for more.
Amazon, as a marketplace, is also subject to the same law. In Rhode Island, Amazon is now termed a “Retail Sale Facilitator.” And as a “retail sale facilitator” Amazon is required to do the following:
- Annually provide a list of names/addresses of retailers for whom you collected Rhode Island sales tax; and
- Annually provide a list of names/addresses of retailers for whom you did not collect Rhode Island sales tax but who still used your services.
To sum it up, Amazon sharing 3rd party seller information with the state of Rhode Island is due to compliance with Rhode Island’s notice and report laws.
You can find out how to find your Rhode Island sales tax liability here:
Is this just about FBA sellers?
No. In this case, the way Rhode Island’s notice and report law works, Amazon is required to provide information on all Amazon 3rd party sellers. You can read more about Amazon’s responsibilities to Rhode Island as a retail sale facilitator on the Rhode Island Department of Revenue website here.
Doesn’t this contradict the precedent set by Quill v. North Dakota?
No. This is where the fact that this law is a “reporting” law and not a “tax” law comes into play. Colorado was the first to pass a notice and reporting law, and the case went all the way to the US Supreme Court in DMA v. Brohl. Long story short, the Supreme Court ruled that the law, because it merely required “reporting” and wasn’t a tax that crossed state lines, was not unconstitutional and sent it back to a lower court where it was allowed to stand.
Incidentally, this is also the Supreme Court case where Justice Anthony Kennedy encouraged states to send a new case to the Supreme Court in hopes of overturning Quill. The result of that encouragement was South Dakota v. Wayfair which will be heard this spring. If Quill is overturned, the protects regarding “sales tax nexus” will be gone, and states could require that all sellers collect sales tax.
What are a “non-collecting retailer’s” responsibilities under Rhode Island’s notice and report law?
Under Rhode Island’s law, you are considered a non-collecting retailer if you do any of the following:
- Use in-state software to make sales at retail of taxable goods/services;
- Sell, lease, deliver, or participate in any activity relating to the sale, lease, or delivery of taxable goods/services, including: o Use of a referrer, retail sale facilitator, or other third party for direct response marketing or referral;
- Use of a sales process including listing, branding, selling, soliciting, processing, fulfilling, or exchanging;
- Offer taxable goods/services for sale through retail sale facilitators;
- Are related to a person with physical presence in this state.
Under this definition, a seller who sells online and makes sales to buyers in Rhode Island.
The good news is that even if you are a “non-collecting seller,” you are only required to comply with Rhode Island’s notice and report law if you meet the following criteria:
- $100,000 in gross revenue from the sale of taxable goods/services delivered in
Rhode Island; or
- 200 or more transactions of taxable goods/services delivered in Rhode Island
If you do fulfill the above criteria, you are required to to:
- Register, collect, and remit sales tax; or
- Do all of the following:
- Post the Website Notice on your website;
- Notify the customer at the time of purchase (Checkout Notice);
- Notify the customer within 48 hours of purchase (48-Hour Notice);
- Send customer with $100+ in annual purchases the Annual Notice by January 31st; and
- Provide by February 15th each year the Annual Attestation that the notice requirements were fulfilled.
These laws are designed to make not collecting sales tax so onerous and difficult that sellers register and collect sales tax rather than going through the hassle and rigamarole of posting notices on their websites, notifying each customer at checkout, sending out individual notices to customers by January 31, and then sending a report to Rhode Island by February 15th.
You can read all of this straight from the state by viewing Rhode Island’s Notice to All Non-Collecting Retailers at the Rhode Island Department of Revenue website.
Could Amazon just stop selling in Rhode Island?
That’s doubtful. Many states – including Colorado, Louisiana and Vermont – also have notice and reporting laws, and Amazon is already sales tax compliant in every US state with a sales tax. Though Rhode Island’s notice and report law requires extra reporting from retail sales facilitators like Amazon, I don’t think it’s burdensome enough to convince Amazon to stop selling in an entire state.
As an Amazon seller, what should I do next?
As always, knowledge is power when it comes to sales tax.
Check your Rhode Island sales from 2017 to determine if you have over $100,000 in sales or more than 200 transactions to buyers in the state. You can do this quickly in TaxJar or by pulling a report from Amazon and slicing and dicing your data in Excel or another program.
If you find that you have either, you will be required to comply with Rhode Island’s guidelines for all Non-Collecting Retailers, or register for a Rhode Island sales tax permit and start collecting sales tax.
Next, double check the other states that have notice and reporting laws. Join us for a webinar on Tuesday February 20, 2018 to learn what you need to know about this new and pernicious attempt to collect sales tax that is flying under many sellers’ radars.
Do you have questions or something to say about Amazon sharing seller information with Rhode Island? Start the conversation in the comments or in our Facebook group Sales Tax for eCommerce Sellers.