Amazon KS

Amazon FBAers Have a Kansas Sales Tax Problem

by Mark Faggiano

Kansas state sales tax

Last week many FBAers received this message: By February 12, 2015, Amazon is closing its only currently operating Amazon Fulfillment Center in Kansas, in the town of Coffeyville. While Amazon is reportedly building a new location in Lenexa, this news means there may be a time where FBA sellers may not have sales tax nexus in the state of Kansas. Or will they? How will this all work?

These are the kind of things we have to look forward to – a confusing sales tax situation becoming just that much more bizarre. To help you understand how this will work, here are a few situations that might play out after the Coffeyville, KS Amazon Fulfillment Center closes down.

Amazon Pulls Out of Kansas Completely

In this scenario Amazon closes the Coffeyville warehouse and Lenexa’s doesn’t get built. All Amazon employees, offices, employees, and whatever else they have there are removed from state lines and are otherwise not in operation.

If this happens, neither Amazon itself nor FBA sellers will have to pay sales tax. There is no official nexus, or significant presence, within the state of Kansas since all traces of Amazon’s business are gone.

This means that neither Amazon.com nor sellers who sell through FBA will have to charge sales tax to buyers in Kansas, (unless you, as a merchant, have nexus in that state for another reason.)

Amazon Leaves Traces Behind

Here we have a case where the Coffeyville warehouse is closed, Lenexa’s warehouse is not built, but Amazon leaves traces of the Coffeyville warehouse behind. This could be a few employees, a company van they actively use, or even one office.

In an article form last October, a spokeswoman from the Kansas Department of Revenue said, “Once Amazon closes the distribution facility, we will have to look at what sort of continuing presence they may maintain in the state, either through property, employees, agents or other representatives in the state, and make a determination [about sales tax] at that time.” So Amazon may or may not have to charge sales tax to it’s customers in Kansas after the Coffeyville warehouse closes.

Even if Amazon itself still has to pay sales tax, though, FBA sellers probably would not, as long as the Amazon Fulfillment Center was completely closed and no FBAer had inventory stored there.

Amazon Opens a New Lenexa Warehouse

Rumors abound that there will be a new Amazon warehouse built in Lenexa, most likely sometime in 2015. If this happens, then FBA sellers may have inventory stored in Kansas again. Amazon.com shoppers will have to pay sales tax (if the scenario above didn’t mean that they had to already) and any FBA sellers will have to collect sales tax from buyers in Kansas if they find that they have inventory stored in the Lenexa, KS Amazon Fulfillment Center. In other words, sellers with inventory stored in Kansas might find that they lose nexus in Kansas when the Coffeyville Fulfillment Center closes but then regain it when the Lenexa Fulfillment Center opens.

It’s ultimately up to you how you decided to handle sales tax in your business, Though, As you can see, this has the potential to be very confusing for sellers and buyers all over the country, not to mention Amazon itself and the Kansas Department of Revenue as they try to determine whether Amazon and FBA sellers have sales tax nexus in their state. However, look for this to be an issue in all states moving forward as Amazon closes and opens fulfillment centers.

What do you think? Weigh in on Kansas and sales tax nexus in the comments.

  • Hi Mark,

    Great Post and very timely. Many FBA sellers are scratching their heads and wondering if they should stop collecting sales tax or not. There are a number of factors to considering whenever a company is looking to stop collecting sales tax. The first is whether or not the state has what is called “trailing nexus”. Trailing Nexus means that you could have a responsibility to continue to collect and remit tax for a specified period of time, even after you no longer have nexus. The state of Washington has a five year trailing nexus period and the state of Texas has a one year period. The rest of the states either do not have a tailing nexus period or have one that generally lasts between three – six months. For more information about trailing nexus you can read, Trailing Nexus — Check Out Anytime You Like, But You Can Never Leave (http://peisnerjohnson.com/trailing-nexus-check-out-anytime-you-like-but-you-can-never-leave-4/).

    Kansas by the way does not have trailing Nexus, so you are safe there. However, we are currently advising our clients to take a wait and see approach, before they deregister. As Mark mentioned there are rumors surrounding a Lenexa, Kansas location potentially opening. Amazon usually plays it close to the vest when it comes to their warehouses, but in a Kansas City Business Journal Article there from July, the reporter Rob Roberts, tells us that Amazon has signed a lease to occupy 260,700 sq. feet for the purposes of a logistics center and Amazon’s Job has postings for Lenexa, KS positions including fulfillment specialists. While Amazon may have or will change its mind about this location, we think it wise to wait and see what happens.

    The reason for this approach stems from the simple fact in that there is usually more cost, either monetary or time & energy to shut down a sales tax account only to reopen it months later, rather than continuing to collect and remit tax while we wait and see Amazon’s final decision on Kansas.

    If you do decide to stop collecting sales tax, we would like to remind you that you must officially close out your account, otherwise the state will still be expecting returns and may assess you fines and penalties for not filing.

  • YC

    Interesting. I am just starting to look into selling through Amazon, so this is all new to me. However, do I understand correctly that it is considered that I have a nexus in a state just because Amazon stores my inventory there as an FBAer? If true, it’s potentially really complicated because every time I ship to Amazon, I have to check to see if my settings within Amazon are already set up to collect taxes for that state.

    Do I understand this correctly?

    • Hello, Unfortunately yes, YC. You need to keep an eye on where Amazon stores your inventory (and thus gives you nexus.) You can do that by running this report:

      http://taxjar.wpengine.com/amazon-fba-nexus/

      or using a service like wherestock.com.

  • Great comments. Thanks, Michael

  • nickthenerd

    Amazon fulfillment center is already being used and is at least partly built according to this thread…http://www.reddit.com/r/kansascity/comments/2sv2k5/any_amazon_fulfillment_employees_here/

  • Pingback: Know Your Amazon Fulfillment Center: Edgerton, Kansas()

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