Last week a Massachusetts judge ordered Amazon to provide the Massachusetts Department of Revenue with the names, addresses and federal identification numbers of some of it’s 3rd party vendors within 20 days. It’s unclear whether Amazon has responded to the court order, or if they will challenge the ruling.
According to Bloomberg BNA, “The [Massachusetts] DOR had issued a summons to Amazon for information on any third-party vendor ‘who stores, or who has stored, any tangible personal property in any location in Massachusetts that is, or was, owned or leased by Amazon Retail LLC or any other affiliated entity after January 1, 2012.'”
The Massachusetts DOR filed the petition in court after Amazon first refused to hand over seller information.
You can read the text of the judgment here.
What does this mean for Amazon FBA Sellers?
Massachusetts requested info from Amazon specifically to ensure that all 3rd party sellers with sales tax nexus in the state are collecting sales tax from buyers in the state. In other words, under Massachusetts state law, online sellers who store inventory for sale in the state are required to register for a Massachusetts sales tax permit and collect sales tax from Massachusetts buyers. This is an unprecedented move by a state and the first time I’m aware of that a state asked Amazon specifically to provide info on 3rd party sellers. (Though Amazon has in the past provided states with other seller info, which I’ll discuss below.)
I might have nexus in Massachusetts. What do I do?
Are you worried about your sales tax exposure in Massachusetts? Massachusetts is taking part in the current sales tax amnesty. However, Massachusetts is one of the states that requires a three-year look back period to determine your sales tax liability over that time period. Under the amnesty they may, though, waive some fines and penalties to online sellers seeking amnesty.
1. Determine if you have sales tax nexus in Massachusetts
Whether you plan to participate in the amnesty or not, as an FBA seller I recommend you determine if you have nexus in Massachusetts and whether your name and identifying info will be shared with the state. To do this:
- View your “Inventory Event Detail” report in Amazon
- View your nexus states in TaxJar. if you are a current TaxJar customer, you can login and look for the brown “Amazon” badges on your TaxJar State Settings page. We’ll show you a brown Amazon badge next to each state from where we see your Amazon FBA items ship to customers.
2. Determine your sales tax liability in Massachusetts
If you have nexus in Massachusetts and have not been collecting, your next step is to determine how much past due sales tax you owe in the state. To do this:
- Consult with a sales tax expert or
- Use TaxJar’s “Expected Sales Tax Due” report to determine how much past due sales tax you owe to the state of Massachusetts
When determining your potential exposure, also be sure to take into account penalties and interest that may be imposed by the state.
Amazon’s History of Sharing Data with States
We know of at least two other times that a state has asked Amazon for data on 3rd party sellers.
- Amazon shared info on New York residents who were collecting New York sales tax through the platform. This was presumably to make sure that those residents were remitting sales tax to the state. (Collecting sales tax without remitting it is illegal!)
- Connecticut asked Amazon for seller information, though it was unclear what data Connecticut asked for or if Amazon complied. With the New York case, we only found out about the data sharing when Amazon sent their New York residents an email, so it remains to be seen if Amazon shared data with Connecticut or not. Even if Amazon refused to share data at the time, the success of the Massachusetts’ court order may embolden them to try again.
What happens next?
Amazon is currently under a court order to produce the names and identifying details of 3rd party sellers with inventory in the state. Massachusetts has made it clear that their next step upon receiving this data is to determine if 3rd party Amazon sellers are sales tax compliant.
According to sales tax attorney Mike Dillon of Dillon Tax Consulting, Amazon will most likely fight this court order, and Massachusetts may even experience political backlash from the attempt.
On the other hand, according to sales tax expert Mike Fleming of Peisner Johnson, “I think MA is issuing a very loud wake up call for FBA sellers and this is exactly why we advise that, if your sales are taxable and your exposure is material, that taking the conservative route and registering to collect sales tax is the safest position in any state where the FBA program could create nexus for you.
We have long feared and publicly stated that sooner or later a state would sue Amazon for their third-party seller lists and that Amazon would, at least initially, fight it vigorously. I do not have a crystal ball and do not know who will ultimately prevail in this case, but if more states follow this course of action, and we think they will, we believe that Amazon may eventually be forced to capitulate. Just as they eventually stopped fighting pressure to collect sales tax in each state. If this happens it is probably the worst case scenario imaginable for any sellers who are not compliant in the states that follow this course of action.”
What do you think about this issue? Are you going to begin collecting sales tax in Massachusetts? Start the conversation in the comments section!