Recently some of our New York TaxJar customers have received this message in their email:
Here’s the text transcribed:
In response to a formal inquiry, we are required to disclose limited information about your business on Amazon.com to the New York State Department of Taxation and Finance. In approximately two weeks, we will be providing the Department of Taxation and Finance with the following information from your seller account: name; address; U.S. federal tax ID number; the amount of your Amazon.com sales to New York customers from June 1, 2013, to May 31, 2016; and the New York sales tax, use tax, or local tax collected on those transactions in accordance with your tax-calculation settings.
Consistent with our legal obligations, we are providing this information for all Amazon.com sellers whose primary business address in our records is a New York address and who have elected to use our tax-calculation services for sales to customers in New York. Because your seller account meets these criteria, your information will be included in this mandatory disclosure.In many cases, sellers who register and file taxes in New York already provide information on their Amazon.com sales as part of their tax filings. We encourage you to consult a tax adviser if you have additional questions on this topic. As a resource for sellers, Amazon has compiled a list of tax advisers on our Solution Provider Network: https://services.amazon.com/
Thank you for selling on Amazon.Sincerely,
What does this notice mean for Amazon sellers?
This is just another example about how state taxing authorities, hungry for revenue, are pulling out all of the stops to make sure sellers in their state are registered and collecting sales tax.
In this particular case, it’s important to note that New York appears to have requested from Amazon a list of online sellers who are using Amazon to collect sales tax. It’s illegal to collect sales tax and then keep it for yourself. We’re speculating, but it appears as if the state of New York is looking for sellers who are collecting sales tax and pocketing it.
Alternatively, the presence of a time period in the letter means that they may also be seeking out sellers who had sales tax nexus in New York state going back to June 1, 2013, but weren’t collecting during the whole time period.
For any out-of-state sellers who may be worried about this notice, also take note of the fact that New York is one of two states (the other is Virginia) to rule that using 3rd party fulfillment services alone do not create sales tax nexus. (Keep in mind that you may have other activities that cause nexus.)
For now, if your main Amazon address is in New York and you are sales tax compliant, you should have nothing to worry about.
If you are worried, you do have options. If you haven’t been collecting sales tax in New York (or any other state) and are concerned about fines and penalties, you have options like a Voluntary Disclosure Agreement (VDA). VDA’s and other mitigating measures require a sales tax expert. Here’s a list of vetted CPAs who will be happy to help you.
What does this notice mean for the future?
We’ve heard rumors that this is the case, but now it is confirmed – state taxing authorities are talking to Amazon. And they’re asking for 3rd party seller information.
I don’t expect this New York case will be an isolated incident.
At TaxJar, we often talk about your risk tolerance. For example, if you live in New York and have been selling on Amazon for two years, but only started collecting sales tax one year ago, then the New York Department of Taxation and Revenue may find that you owe the sales tax you should have collected from your buyers. If you were a tiny seller in that first, non-compliant year, then the interest and penalties may not harm your business’s bottomline. But if you should have collected a large amount of sales tax – and didn’t – you may be in more trouble.
If you decide not to comply with sales tax obligations, always consider your risk. Here’s our post on “When to Register for a Sales Tax Permit” that may help you weigh risks vs. rewards. Ultimately when you register for a sales tax permit, and where is up to you. Check back here for more updates about sale tax compliance, Amazon and eCommerce as we receive them.
Have questions or comments about sales tax compliance? Start the conversation in the comments.