On September 25, a judge in Massachusetts ordered Amazon to hand over the identities of vendors who sell through Amazon’s Marketplace. The order comes after Amazon refused to comply with a summons by the Massachusetts Department of Revenue to hand over these data in August.
Amazon has until October 15 to fulfill the judge’s order, and provide records revealing the identities of all third-party vendors who had stored goods in Amazon warehouses in Massachusetts after January 1, 2012. However, Amazon has not yet indicated how it will respond to the order.
What Is Massachusetts Looking For?
The order for information on Marketplace Sellers comes amid a flurry of efforts from states to increase their tax collections from online sellers. Massachusetts’ order specifically is targeted at online sellers who have stored inventory in the state. When an online seller stores inventory in a state, even if it is held and controlled by a third party like Amazon, that seller is considered to have a physical presence in the state, establishing nexus and an obligation to collect and remit sales tax on their sales made in that state. Later today we will share instructions on how to check if you may be affected by this order.
In demanding information on Marketplace sellers with inventory nexus in Massachusetts, the state is setting itself up to go after these sellers for back taxes owed. Marketplace sellers who have had inventory stored in Massachusetts since 2012 should therefore be prepared for a potential audit in the future, which could lead to a hefty bill for back taxes, including interest and penalties for failure to pay.
What Can I Do Now?
Marketplace sellers facing a potential audit from the Massachusetts DOR in the near future should consider signing up for the Multistate Tax Commission Amnesty program, which is going on through October 17. This program, which Massachusetts is participating in, is an opportunity for online sellers with inventory nexus to voluntarily disclose to the state that they have nexus and an ongoing obligation to collect and remit tax on their sales. In exchange, under this program, the states agree to defer some of the back taxes owed.
Massachusetts, under the MTC amnesty program, does require sellers to comply with their standard three-year lookback policy. This means that sellers would need to reveal information on their sales for the last three-years (or less, depending on when they first began storing inventory in the state), and may require payment of taxes owed for sales made in this period. However, the state will still grant some forbearance of penalties and possibly interest as well.
The MTC program is only available until October 17, however, so sellers interested in apply should act now. For more information on how to apply for the MTC amnesty program and to see if it’s worth it for your business, go here.