For years, the sales tax compliance obligation of eCommerce sellers has been defined by the 1992 Quill decision, resulting in nexus continuing to be defined by the physical presence standard. That may soon change, as states were extremely quick to take up Justice Kennedy’s suggestion in his concurring opinion in the DMA v. Brohl case by enacting nexus rules squarely aimed at taxing e-commerce in a way that directly contravenes the Quill physical presence requirement. Earlier this month, the United States Supreme Court agreed to hear South Dakota’s challenge to the Quill doctrine, signalling a potential turning point in the ongoing efforts of state governments to collect tax revenue from e-commerce sales.
Even as we stand on the verge of a game changing event at the federal level, states are continuing their efforts to nibble at the fringes of the Quill rule and claim at least some piece of the e-commerce tax pie through any number of increasingly more creative techniques. Connecticut requested Amazon provide information on its Marketplace sellers in April 2017. That spurred neighboring Massachusetts to take an even stronger stance on the issue.
Massachusetts Compels Amazon Into Providing Seller Information
Back in September, we reported that a Massachusetts judge, in an unprecedented move, ordered Amazon to supply records of its Marketplace sellers. This order applied to every seller who had stored inventory in Massachusetts-based Amazon FBA centers since the start of 2012.
As a result, Amazon sent out an email last week notifying its Marketplace sellers the eCommerce giant was required by law to submit information to the Massachusetts Department of Revenue (DOR) by January 26.
So, what exactly does this mean for Marketplace sellers?
- If you had inventory in a Massachusetts fulfillment center from 2012 forward, the Massachusetts DOR has your contact information. This includes your name, address, federal tax ID, and phone number.
- The DOR also has an estimated value of your inventory in Massachusetts. Amazon calculated these estimates based on selling prices in late 2016 and in 2017.
- Having your inventory stored in a state triggers nexus. While Amazon makes it difficult to choose where your inventory is stored, you are on the hook for sales tax in Massachusetts if you sell to Massachusetts customers and your inventory is kept in an FBA warehouse there.
- You need to know where your inventory is being stored. We provided guidance on how you can sort this out in September, and Amazon also has a monthly inventory report tool that allows you to see the quantity, location and disposition of your inventory in U.S. fulfillment centers.
The result of South Dakota v. Wayfair et al will determine the future of nexus, but for now, eCommerce sellers need to stay on top of the latest state-level regulations to ensure they remain in compliance.
Learn more about how you can protect your business in our comprehensive Amazon ebook for sellers.