In which states do I have to pay sales tax?


#4

You only have to collect and remit Sales Tax in states where you maintain a +physical presence.+

That does not include Amazon’s warehouses.

For the overwhelming majority of us, that’s just one.

Funky


#5

It is likely that every state that has a sales tax believes that FBA inventory creates a “significant nexus” and thus an obligation to collect sales tax in that state. Some have made that explicit in their regulations. However, the “significant nexus” requirement is a matter of federal, not state, law.

Until the federal courts rule on this specific issue, no one knows for sure if (and how much) FBA inventory creates a “significant nexus”. Even then, it would take a Supreme Court ruling to remove all doubt, since district and appellate courts covering different parts of the country can disagree among themselves.

In the meantime, it’s a matter of risk assessment. If you don’t register as a seller and collect sales tax in every state where you have FBA inventory, you may fly under the radar, or the courts may eventually rule that you are not required to. On the other hand, you do incur a risk of significant tax penalties in those states, which could be enforced in various ways, including seizure of your inventory. And you probably can’t afford to fight those penalties in federal court and set a precedent.

If you do register and collect, you incur a lesser expense, but possibly an unnecessary one.


#6

This is above the pay grade of anyone who answers here. Contact your tax advisor.


#7

Please note that it is illegal to collect sales tax when none is owed. So there can be penalties for unnecessarily collecting sales tax from buyers outside your own state. Taxjar never mentions that.


#8

>
I agree that getting professional advise is very important.

However, it needs to be clear that most people who respond to these questions are the business owners who are making decisions based on their own risk assessment. The OP and each seller needs to make their own business decision based on their understanding of the risks.

One area that needs to be very clear is that there are significant risks in both decisions.

If you choose to only collect sales tax in your state, if the other states ever can find an effective way to identify qualified out of state retailers, they would try to get sales tax for previous years. That information would only be available from Amazon and Amazon would need court orders to provide that very private information. Even then, it would require extensive legal action at a federal level to prove that anything was owed.

On the other hand, anyone who voluntarily registered for sales tax in other states would also be faced with prior years audits, filings for prior years use taxes, a business license, and state income taxes.

Dave


#9

Just about every state with a sales tax insists goods in an Amazon warehouse constitutes a nexus.

Amazon, on state request, is providing information on whose goods are housed in their warehouses in the state. Some sellers have received collection notices.

Not collecting sales tax leads to financial penalties which are often significant.

You are unlikely to suffer any negative consequences for collecting and paying sales tax in any state since almost all require their residents to pay a use tax equal to the sales tax on their purchases.

This is not a complex issue. It is complicated solely by arguments by online sellers who don’t want to be unpaid tax collectors.


#10

Do you have any supporting documentation this has happened, or are you jsut assuming it has?
>
> Not collecting sales tax leads to financial penalties which are often significant.
Not when you don’t have to collect them.
>
> You are unlikely to suffer any negative consequences for collecting and paying sales tax in any state since almost all require their residents to pay a use tax equal to the sales tax on their purchases.
Now that Amazon has over 60 fulfillment centers in I’m guessing 40 states then you really think we have to collect sales taxes in 40 states? I think that is absurd. It is in direct conflict with over a century of interstate commerce rules.
>
> This is not a complex issue. It is complicated solely by arguments by online sellers who don’t want to be unpaid tax collectors.
No, it is complicated by the contradictions in Federal tax laws and the increasing desire for states to collect as much money as they can from non-state residents.


#11

>
> However, it needs to be clear that most people who respond to these questions are the business owners who are making decisions based on their own risk assessment.
>
>
The fact that most people who respond to these questions are the business owners who are making decisions based on their own risk assessment does not make what they say applicable to the OP or even right. The OP should rely solely on a tax professional preferably one who knows the ins and outs of the OPs business and is licensed and bonded to work in the OP’s state. I could post what I do but it would be my opinion of what I do and what has worked for me in the past. Or the OP could just decide what answer he/she like and go with that. It works so well.


#12

>
By the way, if you ask the opinion of a professional from your state, what are the odds that they will tell you that you also need to be registered and paying taxes in other states?

I would expect that their knowledge would be (and should be) less about inter-state taxation than about taxation within his state.

Dave


#13

So you would not expect a tax adviser to be competent but would expect people on the boards to be so? Maybe I just have a competent adviser. Their first question was I an Amazon 3rd party seller and the second was I FBA, FBM or both. A competent tax adviser should know the ins and outs of multiple state tax requirements both income and sales tax. That is why I specified licensed and bonded. That way there is less chance you just get some yahoo with limited experience off the street. You also need to interview them before you hire them. Prepare a list of questions and have at it.


#14

For the most part, Tax Advisors are clueless about internet business.

Funky


#15

Dave and Red Wing are correct.

You only need to collect and remit Sales Tax in states where you maintain a physical presence.

Marketplace Fairness Act

+The General Rule: Physical Presence in the State+

+The current default rule throughout the United States is that you must collect sales tax on Internet sales to customers in those states where your business has a “physical presence.” The physical-presence rule is based on a 1992 United States Supreme Court decision, Quill Corp. v. North Dakota, that addressed the obligations of mail-order businesses to collect sales tax on out-of-state sales. The decision has been extended to include online retailers. Generally speaking, a physical presence means such things as:+

± having a warehouse in the state+
± having a store in the state+
± having an office in the state, or+
± having a sales representative in the state.+

This will change if/when the Marketplace Fairness Act of 2013 passes in Congress. Until then, we have the backing of SCOTUS (Supreme Court of the United Sates), and don’t have to worry about which FBA warehouse ships our inventory.

Feel free to waste your own time and money. Just don’t encourage others to follow your ill-advised example.

Funky


#16

That may be true.

However, what Lake says may be true as well.

In the event that a state identifies your business as having a tax liability you will have to deal with it in that state. Taxing authorities have greater power now in prosecuting your business and you personally for any fees or violations they claim you owe. This includes reporting to any and all credit bureaus.

You should do your own research and talk to a tax accountant who specializes in interstate commerce and make your own decision and risk assessment.


#17

Lake has been posting miss-information for a long time, and has been called out many times for his replies.

I don’t need a tax accountant, and have made my own decision. I’ve been in this business for 19-years, and the Assistant Texas Comptroller can pick me out of a crowded room.

I also have the Supreme Court on my side.

Funky


#18

Possibly. Until this has been actually challenged in court it is just an opinion.

Whether or not the Supreme Court decision is valid in this case is immaterial. What matters is what the individual taxing jurisdictions determine. If they wish to go after you for unpaid taxes or failure to remit in a state in which you don’t reside, it is up to you to pay your money and deal with the legal headaches in fighting the issue. Perhaps yours will be the first case to actually go to trial and determine this in court. However, it is your time and money invested in fighting it.

We currently don’t collect sales tax in any state other than our home state.

However, confidently posting your opinion as fact here is dangerous.


#19

that is counter to my experience but OK


#20

I have a physical presence in both Illinois and Indiana. I live in Indiana but have my items placed in a shop in Illinois. So I am registered in both states to pay Sales tax there and charge buyers accordingly. At shows, everyone pays sales tax. Online only buyers in those two states are charged sales tax. I believe out of state buyers are required to report and pay a user tax (not positive).


#21

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They are, but few comply and there is really no way for the state to monitor it.

Dave


#22

What individual taxing jurisdictions say has nothing to do with me. They can say the sky is blue and I owe a blue sky tax and I wouldn’t care. Tell me - if some town in Wyoming says I need to remit sales tax do you really think I do? States can only make laws for their own citizens, not for other state’s citizens. I am a citizen of NC so the NC DOR is the only taxing entity (other than the Feds) that can make me do anything. Now if I have a business presence in other states then they can make rules for me, but I do not.


#23

No they wouldn’t. And a competent tax advisor would tell you that they do not know. If you have a tax advisor that tells you he knows the answer then he is either incompetent or lying. That’s because the laws are contradictory and states are assuming taxing authority they may not have. States can say anyone owes them tax, but that doesn’t make it so. If the laws and requirements were clear then there would be no uncertainty. And frankly, a tax advisor is no more qualified than anyone else to say an Amazon FC gives you a business nexus in Arizona.