State income taxes


#1

Hi,
My accountant and my tax advisor are telling me that if I am filing sales taxes for other states, including the states where Amazon automatically deducts sales tax like MN, PA and CT, that I also need to file state income taxes for these states based on the portion of income I had for those states.

I realize this is a controversial topic and there are many people in the forums who do not think we need to file anything. I respect your opinion.

However, I have made the decision to file in states because of our volume.

Does anyone in the forums have any information about state income taxes for states where Amazon already collect sales tax and you have economic and/or physical nexus?

Do I need to create a TAX registration for these states?

I appreciate any help or direction.

Many thanks

Liam


#2

This is what you can expect when registering in states when you don’t have to.

Since Amazon is collecting sales tax from the states enrolled in the Marketplace Tax Collection service, you haven’t registered in those states and should not be subject to income tax.


#3

They are probably stating this on the “old” notion that if you are collecting sales tax in another state then you must have a physical location (nexus) in that state. They either need to get with the times or you need to find new people.


#5

Thank you. Where I get confused though is when we have physical nexus. If that state requests Amazon for sales records and sees that we have sold X amount of dollars in their state and we have physical nexus, we need to pay income tax by logic. I have not been able to find anything that legally tells me otherwise.


#6

I’m not going to turn this thread into another debate over WAYFAIR. Please don’t hijack my thread.


#7

Are you talking about personal income tax or corporate tax?

I would suspect that if you are a corporation, you may need to file as a foreign corporation in most if not all of those states.

If you are filing as an individual, I would assume a decision would need to be made based on each state’s requirements for non-resident income tax.

Well above my pay grade, but if you got a blanket statement from your accountant and tax advisor, it might be above theirs too.


#8

Actually, both. I think this is an area that not too many people have a solid idea. It is all new territory. I just want to reduce my exposure, that’s all. If these states come back and demand money, I’m a goner.


#9

When Amazon released the information to the State of California, they provided:

Information about our business in 2017:

  • Contact information (name, address, and email)
  • US Taxpayer Identification Number

I don’t want to get into a battle over the Wayfair decision, but none of these states have conformed to the stipulations outlined by Justice Kennedy in his ruling. Until they do, I have no intention of complying.

Fury


#10

As @Lake said, this is beyond the expertise of the seller’s forum, at least to rely on any advice.

That being said, many states have slight differences for physical nexus that obligates you to collect sales tax and physcial nexus that obligates you to pay proportional income tax. If memory serves, presence of your inventory in a state will generally qualify you for both obligations.

You’ll want to talk with a CPA who’s really in-tune with the nuances of interstate businesses. Your local accountant likely mostly deals with local small businesses. This really requires some expertise to help you way risks and consequences of any action.


#11

Maybe for CA, but for MASS, Amazon provided numbers. MASS knows exactly how much I owe them and they have already asked for it.

OP is seeking information from sellers how have any knowledge on STATE INCOME TAXES.


#12

Sorry, but these are 2 different things. I am giving you that you are doing sales tax. Right or wrong.

Income tax in a state where you have no physical nexus but have economic nexus.


#13

I don’t think that’s a thing.


#14

I never received notification of this. Please post the email.


#15

Perhaps you should open your own topic?


#16

I DO HAVE PHYSICAL NEXUS. My inventory is in these states.


#17

I HAVE PHYSICAL NEXUS. My inventory is in an Amazon warehouse in that state.


#18

You probably aren’t a large enough seller for MASS to worry about…


#19

If you have a physical nexus AND you’ve already registered to collect sales tax in a given state, then it’s probably only a matter of time before they come after you to file income taxes on the portion of your income derived from that state.

States where Amazon collects sales taxes due to Marketplace Facilitator legislation don’t impact your nexus at all. Totally separate.

If you have physical nexus and have not registered to collect sales tax, then the possibility / probability of being required to file income taxes as well has to go into your risk calculation of whether or not to register.

If you’re looking for how to do the first one, it’s going to have to be a CPA, as any advice that you get here is going to either be so general that it’s not of use or so specific to someone else’s situation that it’s not going to be of use.

If you’re looking to discuss the risk / reward / consequences of not filing, that also requires someone with more expertise. And at best, they’ll give you information. I don’t think any CPA will officially “recommend” not paying taxes that are legally required, but if the risk of not paying is low compared to the costs of paying, they may point that out and let you come to your own decision.


#20

Yes you have to register with all the states you’re going to be remitting taxes too, even the ones that Amazon already collects for if you have a website or sell on other platforms like ebay, but if Amazon is the only platform you use then you might not have to register with those states. We did like 30 states so far since we didn’t hit the threshold for a couple and a couple don’t start until later in the year like CA, they start April 1 if I remember correctly. It took me weeks to set up all the states because we didn’t want to go through streamline tax.

Here’s the chart I used to start my registrations https://blog.taxjar.com/economic-nexus-laws/ beware craziness will start once you start registration, we just got like 36 letters from the state of Indiana for back taxes all the way back to 2016, and I’m sure a bunch more are going to try and fish for more taxes, the nature of the beast I guess. Thank you South Dakota!!!


#21

thank you!

How are you handling Indiana?