
Amazon Sellers Brood as States Come Calling for Taxes - ingve
https://www.nytimes.com/2017/11/15/technology/amazon-sales-tax.html
======
c2h5oh
It's a clusterfuck of epic proportions.

Let's say you use Amazon Fulfilment (FBA):

1\. Does just storing goods in a state establish tax nexus in that state? Most
states claim it does, but it hasn't been tested in court.

2\. Assuming it does, Amazon keeps moving your goods between warehouses - how
do you keep track which states do you have nexus in and need to have a
business license in?

3\. Assuming you figured it out, in some places you need to register per
county, not per state (I believe it was 10+ registrations in one state, can't
remember which). With all the locations with Amazon warehouses you're looking
at 25+ licences. Possibly 40+.

4\. Let's say you're willing to handle the 40+ business licences you're
supposedly required to hold, you have to file 40+ tax returns with different
deadlines, make 40 payments and keep track of law changes. Also you have to
pay to get a business license and often you have to pay to keep it active
every year.

5\. Add being a foreign seller (let's say Canadian):

\- out of all the states with Amazon warehouses only 2 will accept a non-us
business address when registering for a business license. The others either
don't allow you to select a country, require you to select a US state or only
accept The One True Zipcode Format.

\- taxes you remit using ACH will also routinely explode due to a non-US
address on your US bank account.

\- sure, you can file a paper registration (usually at 3+ times the
registration fee), unless the state only accepts a XFA PDF form that generates
a scannable code. One DOR representative told me the only way I'm getting a
licence in that case is if I show up in person.

\- government issued photo id is sometimes required. Guess which government
often is the only one that exists ;-)

By comparison in EU you collect VAT per destination country, remit it to your
local tax office indicating where it should go and forget about the whole
thing.

~~~
mysterypie
Possible solutions (speaking about the US of course):

1\. Let the federal government establish a uniform national sales tax _and_
outlaw all state and local sales taxes.

2\. Even better, eliminate sales taxes entirely. Replace it with higher income
taxes or property taxes. Yes, yes, I know, regressive, not progressive, taxing
consumption is better, but there's something to be said about an economy
without crazy levels of bureaucracy and regulations.

3\. Just keep fighting off the states until they accept that Internet orders
should be non-taxable. The Internet has completely changed the business models
of music delivery, porn, and newspapers. No reason it can't _eventually_
convince states to back off on sales taxes.

~~~
ggg9990
The federal government has no Constitutional authority to outlaw sales taxes
on intrastate sales.

~~~
mysterypie
I did realize that, but there are ways the federal government could do it. For
example, the way they strong-armed[1] all the states to impose a 55 mile per
hour speed limit for a period of 2 decades by threatening to cut off highway
funding.

[1]
[https://en.wikipedia.org/wiki/National_Maximum_Speed_Law#Ena...](https://en.wikipedia.org/wiki/National_Maximum_Speed_Law#Enactment)

~~~
ggg9990
That was an unconstitutional disgrace and should not be a model for the
future.

~~~
nkurz
I downvoted this, but now I wonder if I was too hasty. I agree that it might
be a disgrace, but I don't know of any legitimate argument that the approach
was unconstitutional. Do you have such an argument?

~~~
logfromblammo
They lacked the explicit constitutional power to enforce the federal will, so
they did it in a sneaky, backhanded manner by pulling at the purse strings.

Same BS as making the uniform drinking age of 21 years.

The feds raise taxes in every state to pay for something, then extort those
same states to dance to the federal tune in order to get back some of the
money taken from their citizens to build roads that would benefit them. If the
Feds didn't take that money, the state could have taken it to build their own
roads.

It would be great if the federal power could not transfer funds to the states
without using apportionment solely by criteria that cannot be gamed
politically. Divide-and-conquer is not a tactic that should be countenanced
within a federation of supposed equals.

I think Real ID is the latest round of the same way of strong-arming the
states, by denying to non-compliant states a benefit that will be enjoyed by
compliant states.

------
maaaats
> _(...) from the millions of independent merchants who sell products through
> Amazon’s website_

It may make Amazon of lot of money, but it has become increasingly frustrating
to try to buy products through Amazon. Get thousands of hits on a search.
Mostly the same crap through a thousand dropshippers. Used to shop through
Amazon because it was consistent and easy. Now it's like shopping on Ebay.

~~~
dawnerd
It gets worse the closer you get to generic items, like usb cables. What’s
more annoying is filtering by prime and selecting amazon as the seller doesn’t
actually stop marketplace sellers from showing up. All they have to do is be
just one cent cheaper than amazons price.

~~~
paulmd
eBay is actually better for "generic" items like USB cables, because at least
you know you're getting whatever's in the picture. There's no telling what
you'll get from Amazon... unless it's sold+shipped by Amazon.

~~~
dawnerd
Even if it’s shipped and sold, because they comingle inventory there’s a
chance it won’t be identical. That’s why anker products are listed the way
they are. Prevents 3rd parties from coming in and selling fakes.

~~~
paulmd
I don't think Amazon comingles "Sold and shipped by Amazon" inventory. Or at
least they didn't use to - do they now?

~~~
vturner
Purchased a Pure water filter shipped and sold by Amazon for my girlfrend...it
arrived yesterday. I go over to her apartment to install it and wow what a
surprise. It was a used filter. The filter element was in a ziplock bag. One
of the faucet attachments was out of its packaging and the inside of the main
unit was wet. It has nearly caused me to not renew Prime this spring.

~~~
astura
This is a different but similar problem. The wearhouse employees mark pretty
much every return as "sellable" and put it on the shelf if it's in the box it
came in. Even if the return reason is "tried it and it doesn't work." Leads to
a lot of people getting returned items.

I wrote this is a comment last week:

>Several years ago I sold a memory card via FBA. The buyer returned the card,
they said they were returning it because of a defect, they said "card slows
down significantly after it gets half full." Amazon's wearhouse receives the
return, they mark it as sellable, and then sell it (as new) again!! Clearly
its not new, the problem was evident only from using it!...If the return
reason is "defective," why would mark as sellable ever be possible?

~~~
vturner
That's incredible! What stunning dishonesty on their part.

------
beberlei
The same is happening in the EU where marketplace sellers are using tons of
shady tactics essentially pocketing the VAT for themselves and having a 10-25%
(depending on EU country) extra profit compared to businesses that follow the
law.

------
Glyptodon
I honestly don't think sales tax as currently structured is worth the
complexities (and is also - uninformed armchair lawyering opinion incoming -
conceivably a violation of the commerce clause since its taxed rate is not
reflective of anything that explicitly occurred within state borders as it
would be with a VAT or similar).

I also feel like taxes are something that deserves to be in a the transaction
handling layers rather than the buyer/seller layers. Of course this would
drive people to cryptocurrency, but imagine if taxes were just added to your
credit card bill based on its billing zipcode and merchants didn't have to
think about it at all. I mean for all kinds of reasons it's not feasible, but
it seems like the least pain point to deal with transaction taxes is at the
transaction.

~~~
thaumasiotes
> imagine if taxes were just added to your credit card bill based on its
> billing zipcode and merchants didn't have to think about it at all

That would be great, for customers. You can have your billing zipcode anywhere
you want, regardless of where you might technically live or buy things.

~~~
dsfyu404ed
No that would be terrible for customers because the .gov would hike taxes and
they wouldn't notice.

------
raker
This seems like a rather glaring omission to have gone unaddressed for so long
by such a giant? Has it not come up before?

~~~
jasode
_> to have gone unaddressed for so long by such a giant?_

It's complicated because Amazon isn't the one who owes the state taxes -- it's
the _marketplace sellers_. This is a different situation from the previous
cases of "nexus" which determines state taxes that Amazon itself owes. That
nexus case was resolved and Amazon has been paying its own state taxes for
many years now.

In other words, Amazon already pays all sales taxes for items that say _"
Ships from and sold by Amazon.com."_ Amazon does not file sales taxes for
items such as _" Sold by RareOldBooks and Fulfilled by Amazon."_

Even if Amazon added a "sales tax" line item for 3rd-party marketplace
sellers, it's still up to those marketplace entities to properly file their
state tax forms and declare Amazon sales revenue. The state regulators know
that Amazon can't file on their behalf but they'd at least like some "help"
from Amazon by way of audited reports so they know which marketplace sellers
to pursue.

In contrast, Ebay does have the ability for sellers to add sales tax for
bidders when they check out. However, it's optional. Ebay doesn't actually
collect the sales tax money for sellers. In other words, Ebay is just
providing a sales tax "calculator" rather than _acting as a sales tax
"collector"_. Paypal also doesn't collect and pay sales tax on behalf of
sellers.

~~~
ikeboy
There are arguments that Amazon does have to collect the tax. The theory is
that they are the actual seller.

See [https://www.ecommercechris.com/south-carolina-amazon-
collect...](https://www.ecommercechris.com/south-carolina-amazon-collect-
sales-tax/),

[https://www.ecommercechris.com/amazon-sales-tax-amnesty-
need...](https://www.ecommercechris.com/amazon-sales-tax-amnesty-need-know/)

[https://www.sellerlabs.com/blog/sales-tax-amnesty-what-
do-i-...](https://www.sellerlabs.com/blog/sales-tax-amnesty-what-do-i-need-to-
know/)

~~~
jasode
_> The theory is that they are the actual seller._

Right, South Carolina in particular wants to change the "seller of record"
from the marketplace sellers to Amazon itself. Most of the other states are
targeting the marketplace sellers and they want more of Amazon's help in that.
(E.g. add explicity sales tax line items like Ebay and provide audit reports
to help identify sales tax evaders.)

~~~
ghaff
Which, if sellers are going to collect sales tax at all, is probably the only
thing that makes sense. It's impractical for small sellers to file tax returns
for all the states they sell to just because they sell on Amazon. (And in the
vast majority of cases, non-Amazon sellers without a presence in the buyers
state don't and, indeed, can't be forced to.)

------
PatientTrades
> Caught in the middle are Amazon’s marketplace sellers, who run the gamut
> from small mom-and-pop operations

This will be a nightmare to fix, especially for the small sellers. Taxes based
on where the seller is, taxes based on where the buyer is, taxes based on
where the warehouse is, etc. Plus accounting and declaring profits government.

------
longbrass
Another very real and expensive proposition from the point of the marketplace
seller is the cost of compliance in each State and within each State every
municipal tax district. Collecting sales tax is relatively easy, filing to
remit that tax in each state is a varied, difficult and expensive process that
most "mom and pop" retailers can't easily comply.

~~~
mikeash
Aren't there services that can handle this for smaller companies? Delivering
physical goods to thousands of households scattered across the US is an even
more varied, difficult, and expensive process, yet many "mom and pop"
companies do it with ease by outsourcing it.

------
coin
> over Amazon’s resistance to charging state sales tax

Correction, it should be "collecting sales tax". The one charging state sales
tax is the state, they want Amazon to collect it on their behalf.

------
throwawaylalala
Amazon has the ability to easily fix this. Also, I would say that I believe
the reason why Amazon isn't collecting and paying taxes is not because of US
sellers; it's because of foreign sellers. Their existing process allows them
to put it on the seller, who may be one of the thousands of chinese sellers
they are signing up. This allows them to outcompete Walmart because they can
say it's the sellers responsibility. The seller, not located in the states, is
under no threat to ever have to pay that state tax.

------
wdn
I thought the law is the buyer is response to pay for usage (sales) tax for
item they purchase online.

Now, it is the seller's responsibility when the sellers don't even live or
ship from that state?

------
lsaferite
It sounds like Amazon should collect taxes for the 3rd Party and FBA
merchants. The states need to indemnify Amazon against sellers messing up so
Amazon is not legally on the hook for any additional taxes owed by a seller.
And Amazon could pass along the compliance costs to the sellers easily enough.
Doing it as a whole for Amazon would simplify the matter and make it 'fair'
for the merchants since it would be for all of them.

------
ballenf
The next issue is going to be the Alibaba's and AliExpress's. Good luck trying
to collect taxes there, so that means that they have an artificial advantage
over domestic sellers (or reseller/dropshippers).

Personally become a big fan of AliExpress. It's a much better experience than
buying a 3rd party item on Amazon. Although, only if you're flexible on
shipping times.

------
armenarmen
My guess is that people/voters in these states aren't chomping at the bit to
pay extra for their amazon goods. Hopefully the desire to not get unelected is
greater than the desire to have not tax money to play with

------
inopinatus
My inner frustrated cyberpunk novelist says that this will be resolved when
Congress admits Amazon as the 51st state.

------
Gustomaximus
I was paywalled form the article but wouldn't an easy solution be to rule;

1) Businesses are responsible to collect tax at point of payment.

2) Sales tax is paid at the rate of, and to the state where-ever the item is
delivered to/or picked-up by purchaser.

------
macawfish
Meanwhile in Congress...

