
Small retailers who sold through Amazon are facing a tax time bomb - pseudolus
https://www.latimes.com/opinion/editorials/la-ed-amazon-marketplace-taxes-20190501-story.html
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Waterluvian
Wait, so if I sell widgets to people in 50 states from my little website, I
might have to file and submit collected taxes for 50 states? That seems like a
mountain of work for selling my crappy little widgets.

~~~
RRWagner
As a seller of little widgets that just started on Amazon a few months ago,
that's exactly what I have just discovered this past week as Q1 2019 ended. I
sell one widget for $25 and I have to file, and I sell $0 in another state
where Amazon has a warehouse, and I still have to file. TaxJar will do
everything for me, but it's $20 per filing period per state. If you have a
monthly filing period in 50 states that will be $1000/month, $12000 year, just
to file. Actually paying the taxes, that must also be calculated town-by-town,
is on top of the $12000/yr. Note: TaxJar offers a 20% discount for annual and
lots of filings, and is a great company and service, but the foregoing
illustrates the problems for small companies going forward.

~~~
rgbrenner
Each state has a minimum gross sales before sales tax must be collected. In CO
(where I am), it's 100k/yr shipped into CO; in CA, it's 100k/yr or 200 orders.

But if you have a physical presence in CO (or CA), then you have to collect it
for all orders (no minimum). But CO and CA consider Amazon FBA warehouses to
be an extension of your business.

So if you wanted to make it cheaper, just don't use Amazon's warehouses to
store and ship goods from. Also a lot of states allow sales tax to be filed
annually.

~~~
teilo
In most states, filing periods are based upon transactional volume. Sometimes
that's defined as the transaction count. Sometimes that's the tax base itself.
But with lower volumes, you can often do quarterly or annual filings,
depending.

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salvavida2
My tax accountant who used to work for IRS said once: if you have problems
with IRS and CA FTB, satisfy FTB first, because they are essentially
irrational and act like rabid dogs. The state has the entitlement mentally
permeating its government. For example if you create a business in CA that
never operated and don't dissolve it, they will wait 10 years and come after
800*10 franchise tax plus penalty to the tune of $13,000. If you are a small
business, CA is not a good place for you.

~~~
gamblor956
_if you have problems with IRS and CA FTB, satisfy FTB first, because they are
essentially irrational and act like rabid dogs. The state has the entitlement
mentally permeating its government._

This is categorically false. In my practice as a tax lawyer, I deal with the
FTB all the time and they are not only more than reasonable--they are willing
to bend over backwards to help my clients comply with CA tax laws and to waive
penalties. The IRS, on the other hand, especially under the current
administration, is unwilling to negotiate on anything unless you have
political connections to the administration.

If you are a small business, CA is the best place for you unless you don't
care about making money. CA has the largest and best-educated employee base,
the largest customer base, and the largest network of manufacturers,
distributions, and various service providers you could ever need. There's a
reason that CA has been one of the top 10 economies in the world for decades
straight.

~~~
dsfyu404ed
The IRS is currently strapped for manpower/funding so they're as willing to
negotiate as they've ever been. CA is a terrible place to do business (because
of all the overhead associated with complying with CA's labor and
environmental laws) unless that business is tech or selling metaphorical
pickaxes to the metaphorical miners.

Your statements appear to be specifically calibrated to be totally false yet
believable to people who know nothing about the subjects in question and I
find this dishonest and disagreeable.

~~~
callmeal
> CA is a terrible place to do business (because of all the overhead
> associated with complying with CA's labor and environmental laws)

Thanks for letting the cat out of the bag on what business is: exploiting
labor and the environment.

~~~
Kalium
Given what CEQA enables, there need not be any form of exploitation involved
for overhead to become expensive and painful.

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gumby
There are companies that do nothing but calculate the tax on some good in a
given jurisdiction. I only know this because my neighbor works for one, and
before that she worked for another.

I don't know the names and couldn't recommend one if I did, but when she was
at her previous job I asked if it was really a big deal deal and when she
started to tell me it was like opening the gates of hell... Seems like if
there are two such companies on the west coast there must be several at least.

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baybal2
Having American sellers pay tax in other countries will just play to advantage
of Chinese mail order sites who don't have to do so

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femto
Australia recently ruled that its local (10%) Goods and Services Tax (GST)
applies to the majority of online purchases. The big overseas sites, such as
Amazon, claimed that it was not practical for them to collect the GST on
behalf of the Australian Government. It could get interesting now that that
Australia can say "but you have the facility to collect out of state taxes, so
why not out of country?"

Presumably there will be a host of new web based startups offering a one-stop
tax collection service for all jurisdictions in the world.

~~~
SyneRyder
Amazon has reopened the Amazon US store to Australia now that their systems
are upgraded. But it only applies to a handful of items, sold directly by
Amazon - you can't buy items from third party sellers on Amazon US & have them
delivered to Australia anymore. Third party sellers still have to register on
Amazon Australia instead.

~~~
wavegeek
Yes there was recently an item on Amazon I wanted to buy. But could not as it
was not listed on the local amazon.country. It ended up costing me 10X as much
having it shipped from Europe to a friend in the USA and then here.

Enormous costs imposed on me and others for very little benefit.

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teilo
This ruling is actually a larger problem than Amazon. It effects businesses of
all kinds, even those that do not touch online marketplaces like Amazon.

My company has an online presence, selling and shipping out of one state, on
our own custom-developed online platform. We also have a very large "offline"
business selling in-store visual merchandising material to major retail
chains. But it's all produced in and shipped from one state. We also have a
small New York sales office.

In the past, we have only had to collect sales tax for three states. Our home
state, New York, and California. California is interesting. They decided that
since we travel there a lot, and do a significant amount of business there, we
have a business nexus there. The key was really the amount of travel we do
there, even though we have no CA office.

But now, with the Wayfair ruling, the bar has been substantially lowered. An
economic nexus is now sufficient to require us to collect sales tax. We
decided to get ahead of the freight train heading our way. Rather than waiting
for the states to come knocking on our door, we ran the numbers and determined
that we now need to file in about 75% of the states. This is a huge burden.
Even calculating the tax is a nightmare, not to mention filing.

Thankfully, I was already leading a project to integrate a 3rd-party tax
calculation service into our ERP, so the calculation side of things is
covered. Filing is another matter. For that we engaged our accounting firm,
who offers filing as a service. It isn't cheap, but it's cheaper than hiring
the additional staff it would have taken to keep up with this.

I expect that these types of calculation and filing services are going to be
doing a lot of additional business very soon.

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sudonim
If you run a SaaS business this applies to you too especially when you start
to reach any sort of scale. The wayfair case has only emboldened the states.

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javagram
This back tax collection seems weird.

Doesn’t CA have a use tax law like other states requiring taxpayers to file
and pay the sales tax as part of their yearly income tax filing?

I know most people commit tax fraud and fill 0 in on that but in the case of
people who did pay those use taxes, the state is now double dipping and
getting the money from the retailer as well as the customer.

~~~
sundaeofshock
Nope. The sales tax is imposed on the retailer, and is collected at time of
purchase.

~~~
gamblor956
Sales taxes are imposed on the buyer, but is _collected_ by the seller. That
is why buyers are supposed to file use tax returns for out-of-state purchases.

This is in contrast to something like Hawaii's GET, which is a tax on the
seller that is "passed on" to the buyer.

~~~
sundaeofshock
In the state of California, sales tax is imposed on the retailer. The retailer
has the option of collecting that tax from the buyer.

[https://www.boe.ca.gov/sutax/faqtaxrate.htm#1](https://www.boe.ca.gov/sutax/faqtaxrate.htm#1)

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adrr
If they were using FBA they had a nexus in California and should have been
paying sales taxes. This was the case even before South Dakota vs. Wayfair
decision. Amazon runs warehouses and logistics in California and is acting as
an agent.

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_Codemonkeyism
Glad Germany has a federal VAT + EU has a system for VAT implemented.

~~~
luckylion
From what I hear from friends that sell from Germany to EU countries, it's
easier than this US thing but it's not a cake walk either.

~~~
_Codemonkeyism
No it's not, e.g. with b2b where you have to validate VAT IDs - but, it's far
away from the nightmare of the US.

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vturner
How does this work for someone selling on Ebay (or any other auction site)? Is
that classified as something else because I don't recall sales tax being
collected for eBay purchases.

~~~
garmaine
Just because the site didn’t collect it for you, doesn’t mean you don’t owe
it.

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dubcanada
I know 50 states is more than 10, but you've always had to do this in Canada.
Each province roughly has a different tax rate, and different tax rates apply
to different items.

You just submit it all to the Federal government (or Quebec government for
just Quebec) and they deal with the distribution to each province.

For example I get taxed by DigitalOcean based on what my billing address is
set to. DigitalOcean then takes that tax sends 9 provinces worth of it to the
CRA and 1 (Quebec) to the Revenu Québec.

~~~
maroonedanchor
For what it's worth in the states there are also thousands of localities to
deal with as well. Software is needly very quickly to actually properly
account for sales. Also in the US there is a complicated system of sales tax,
use tax, and exemptions for certain businesses buying goods for resale.

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nosauceplease
The LA Times article is wrong and most of the comments here are wrong too.

Merchants ALWAYS had to collect sales tax for sales to any state in which they
have nexus. The only thing South Dakota vs. Wayfair changed is the standard
for nexus -- previously, you had to have physical presence[1] in the state,
but now states can define substantial nexus as making a certain number and/or
dollar value of sales to the state.

You ALWAYS had to remit sales tax to any state you warehouse merchandise in
(except for Virginia and New York, which do not consider merchandise in third-
party warehouses to create nexus). Amazon ALWAYS screwed merchants over by
moving Fulfilled By Amazon / Amazon Multichannel Fulfillment merchandise
around willy-nilly and creating tax obligations for the merchants. (Note: Once
you have nexus in a state, you have to collect and remit sales tax for ALL
sales in that state, not just those from the warehouse in that state[2]). Some
of their competitors, like Ship Bob and Deliverr, do the same thing -- it's
all based on the nasty attitude that the consigned merchandise in their
warehouses belongs to them, not the merchant (who it actually belongs to).
Most merchants appear to handle this by either flagrantly breaking the law, or
by being too stupid to realize they have physical presence outside their home
state.

California AB 147 is one of the many bills that states are passing in the wake
of South Dakota vs. Wayfair to set non physical presence based substantial
nexus standards. In the case of California, AB 147 sets the threshold at
$500,000 gross sales to California addresses.

The Times article says that California is going after small out-of-state
merchants under the new law. Bzzt! They are going after out-of-state merchants
who had physical presence and had already been shirking their tax
responsibilities for years. They would have been going after those merchants
anyway, AB 147 or no AB 147.

Anyone who lies down with wolves (FBA), doesn't do due diligence and complains
they got fleas is getting what they deserved.

The LA Times article also says that the bill requires marketplace facilitators
to collect taxes in order to help small out-of-state businesses, which is
another instance of the article's author failing to read and understand
anything at all. The bill requires marketplace facilitators to collect taxes
because most of the merchants doing business through the marketplace
facilitators fall below the $500k substantial nexus threshold and would thus
be exempt; by declaring the marketplace facilitator as the retailer of record,
California is able to collect taxes on the aggregate sales through that
marketplace facilitator where the sales would otherwise be considered exempt.

I am not a lawyer and this is a rant, not legal advice.

[1] Or certain other things that trigger nexus, such as sales agents. [2]
Although, if the merchandise stored in that state is used only to fill orders
outside that state, it doesn't create a market in that state and might be
argued not to create substantial nexus. Do you feel lucky, punk?

~~~
ikeboy
California may be arguing that, but that doesn't make them right. As far as I
know, there's never been a court that ruled that FBA inventory counts as
nexus, and there's strong arguments against that (not being able to know in
advance where inventory is, not having control over it, commingling).
California was just bullying smaller sellers who didn't want to get into a
legal battle.

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m463
I think an argument could be made for "No Taxation without Representation",
one of the causes of the American Revolution.

~~~
DoofusOfDeath
> I think an argument could be made for "No Taxation without Representation",
> one of the causes of the American Revolution

People always have gripes, some valid and some invalid, against the powers
that be.

One difference with the American revolution was a willingness to commit acts
of violence against British soldiers. I would hope we're able to resolve most
of our gripes without resorting to the horror of war.

~~~
acct1771
Willingness to do that because the government wasn't representing them.

The only job of government.

Don't make it sound unreasonable.

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doodliego
"The states are prohibited from passing ex post facto laws by clause 1 of
Article I, Section 10. This is one of the relatively few restrictions that the
United States Constitution made to both the power of the federal and state
governments before the Fourteenth Amendment." \- wikipedia

What California is doing is unconstitutional and they should be slapped, hard.

~~~
gamblor956
Taw laws are written sufficiently broadly that the _enforcement_ of the laws
can be ex post facto.

In this case, the law merely clarifies the state's long-standing position on
sales taxes based on pre-existing state laws, so it is arguably Constitutional
for them to seek retroactive sales taxes. Whether it is wise for them to do so
is another matter.

