For many Amazon sellers, this topic comes with a burdensome liability not in terms of paying for taxes but for compliance since each US state has their own tax laws and compliance rules. A newsletter from Liz Adamson is spot on in terms of explaining this complicated tax issue. I personally feel that Amazon should step in to make this tax compliance less burdensome to small and medium-sized businesses alike by collecting and remitting taxes on behalf of the sellers. I know it’s easier said than done but if big companies like Amazon can make the lives of many entrepreneurs easier and have all US states benefit from increased and efficient tax collection. I quoted what Liz sent in her Newsletter.
You may have already heard that the Supreme Court overturned the Quill ruling that had restricted state sales tax collection. Quill had ruled that states can only require sales tax collection from businesses with a physical presence in their state. Last week’s decision on South Dakota v. Wayfair Inc. overturned this and now allows states to require any internet retailers to collect and remit sales tax, even if they do not have a physical presence in the state. The court did not decide whether states may seek sales tax retroactively.
While Amazon itself is already collecting in all states with a sales tax, many 3rd party sellers are only collecting in states where their inventory is stored and even more are only collecting in their home state. Many states have already passed laws outlining minimum sales thresholds that will trigger a sales tax requirement, more states are likely to do the same after this month’s ruling. In many cases the threshold is as low as 200 in-state transactions.
So what are next steps for 3rd party sellers? We recommend you contact a state and local sales tax expert to determine next steps for your company. With over 10,000 sales tax jurisdictions, sales tax compliance is not simple, and in some states it even triggers income tax liability. The court did acknowledge that sales tax collection in all 45 states plus their cities and counties will be burdensome to small business. It’s now up to Congress to pass legislation that reduces the burden on small and micro businesses.