What does Amazon’s address requirement mean for sales tax?
by December 1, 2023
Please note: This blog was originally published in 2019. It’s since been updated for accuracy and comprehensiveness.
Amazon sellers had, understandably, questions about this change, with many citing security concerns.
However, here at TaxJar, we had a different question:
What will Amazon requiring published seller addresses mean for sales tax?
Where an Amazon seller is required to either register for or collect sales tax is based on the seller’s address and where they have sales tax nexus.
Now that Amazon sellers are required to publicize their physical business addresses, state taxing authorities have one more tool in their arsenal when it comes to noncompliant Amazon sellers.
To find out what public addresses might mean for Amazon sellers when it comes to sales tax, we caught up with one of our sales tax partners, Lauren Stinson of Cherry Bekaert.
As is often the case with developments in the world of sales tax, Stinson had both good news and concerning news.
No news is good news
The good news is that according to Stinson, despite a few clients reaching out with concerns, their firm has so far seen no fallout from Amazon’s decision to require public seller addresses.
What would fallout look like? It would likely come in the form of sales tax or nexus questionnaires sent to the business addresses displayed on Amazon.
However, she offered a word of caution. “[State taxing authorities] are just getting up and running in a limited manner again. As we hit the 3 year mark with Wayfair, and with the states hurting for money, we will start seeing a lot of audits and/or nexus questionnaires.”
Expect action as states ramp back up post-COVID
Many sales tax experts expected states to begin pursuing eCommerce sellers for compliance in earnest around the 2-year anniversary mark of South Dakota v. Wayfair. (The 2018 Supreme Court Ruling that allowed states to require “remote sellers” to collect state sales tax.) However, by the time mid-2020 rolled around a huge obstacle stood in the states’ way: COVID.
Stinson cautioned that we likely haven’t yet seen the state’s full response to Wayfair and the advent of economic nexus. As states begin to open back up, they will begin sending out nexus questionnaires with South Dakota v. Wayfair in mind. This will only be exacerbated by the fact that COVID closures and the flagging economy have meant states reporting lower than expected sales tax revenue.
States on the lookout for date discrepancies Post-Wayfair
One thing Stinson did warn about was states now sending audit notices to already-registered sellers.
Apparently this new tactic is designed to determine if sellers had economic nexus in the state before they registered to collect sales tax. For example, many states will look at sellers who registered for a sales tax permit after that state’s economic nexus law went into effect and question whether they should have been collecting sales tax prior to their actual sales tax registration date.
If you are concerned that your business had economic nexus in the months before you actually got compliant by registering to collect sales tax, we recommend speaking to a vetted state and local tax expert (SALT) about your options should a state or states maile you an audit letter.
Amazon collects sales tax on my behalf. Should I be worried?
Thanks to the fact that most states now have marketplace facilitator laws or rules on the books, Amazon now collects sales tax on behalf of its 3rd-party sellers in most US states.
As a quick refresher:
You should always be registered to collect sales tax in your home state, even if Amazon and other marketplaces collect on your behalf.If you sell on other platforms, such as your own online store or a brick and mortar store, you are still required to hold sales tax permits and collect sales tax from buyers in states where your business has sales tax nexus.
If, aside from your home state, you only sell on Amazon and only have sales tax nexus in states where Amazon collects on your behalf, then whether or not you need to be registered for a sales tax permit in those states depends.
Some states have come out and said, “If you are a remote seller who only sells on marketplaces, then you are not required to hold a sales tax permit in our state.”
But other states say differently. Some require online sellers with sales tax nexus in their state to hold a sales tax permit as normal, even when a marketplace collects sales tax on their behalf. Though some states, like Connecticut, might require that marketplace sellers file sales tax returns less often than non-marketplace sellers.
And still other states have failed to make a public determination one way or another about whether or not marketplace-only sellers are required to hold sales tax permits.
Confused? That’s completely understandable. We put together a guide over at our post, “I only sell on marketplaces. Can I cancel my sales tax permits?”
Just keep in mind that marketplace facilitator laws are fairly new and states always reserve the right to make a declaration or change their minds about whether or not marketplace-only sellers should register or remain registered to collect sales tax permits.
Conclusion
We have not heard a hint of any states using Amazon sellers’ public addresses to contact them about sales tax compliance. While this is great news, the change only went into effect a couple of months ago, so this may not be the end of the story.
As always here at the TaxJar blog, we’ll keep our ears to the ground and report back here if anything changes when it comes to public Amazon seller addresses and sales tax.
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