The New California Sales Tax & What Amazon Sellers Can Do
On October 23rd, 2018, Amazon sellers received a notice from Amazon stating that the company would be turning over seller information to the California Department of Tax and Free Administration (CDTFA) on November 6th, 2018.
Based on my experience representing taxpayers currently dealing with California, I expect that California will use that information to try and collect back sales taxes from Amazon sellers as far back as 2012!
Here is the email that sellers received:
Amazon to Disclose Information to California
Amazon has received a valid and binding legal demand from the California Department of Tax and Fee Administration (CDTFA) requiring that Amazon disclose the following information about your business in 2017:
- Contact information (name, address, and email)
- US Taxpayer Identification Number
To comply with our obligations under the law, we plan to provide this information to the CDTFA by November 6, 2018. In many cases, sellers who register and file taxes in California already provide information on their Amazon business as part of their tax filings. Because each seller’s business and tax needs are unique, we encourage you to consult with a tax advisor to answer any questions you may have.
You also may refer to the following resources in Seller Central:
- Solution Provider Network, a directory with information about several tax advisors: https://sellercentral.amazon.com/gp/help/external/G201687890.
- Tax calculation services, optional services for calculating U.S sales and use taxes: https://sellercentral.amazon.com/gp/help/G200787660.
What The Amazon California Sales Tax Means for Sellers
While this is not really a surprise, I understand how these types of emails can be extremely scary. For many of you who have already been contacted by California, the fact that Amazon is disclosing your information doesn’t really change anything.
For those of you who have yet to be contacted, this doesn’t change the fact that California is seeking years of back taxes going all the way back to 2012, which is more than most sellers can afford. Whether or not you registered with California in the last year would not change the fact that you would be exposed to this extreme demand for back taxes. California is coming for back sales tax from Amazon sellers regardless.
Tax Bullying by the State of California
California is unfairly and unethically targeting sellers using bullying tactics in the hopes of getting you to pay taxes that should have been Amazon’s responsibility under state law. For example, according to California’s tax regulation 1569:
A person who has possession of property owned by another, and also the power to cause title to that property to be transferred to a third person without any further action on the part of its owner, and who exercises such power, is a retailer when the party to whom title is transferred is a consumer. Tax applies to his gross receipts from such a sale.
Despite the fact that this regulation describes an Amazon FBA transaction to a T, California has refused to take action to recover taxes directly from Amazon, which is totally absurd. This new law, enabled by the Amazon information disclosure to California, unfairly forces the California sales tax burden on Amazon sellers.
California Does Not Want to Tax Amazon Directly
Even the former head of the California sales tax department, Fiona Ma, went on record in a recent article discussing how the governor refused to enforce the tax laws against Amazon because he didn’t want to disrupt the state’s discussion with Amazon regarding HQ2. Specifically, when Ms. Ma was asked why has California been reluctant to force Amazon’s hand? Ms. Ma stated that:
“Number one… the governor’s office has been trying to woo Amazon into putting a headquarters here.”
What Can You Do About It?
When the government comes collecting, you need an experienced tax attorney on your side. Paul Rafelson has represented hundreds of eCommerce businesses on this specific issue. His advocacy against tax overreach has gone as high as the Supreme Court.
Contact Rafelson Law today!