Some Amazon U.S. Sellers May Soon Receive Calls from Massachusetts Officials Asking Them to Pay Unpaid Sales Taxes.
On Tuesday (January 23), Amazon informed its platform sellers that the company had agreed to hand over important sellers information to the Massachusetts government – including their federal tax ID number and the stock valuation placed in Amazon's warehouse. This is the first public case of Amazon's transfer sellers' data to U.S. state government tax authorities. The move will help Massachusetts determine which Amazon sellers may owe them unpaid sales tax. But for most third-party sellers who do not comply with state sales tax laws, the news may give them a terrible headache as more states may follow suit in Massachusetts and demand that sellers pay unpaid taxes.
Amazon currently collect sales tax on products it sells directly, but does not charge sales tax on products sold by third-party sellers. And these independent sellers need to be responsible for paying sales taxes in the states where they have any "physical presence," including the state in which they store their products. Amazon said it will share the information with Mass. before January 26, 2018. Amazon initially refused to cooperate in September last year, but decided to comply with the rule after it received "legal and binding legal requirements" from the Mass. Revenue Agency.
Amazon also advises sellers to consult tax consultants because "each seller's business and tax needs are unique." The agreement will be an important case as it sets a precedent for other nations. According to the U.S. Government Accountability Office, U.S. states lose about $ 13 billion in annual revenue due to the sales tax that can not be collected from sellers selling remotely. "This is a game for the U.S. state government and sellers, with less than 10% of sellers sales tax compliance currently, so every state has a motivation to access that information and to audit non-tax sellers.
Scott Peterson, a vice president of U.S. tax software vendor said that the case is being closely watched as it shows that states are taking action to levy sales tax rather than waiting for the new law to come out. Peterson said: "We saw that the U.S. tax department is taking action rather than waiting for changes in the law, and although the government has implemented various forms of measures, it is truly unique this time."
Because different states have different sales tax laws , And the different provisions on who is responsible for the collection of these taxes make the situation even more complicated. Some states have recently passed new laws requiring e-commerce platforms such as Amazon to charge sales tax on behalf of third-party sellers, such as Washington, Minnesota and Rhode Island. South Carolina has filed a petition that requires Amazon to levy a sales tax on third-party sellers on the platform.
This move is a big change for Amazon. After the company refused to cooperate last September, Massachusetts filed a court order to force Amazon to hand in the data by mid-October. It is unclear whether Amazon will make concessions in court or fight the court. Peterson pointed out that when a company uses a language such as "valid and binding legal requirements" in a statement and agrees to comply, it usually means that its lawyers think they are likely to lose the lawsuit in court.
But Paul Rafelson, a law professor at Pace University in the United States, is more subtle about the incident and is also a former tax consultant for General Electric Company. He said it is weird considering that similar claims are so prevalent in the states of the United States, and that Amazon reacted so positively to the transfer of seller data requests this time. Instead, he believes the Amazon's resistance is likely to be a "pretend war" to lessen its liability to any seller because they may sue them because Amazon did not help them to be more tax compliant.
Rafelson said the company can use it as a proof of "self-defending for sellers," given its non-interference with the current tax on third-party sales. And the situation is getting trickier as Boston is struggling to bid to win Amazon's second headquarters (HQ2). In order to secure Amazon's HQ2, cities across the United States offer a variety of tax benefits, as it will create 50,000 new jobs and attract more than $ 5 billion investment. Rafelson said: "This is just a basic requirement put forward by the state government, Amazon has no reason not to reject it, it is just doing a large public show."