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Amazon Sellers Hit by Huge Back-Tax Bills Across the Country

Amazon Sellers Hit by Huge Back-Tax Bills Across the Country
03 Mar 2020

Steve Jenson of Logan, Utah, thought he had a good business selling books through Amazon.com Inc.—then he got hit with a $200,000 tax bill from the state of Washington, alleging he had failed to collect and remit sales taxes from customers dating back to 2011.

It was a rude awakening for Jenson, who, like many other Amazon sellers, says he wasn’t even aware that he was supposed to collect the tax in the first place. He is now paying off the bill at a rate of $2,500 a month, which threatens his business.

“I can’t pay money I never made, that I never collected. We can’t afford one more lien. One more state, and that’s it, it’s game over,” Jenson told Bloomberg Tax.

Jenson isn’t alone, and likely won’t be the last third-party seller chased down by states for sales tied to merchandise they housed in Amazon warehouses as early as 2010. At least five states have begun efforts to collect potentially billions of dollars in unpaid sales taxes.

California and Washington were the first to start sending demand letters for back taxes in late 2016, followed by Massachusetts in 2017. More recently, Minnesota, and Wisconsin have confirmed they’re also sending demands for back taxes—usually with penalties and interest attached.

The issue is one of many related to remote sales taxes expected to be aired at a hearing on Capitol Hill Tuesday. Amazon sellers will be among those testifying at a House Small Business subcommittee hearing on how retailers have been impacted by South Dakota v. Wayfair, the landmark Supreme Court sales tax ruling that opened the door to states taxing out-of-state businesses that sell online to customers in their states.

While Amazon collected on sales of its own products shipped from warehouses, it didn’t do so for third-party sales until state marketplace facilitator laws required them to do so. Such laws have blossomed in the wake of Wayfair, which ushered in a new era of sales tax requirements based on a remote seller’s economic activity in a state.

By Tripp Baltz

Source: Bloomberg Tax

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