Amazon Marketplace and nexus

Does selling on Amazon change the states where sales tax must be collected?

[arieng]

We are evaluating selling on the Amazon Marketplace platform, but are concerned about the implications on nexus in the states where Amazon has a physical presence (KS, KY, ND, NY and WA).

More and more state governments are going after affiliate marketing, stating that having an affiliate in their state is sufficient to create nexus. Subsequently, many large affiliate programs have dropped all affiliates in these states to avoid having to collect sales tax on orders from customers in the state.

In the Marketplace program Amazon collects the money, we ship the product, and Amazon pays us periodically in one lump sum for orders taken less a referral fee.

Our contacts at Amazon have assured us that this will not have any affect on nexus. I trust they know what they're talking about, and I'm sure we're not the only seller that is concerned with this. Having to collect sales tax for 5 more states would be a MAJOR impact to our online business.

I can't seem to wrap my head around why this relationship circumvents the definition of an "agent". If an affiliate is an agent, how can a company actually selling our product and collecting the money not be?

[jwolthuis]

I'm quite sure that the revenue offices in those 5 states would all say that you've now established a nexus in their state. What is less clear is how they would coerce you into collecting their sales tax. Wouldn't Amazon collect sales tax from the customer, since they are processing the payment?

[RhinoFish]

nobody can guarantee what states will consider a nexus, recent events are showing how desperate states are going after "new" nexi.

ecommercetimes.com/story/Got-a-Server-in-Texas-Beware-of-New-Sales-Tax-Rules-70878.html
"The Texas Comptroller's Office recently made revisions to its sales tax rules that could ensnare many companies that merely use computer servers ("servers") located in Texas, requiring them to collect the state's sales tax on sales to customers there."

[arieng]

Amazon's marketplace policy is to collect tax in the states where WE have nexus. They pass it on to us, and we remit it to the state.

Amazon's take is that they are just a checkout function, much like Google Checkout but with product pages. I can see their argument, but I'd hate to get 6 months into this and find out that I did have nexus in 5 new states, for which I hadn't been collecting tax the entire time.

I'm not 100% on this, but if the tens of thousands of merchants already on Amazon aren't having a problem then I guess I should be able to fly under the radar.

[Rugles]

These are good reasons to just have a national sales tax (VAT). Gets rid of all these mysteries and treats everybody equally.

[jwolthuis]

These are good reasons to just have a national sales tax ...

I don't see the connection, unless you're saying that state sales taxes become illegal under a national VAT system. Otherwise, a national VAT simply adds to the problem.

[arieng]

From my limited understanding, the proposals for a national sales tax will supersede any state sales taxes for purchases across state lines. The tax will be remitted to the state where the buyer resides, regardless of the local tax rates there.

I, for one, think that a national sales WOULD simplify things significantly. I also fear that it would make it even harder for small and mid-sized businesses to compete with the really heavy hitters. Either way, this is probably the way things are headed and we will have to adapt...

[LifeinAsia]

It's also bad news for those who live in and/or have a business in a state with no sales tax.