A common question amongst Amazon warehouse sellers is, “If I am part of the Fulfillment by Amazon (FBA) program, am I obligated to collect and remit sales tax?” This can be a tricky question to answer as it is continuously changing and evolving per state. State and local jurisdictions continually shift and change their tax rules and stances. To complicate things further, Amazon continues to build warehouses in every state. So, finding an accurate answer to what the Amazon warehouse laws are can prove to be grueling. We’re here to help.
In general, most states agree that any inventory stored in their state creates nexus which in turn imposes a tax obligation upon sellers. However, the state's stance on this can be ambiguous. Sellers that utilize a marketplace facilitator find that selling through a third party warehouse can throw a wrench in the works. Why? Because you don’t always have control over where your inventory is located. Typically, inventory creates physical nexus. Though, Arizona has recently taken a different stance on this matter.
Previously, Arizona has stated that storing property for sale in the state (including merchandise owned by FBA merchants) and stored in Arizona in a warehouse owned or operated by Amazon triggered physical nexus. However, Arizona has recently indicated that if you don’t have control of the inventory stored at the third party warehouse, they do not treat that as establishing physical nexus.
On the website Arizona Department of Revenue, the question is asked on their FAQ page;
“I’m temporarily storing property (in the state of Arizona) with a third-party fulfillment center over which I have no control. Do I have physical nexus?” The answer states, “Not likely. Temporarily storing property with a third-party fulfillment center over which you have no control likely does not rise to the level of physical nexus.” To find out more about Arizona’s economic nexus, click here.
On the other hand, Pennsylvania has recently shifted the other direction. The Pennsylvania Department of Revenue has stated,
“When you maintain any inventory in Pennsylvania, you may be subject to various Pennsylvania taxes, including Sales and Use Tax, Corporate Net Income Tax and/or Personal Income Tax.
Your business is subject to Pennsylvania sales tax when:
It is important to know where you have nexus and what your responsibility is. It is imperative to get the correct information and to talk with an expert. As we touched on before, laws change continuously which adds a thick layer of complexity to an already complicated situation. When it comes to sales tax you have to look at it state by state. Thresholds, time periods and sales may be different. Therefore, it is crucial that you look at nexus, taxability and sales tax remittance responsibility state-by-state. Join us on a “What’s Next Call” and we can walk you through each of these questions state by state to help give you good direction. As said in the African Proverb, “If you want to go fast, go alone. If you want to go far, go together.” There is confidence in collaboration. Find peace of mind; it’s a phone call away.
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