I Sell Products Through Amazon or a Marketplace Facilitator. Do I Owe Tax

I Make Sales through Amazon eBay Walmart etc etc or Some Other Marketplace facilitator do I have an obligation to file sales tax returns and or pay tax the answer to this question is you might and might is a key word here because a lot of states as you may have heard have passed these marketplace facilitator laws so let's take California for example California is the jurisdiction that I'm in and it's one of the more aggressive States towards businesses that operate through a marketplace facilitator so California has actually created a fairly high threshold if you do $500,000 in transactions or less then you do not have to file sales tax returns and you don't have to pay sales tax either reason you know what to pay sales tax is because Amazon or one of these other marketplace facilitators is collecting tax on your behalf you don't have a filing or a reporting requirement until you cross that certain threshold the problem is is the way the marketplace facilitator statutes are written in California if you do any sales outside of the marketplace facilitator then you immediately have a filing and or a obligation to pay over sales tax so a lot of businesses that operate on the internet will sell through Amazon but they'll also make direct sales through their website and you know let's say your Amazon sales are 80 to 90 percent of your business even if you sell like ten dollars through your website to California you have now gone outside of the protection of the marketplace facilitator statues so now you at least have a filing requirement in California amazon may still be collecting the tax through the transactions that you're doing with Amazon but by not reporting now you're out of compliance so it's important as a internet based business to understand what your channels are and understand through those channels what your exposure is from a tax perspective do you have a filing requirement do you owe any thing in tax or do you have a collection requirement in the states that you're selling in and if the answer to those is yes then you need to get in compliance the states are getting more sophisticated in this area they're relying on a lot of third party data they're lying on a lot of information and they're slowly and quickly working through and trying to catch businesses that are not in compliance so the important thing again is have a plan put it in place and execute that plan appropriately so that you can go back to business.

avatar

Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law

COMMENTS