Now more than ever Amazon has been a one stop shop for many consumers. Not only can you buy just about anything you can think of on the Amazon website, but you can also receive lightning fast delivery of whatever you buy. Over the past few years, Amazon has taken their company to the next level. Now, in addition to selling items, Amazon provides a fulfillment service to online retailers.
As Amazon puts it, their fulfillment business “helps you grow your online business by giving you access to Amazon’s world-class fulfillment resources and expertise.” Simply put, the online retailer sends their products to Amazon. Amazon stores the item at one of its distribution centers. Once the item is purchased, Amazon packs and ships your product to the customer. In addition, Amazon provides customer support. While it certainly charges a fee for its services, Amazon boasts that retailers’ sales significantly increase. However, from a state and local tax perspective, this can create a ticking time bomb for the online retailer.
Rather than waiting for the preverbal time bomb to explode, it may be advisable to take the proactive approach. One alternative may be a program offered by most states, called a voluntary disclosure program. The power and beauty of the voluntary disclosure program is that it limits a company’s sales tax exposure to three to four years in most states. This often substantially reduces a company’s exposure for a potential nexus determination.
Now more than ever, states have detailed third party information about what a company is doing in a particular state. This makes it more difficult for an unsuspecting business to remain under the radar and avoid tax responsibilities. Further, the current economic climate has led states to be more and more aggressive in nexus determinations. Therefore, it may be wise to cut your or your client’s exposure to three years and enter into a voluntary disclosure. Further, if you are an online retailer using Amazon’s fulfillment, proceed cautiously.
Original Post By: Jerry Donnini