For years, Washington State has been one of the states passing online sales tax legislation. From statutes expanding nexus (making more businesses responsible for the state’s taxes and fees) to its five-point internet sales tax solution, the Evergreen State is quick to come up with more solutions to make the marketplace “fair.”

The latest attempt to level the playing field makes some fairly aggressive changes in the state’s sales tax collection policy for marketplace facilitators.

While the state says it will make the marketplace more fair to brick and mortar retailers, we’d actually argue it’s a compliance burden and onerous on the seller. Why? The “solution” designates three additional definitions businesses will need to examine in order to determine how they apply if the definitions do apply, the business needs to pay close attention to another piece of legislation that may change again in the future.

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Monika Miles, Tax Advisor

If you’ve purchased from Amazon lately, you may have noticed they’ve started charging sales tax. However, many third-party merchants that sell through the website haven’t been collecting it.

In fact, research shows that despite half of online sales happening through marketplaces (a number which is expected to grow to two-thirds within five years), these sellers don’t collect sales tax – even if the retailer they work through does (such as Amazon).

States’ Efforts: Collecting Sales Tax From Third Party Sellers

Come December 1, it’s expected the states involved in the amnesty program we’ve recently discussed will begin collecting sales tax from online merchants – including those that sell through a website like Amazon.

As the Seattle Times points out, this presents an important question: “Who will be responsible for collecting and remitting the taxes when someone buys something from a third-party seller on Is that Amazon’s job or the merchant’s job, or some combination?”

The answer isn’t clear to experts or even to states themselves, as each has a different solution and approach. For example:

  • Minnesota: In June the state passed legislation that requires major retailers (such as Amazon and eBay) to collect sales tax on all items sold – including those sold by third-party sellers. The law goes into effect in 2019, however it could be even sooner if the courts overturn the precedent set forth by Quill Corp v. North Dakota.
  • Washington: The state passed a similar law to Minnesota, although this one goes in to effect in January 2018.
  • Massachusetts: The state is forcing Amazon to turn over their marketplace sellers’ identities. They have a court order behind them, which former Amazon Senior Manager James Thomson foresees setting off, “A scramble among states bent on collecting back taxes.” He also says that if the state succeeds, “It’s going to be a bloodbath” as other states will likely follow suit.

It will be interesting to see how states continue in their efforts to collect sales tax from online sellers.

Have a question? Contact Monika Miles 

Your comments are welcome!

Monika Miles, Tax Advisor

Are you still considering whether to take advantage of the current amnesty program? Designed as a way for online sellers to become compliant in states they may have created nexus (either intentionally or inadvertently), the voluntary program provides an opportunity for these businesses to come forward if they haven’t been collecting income, franchise, use or sales tax.

How the Amnesty Program Works

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