New In The Online Sales Tax Realm: States & 3rd Party Sellers

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 Amazon.com? 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 founded Miles Consulting Group which focuses on multi-state tax consulting, helping clients navigate state tax issues such as sales tax and income tax in interstate commerce, including e-commerce.

Prior to forming the firm, Monika worked for 12 years combined in Big 4 Public Accounting and private industry. Monika has provided such services as federal and state income/franchise tax compliance and consulting, sales/use tax consulting, audit support, and credits and incentives reviews. She has served clients in a variety of industries including manufacturing, technology, telecommunications, construction, utility, retail and financial institutions.

Monika graduated from the University of Texas at El Paso (UTEP) with a BBA in Accounting/Finance and has a Masters in Taxation from San Jose State University.

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1 comment on “New In The Online Sales Tax Realm: States & 3rd Party Sellers”

  • Hi Monika! Really appreciate your focused writing. Indeed it will be interesting to see how states continue in their efforts to collect sales tax from online sellers. The info on Minnesota collection in this post was particularly helpful. Thank you.

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