Does your company now, or has it in the past, taken advantage of Fulfillment by Amazon (“FBA”), and did you recently receive a letter stating you owe California taxes? This blog post explains why you cannot ignore this letter. Please contact us right away if you need help navigating your next steps!
Physical Presence Nexus And Fulfillment By Amazon
Back before Wayfair made headlines and the concept of economic nexus became a household term, essentially giving states the ability to pursue collection of sales tax from internet retailers, “physical presence” still established nexus within a state. A variety of factors determined physical presence nexus, such as employees located within a state, or owning or renting property within the state.
One such obvious physical presence item coming into play for a lot of companies that participate in FBA is inventory. If a company’s physical property (inventory) is held within a state (even if held in a third-party warehouse, like Amazon’s), it creates nexus, or taxable presence, for the company. That means that the company is then responsible for collecting and remitting the state’s sales/use tax and also filing income tax returns in the state.