image

Fulfilled-By-Amazon Seller Sales Tax Nexus

In many states, Amazon Fulfillment Centers create Sales Tax Nexus for the FBA Seller. These are state laws, not Federal law. There appears to be no Federal law to supersede the State Nexus Laws. Therefore, the FBA Seller may need to follow the sales tax nexus requirements in each State. Some resources are included below.

Federal Nexus Law or State Nexus Law?

In Quill Corp. v. North Dakota, the Supreme Court ruled that a business must have a physical presence in a state for that state to require it to collect sales taxes. The keyword here is "physical presence". North Dakota tried to extend the vague nexus definition to apply to Quill, ie, " every person who engages in regular or systematic solicitation of a consumer market in the state". But Quill did not have any employee, office, or warehouse in North Dakota and therefore won the case against North Dakota. But for FBA sellers the nexus definition is clear. Many State Tax Laws define nexus as using a warehouse directy or indirectly in the state. Unlike the Quill case which had vague nexus definition, the "indirect use of warehouse" is not vague. The citations below can help FBA Sellers understand that warehouses are specifically defined as nexus. If a seller utilizes a warehouse (in this case, an Amazon fulfillment center), then sales tax nexus is created in that state. "Fulfilled by Amazon" seller could be deemed as indirectly using an Amazon warehouse.

Arizona Sales Tax Nexus

An out-of-state company that is "engaged in business" in the State of Arizona must register with DOR to pay transactions privilege tax (sometimes referred to as “sales tax”) on their retail sales of tangible personal property to Arizona customers. Generally, an out-of-state company is "engaged in business" in Arizona when they have a sales office, warehouse, or sales representative located in Arizona, or have some other physical presence in this state.

Fortunately for FBA sellers, Arizona recently ruled that the marketplace host is responsible for collecting the tax if it controls the delivery/fulfillment process. However there might be a Participation agreement between the FBA seller and the marketplace host where the FBA seller is deemed as the responsible party to collect tax. Thus in a worst case scenario, Can AZ go after the marketplace host for the tax, and can marketplace host go after the FBA seller for the tax?

California Sales Tax Nexus

(c) NONEXHAUSTIVE EXAMPLES OF RETAILERS ENGAGED IN BUSINESS IN THIS STATE.
(C) The retailer maintains, occupies, or uses, permanently or temporarily, directly or indirectly, or through a subsidiary, or agent, by whatever name called, an office, place of distribution, sales or sample room or place, warehouse or storage place, or other place of business in California; or

(c) "Retailer engaged in business in this state" as used in this section and Section 6202 means any retailer that has substantial nexus with this state for purposes of the commerce clause of the United States Constitution and any retailer upon whom federal law permits this state to impose a use tax collection duty. "Retailer engaged in business in this state" specifically includes, but is not limited to, any of the following:
(1) Any retailer maintaining, occupying, or using, permanently or temporarily, directly or indirectly, or through a subsidiary, or agent, by whatever name called, an office, place of distribution, sales or sample room or place, warehouse or storage place, or other place of business.

Indiana Sales Tax Nexus

(c) "A retail merchant engaged in business in Indiana" includes any retail merchant who makes retail transactions in which a person acquires personal property or services for use, storage, or consumption in Indiana and who:
(1) maintains an office, place of distribution, sales location, sample location, warehouse, storage place, or other place of business which is located in Indiana and which the retail merchant maintains, occupies, or uses, either permanently or temporarily, either directly or indirectly, and either by the retail merchant or through a representative, agent, or subsidiary;

II. Engaged in Business in Indiana
An out-of-state vendor is engaged in business in Indiana and must be registered as an Indiana Retail Merchant and charge Indiana Use Tax on tangible personal property delivered into Indiana if the out-of-state vendor:
d. maintains a factory or warehouse in Indiana;

Kansas Sales Tax Nexus

Regulation 92-20-7: Registration of out-of-state retailers; collection of tax by retailers. (a) A retailer shall be deemed to be doing business in this state when engaged in business within this state under, but not limited to, any of the following methods of transacting business:
(1) Maintaining directly, indirectly, or through a subsidiary, an office, distribution house, sales house, warehouse or other place of business;

Kentucky Sales Tax Nexus

(2) "Retailer engaged in business in this state" as used in KRS 139.330 and this section includes any of the following:
(a) Any retailer maintaining, occupying, or using, permanently or temporarily, directly or indirectly, or through a subsidiary or any other related entity, representative, or agent, by whatever name called, an office, place of distribution, sales or sample room or place, warehouse or storage place, or other place of business.

Nevada Sales Tax Nexus

NRS 372.055 “Retailer” defined.
1.“Retailer” includes:
(a) Every seller who makes any retail sale or sales of tangible personal property, and every person engaged in the business of making retail sales at auction of tangible personal property owned by the person or others.
(b) Every person engaged in the business of making sales for storage, use or other consumption or in the business of making sales at auction of tangible personal property owned by the person or others for storage, use or other consumption.
(c) Every person making more than two retail sales of tangible personal property during any 12-month period, including sales made in the capacity of assignee for the benefit of creditors, or receiver or trustee in bankruptcy.
2. When the Tax Commission determines that it is necessary for the efficient administration of this chapter to regard any salesmen, representatives, peddlers or canvassers as the agents of the dealers, distributors, supervisors or employers under whom they operate or from whom they obtain the tangible personal property sold by them, irrespective of whether they are making sales on their own behalf or on behalf of such dealers, distributors, supervisors or employers, the Tax Commission may so regard them and may regard the dealers, distributors, supervisors or employers as retailers for purposes of this chapter.

New Jersey Sales Tax Nexus

"The presence of a New Jersey place of business, warehouse, showroom, or employees in the state is sufficient nexus to require registration;"

New York Sales Tax Nexus

    Whether you operate from a store or sell goods or services from your home, over the Internet, from a cart, or at a craft fair, you will need to register for sales tax if you are considered to be a vendor. You are a vendor and must register with the Tax Department if you sell tangible personal property or services that are subject to sales tax, and meet any of the following conditions:
  • you maintain a place of business in the state, such as a store, office, or warehouse, and sell taxable, tangible personal property or services to persons within the state; or

Texas Sales Tax Nexus

(2) Engaged in business--A person is engaged in business in Texas if the person has nexus with the state as evidenced by, but not limited to, any of the following:
(A) maintains, occupies, or uses, permanently or temporarily, directly or indirectly, or through an agent, by whatever name called, a kiosk, office, place of distribution, sales or sample room, warehouse or storage place, or other place where business is conducted;

Washington Sales Tax Nexus

    A few examples of nexus-creating activities include, but are not limited to:
  • Soliciting sales in this state through employees or other representatives
  • Installing or assembling goods in this state, either by employees or other representatives
  • Maintaining a stock of goods in this state
  • Renting or leasing tangible personal property
  • Providing services
  • Constructing, installing, repairing, maintaining real property or tangible personal property in this state

Other States

Many States have similar nexus laws regarding the use or hiring of warehouses in their territory. More states citations will be added soon but based on the above sample states nexus laws, the FBA Seller who has not yet registered or file sales tax returns should reassess its risks.