The U.S. Supreme Court decision allowing states to tax out-of-state sellers is beginning to have its ramifications felt, especially for one Amazon seller.
California sent a $1.6 million sales tax bill to a Philadelphia area man who sells items on Amazon.
The bill, which is for the first six months of 2019, claims to be for sales taxes that Brian Freifelder didn’t collect from consumers who bought his goods on Amazon, according to the Philadelphia Inquirer.
It follows the 2018 U.S. Supreme Court decision in South Dakota v. Wayfair that sellers can be liable for state sales taxes even if they don’t have a physical location in the state.
Friefelder’s situation is getting attention for its eye-popping number but it’s not an isolated situation. The Inquirer reported that Friefelder is believed to be only one of hundreds of thousands of out-of-state merchants who recently received a tax bill from California.
Freifelder, who has fewer than 10 employees, buys on-sale and clearance items from retail stores, keeps them at a Bensalem, Pa., warehouse, and sells them via the Amazon website, apparently with Amazon handling distribution and logistics from there.
California claims Freifelder became liable for the taxes when Amazon stored Freifelder’s items at a California warehouse. Friefelder claims that it was Amazon’s decision to store his items in California, without his knowledge, and that the amount of the bill is not in line with his company’s revenue.
It is not clear whether Friefelder can wriggle out of the tax liability. What is clear is that states are empowered by the Wayfair decision to ramp up sales tax collections on out-of-state sellers, and they are acting on it.
Expect to learn of more situations like Friefelder’s in the near future. Any business that sells online needs to understand the Wayfair decision and its implications.
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