During 2012 I’ve learned a lot about how small and large e-commerce companies are using the fulfillment services of Amazon to accomplish their retail objectives. This service occurs in two different ways.
1. the e-tailer owns goods that are located in one of Amazon’s many warehouses and they use Amazon’s website to solicit sales. When a sale is placed via the Amazon website, the inventory is shipped the the customer and the e-tailer is charged a fee for processing the order and for managing the inventory
2. Amazon houses the inventory of the e-tailer but the e-tailer manages its own e-commerce site and shopping cart. When an order is placed, the order is sent to the Amazon fulfillment center and is shipped out. Again, Amazon is paid a fee for processing the order and for other administrative services. http://www.salestaxstrategies.com/tax-consulting-services.html#salesTaxNexu
In both of these situations, the e-tailer owns property in the Amazon warehouse. In virtually every state with a sales tax, the presence of inventory or other property in a state creates “nexus” for sales tax purposes. While it is true that the e-tailer does not solicit sales in any way other than through the internet, that may be the least of the worries these companies may have when it comes to their multistate sales tax compliance obligation. The presence of property in the state and the payment of an agent to help fulfill the sales made to customers int that state may be all that is needed for your company to have nexus in the state where the inventory is located.
If you are a company that uses the wide array of fulfillment services provided by Amazon, then you should take a serious and objective look at what states your inventory is located and in which of the many Amazon fulfillment centers your property may reside. In those states, you may want to seriously re-evaluate your previous nexus considerations and evaluate whether there is exposure for uncollected sales tax and what impact this nexus may have for future compliance.
If you have any questions please call me for a no cost discussion.
Ned Lenhart, CPA