3 ms·

You're incorrect about the inventory issue. That was the argument California used, but it was never tested in court and there were strong arguments against it.

by ikeboy 8y ago

You're incorrect about the inventory issue. That was the argument California used, but it was never tested in court and there were strong arguments against it. You're basically repeating California's legal opinion as fact. Then, the Supreme Court ruled last year that nexus doesn't matter, states can tax outside retailers regardless. So many states passed new laws doing just that. The question of whether inventory in FBA creates nexus is still relevant for back taxes, and it's possible that will go to court at some point, although it seems likely California will end up waiving back taxes.

gamblor956 8y ago
No, you're misunderstanding the SCOTUS ruling in Wayfair. The Supreme Court didn't rule that nexus doesn't matter. They simply eliminated the physical nexus requirement of Quill. There are still (undefined) economic thresholds required for nexus for taxing out-of-state retailers. If you sell $5 of stuff into a state, you aren't subject to sales tax collection in that state. If you sell $100,000 of stuff into a state, you are. Unfortunately, the exact threshold where you have economic nexus varies from state-to-state and not every state has yet updated their laws for Wayfair. However, physical nexus still exists (it's "stronger" than economic nexus), and that is why California treats Amazon FBA inventory as giving rising to nexus. It doesn't matter that it has never been tested in court--it's been generally accepted law in the US for decades (predating Quill) and it would take a court ruling for it to be otherwise. (In fact, part of the Quill decision was premised on the fact the seller did not maintain an office, employees...or inventory...in South Dakota and thus had no physical connection to the state.)
- ikeboy 8y ago
  >It doesn't matter that it has never been tested in court--it's been generally accepted law in the US for decades (predating Quill) and it would take a court ruling for it to be otherwise. The issue is there are arguments on both sides how to apply the general accepted law. Do you treat it as seller owned inventory, or do you treat it as consignment? Does commingled inventory belong to a seller, and if so, at what point does title transfer if the seller has not had a sale? If two people send inventory to Amazon, it's commingled, and Amazon stores one of the units in California, which seller has physical nexus? Taking California's position on these legal questions may be the pragmatic approach if someone wants to avoid legal risk, but it's by no means clear that they're right under established law. You're entitled to your legal opinion, but so are others, and other tax lawyers have weighed in and believe California's argument is incorrect here. Given that the issue hasn't been decided in court and there are lawyers arguing both ways I don't think it's right to say that clearly one side is right.
  - MaureenS 8y ago
    That's correct, ikeboy. Also, when California imposed a state sales/use tax collection obligation (effective April 1) on out-of-state sellers with more than $100,000 in sales or at least 200 transactions in the state in the current or preceding calendar year, it also required in-state and out-of-state sellers to collect and remit district sales/use tax in any district where they surpassed the $100,000 sales/200 transactions threshold. Here's the clincher that has created a real headache for a lot of sellers. The law that was enacted April 25 retroactively supersedes the previous April 1 rule. So, as of April 1, the transaction threshold is eliminated, and the sales threshold is now increased to $500,000. The new law also eliminates the need to track sales in each district. And, starting October 1, 2019, it requires marketplace facilitators to collect sales/use tax on behalf of third-party sellers. To be fair, the changes adopted by the legislature should make sales tax compliance a bit simpler for in-state and out-of-state sellers alike. While many businesses are undoubtedly pleased with the new policy, the fact that California adopted one set of rules/requirements as of April 1, changed them weeks later (as of April 25), and set more changes for the not-too-distant future is frustrating.
- deleted 8y ago
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by ikeboy 8y ago

gamblor956 8y ago

No, you're misunderstanding the SCOTUS ruling in Wayfair. The Supreme Court didn't rule that nexus doesn't matter. They simply eliminated the physical nexus requirement of Quill. There are still (undefined) economic thresholds required for nexus for taxing out-of-state retailers. If you sell $5 of stuff into a state, you aren't subject to sales tax collection in that state. If you sell $100,000 of stuff into a state, you are. Unfortunately, the exact threshold where you have economic nexus varies from state-to-state and not every state has yet updated their laws for Wayfair. However, physical nexus still exists (it's "stronger" than economic nexus), and that is why California treats Amazon FBA inventory as giving rising to nexus. It doesn't matter that it has never been tested in court--it's been generally accepted law in the US for decades (predating Quill) and it would take a court ruling for it to be otherwise. (In fact, part of the Quill decision was premised on the fact the seller did not maintain an office, employees...or inventory...in South Dakota and thus had no physical connection to the state.)

ikeboy 8y ago
>It doesn't matter that it has never been tested in court--it's been generally accepted law in the US for decades (predating Quill) and it would take a court ruling for it to be otherwise. The issue is there are arguments on both sides how to apply the general accepted law. Do you treat it as seller owned inventory, or do you treat it as consignment? Does commingled inventory belong to a seller, and if so, at what point does title transfer if the seller has not had a sale? If two people send inventory to Amazon, it's commingled, and Amazon stores one of the units in California, which seller has physical nexus? Taking California's position on these legal questions may be the pragmatic approach if someone wants to avoid legal risk, but it's by no means clear that they're right under established law. You're entitled to your legal opinion, but so are others, and other tax lawyers have weighed in and believe California's argument is incorrect here. Given that the issue hasn't been decided in court and there are lawyers arguing both ways I don't think it's right to say that clearly one side is right.
- MaureenS 8y ago
  That's correct, ikeboy. Also, when California imposed a state sales/use tax collection obligation (effective April 1) on out-of-state sellers with more than $100,000 in sales or at least 200 transactions in the state in the current or preceding calendar year, it also required in-state and out-of-state sellers to collect and remit district sales/use tax in any district where they surpassed the $100,000 sales/200 transactions threshold. Here's the clincher that has created a real headache for a lot of sellers. The law that was enacted April 25 retroactively supersedes the previous April 1 rule. So, as of April 1, the transaction threshold is eliminated, and the sales threshold is now increased to $500,000. The new law also eliminates the need to track sales in each district. And, starting October 1, 2019, it requires marketplace facilitators to collect sales/use tax on behalf of third-party sellers. To be fair, the changes adopted by the legislature should make sales tax compliance a bit simpler for in-state and out-of-state sellers alike. While many businesses are undoubtedly pleased with the new policy, the fact that California adopted one set of rules/requirements as of April 1, changed them weeks later (as of April 25), and set more changes for the not-too-distant future is frustrating.
deleted 8y ago
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