SALT Alert: Amazon Puts FBA Sellers on Notice of Possible Sales Tax Nexus

By Steven P. Bryde  |  December 11, 2018

In October 2018, Amazon advised its Fulfillment by Amazon (FBA) sellers that it intended to provide the California Department of Tax and Fee Administration (the Department) with the FBA sellers’ contact information (name, address, and email) and U.S. Taxpayer identification numbers, by November 6, 2018. This intention was pursuant to a valid and binding legal demand from the Department requiring Amazon to disclose certain information about FBA sellers.


On September 27, 2017, the California Department of Tax and Fee Administration (the “Department”) notified customers of that use Fulfillment by Amazon services of their potential obligation to register with the Department, file sales tax returns and pay tax on sales to consumers in California.

California requires that retailers engaged in business in California and making sales of tangible personal property for storage, use, or other consumption in California, not otherwise exempted, are required to register with the Department for a seller’s permit, collect sales tax from the purchaser, and report/remit the sales tax to the Department. Cal. Sales & Use Tax Regs. § 1699. A retailer is engaged in business in California if it has substantial nexus with California, which includes maintaining a stock of inventory in California for sale. Cal. Sales & Use Tax Laws § 6203

The Department’s letter dated September 27, 2017, advised the respective FBA seller that it “received information that indicates your business may use Fulfillment by Amazon services for sales you make over the Internet. As such, if you have inventory that is stored in fulfillment warehouses in California for delivery to consumers in California, you are required to register with the Department, file sales and use tax returns and pay tax on sales to consumers in California.” Further to the letter, if the FBA seller believed it was not required to register with the Department, then it was required to remit a California Nexus Questionnaire to the Department.

Effects in Other States

It is not clear exactly how the Department initially received information about FBA sellers, though it appears Amazon may have volunteered the information, based on notifications in other states. As early as January 2018, Amazon notified FBA sellers that it was legally bound by the New York State Department of Taxation (“NY Dept. Tax.”) to disclose an FBA seller’s contact information as well as the FBA seller’s total sales to New York customers during 2014. It is not clear when the NY Dept. Tax. advised Amazon of its legal obligation.

Similarly, in either late 2017 or early January 2018, Amazon advised FBA sellers that it was legally bound by the Massachusetts Department of Revenue (“DOR”) to disclose by January 26, 2018, an FBA seller’s contact information and the estimated value of the FBA seller’s inventory located in Amazon’s fulfillment centers in Massachusetts. It is believed that the DOR issued Amazon its initial demand in mid-2017 requesting both FBA sellers’ contact information and the information of any third-party vendors that currently store or had, at any time on or after January 1, 2012, stored tangible personal property (e.g., inventory) in any location owned or leased by Amazon Retail LLC or any corporate affiliated entity. Amazon may, therefore, have received similar demands by other states which led it to disclose information ultimately obtained by California’s Department of Tax and Fee Administration.   

Voluntary Disclosure Program

If you are an FBA seller with inventory in one of Amazon’s fulfillment warehouses and you have not already been notified by a state’s Department of Revenue/Taxation that you may be obligated to register as a sales tax vendor in that state, you may be eligible for a Voluntary Disclosure Program (“VDP”). The VDP allows taxpayers to clear up unpaid taxes and file unfiled returns for a limited look-back period. There are generally no penalties imposed for past mistakes, and the VDP typically covers all tax types.

Marks Paneth’s State and Local Tax Group has been instrumental in helping many taxpayers take advantage of voluntary disclosure, from local retailers selling goods/services within one state to FBA sellers with nexus in many states. In 2014, we successfully entered an FBA seller into VDPs with nine states.

Case Study

Prior to Amazon’s mandatory disclosure requirements, Marks Paneth worked with an FBA Seller that believed it had inventory in Amazon’s warehouses in only two states. However, based on past experience with clients, we knew that Amazon can move an FBA Seller’s inventory at its discretion to any of its warehouses throughout the U.S. to accommodate its fulfillment needs. When we inquired with Amazon, we discovered, unbeknownst to the FBA seller, that Amazon held the taxpayer’s inventory in its fulfillment centers in nine states. This gave the FBA seller nexus, for sales tax purposes, in each state. We helped the FBA seller resolve its past-due sales tax collection/registration/filing obligations in each state, limited to a three-year “limited look-back“ period with tax and interest due and without any penalties imposed.

If you are an FBA Seller, please contact Steven P. Bryde, J.D. at 212.503.8806 or by email at, with any questions about your potential income tax or sales tax obligations.

About Steven P. Bryde

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Steven P. Bryde, JD, is a Senior Consultant in the Tax Practice at Marks Paneth LLP. He specializes in state and local taxation for corporations and flow-thru entities in a cross section of industries as well as for individuals. With more than 30 years of tax experience, Mr. Bryde has spent nearly his entire career in public accounting. Over the years, he has held positions at both global and regional accounting firms. Among his accomplishments... READ MORE +

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