To Our Members and Fellow Online Merchants,

With all that’s going on with the states right now, we wanted to send out a quick update as we move through the process of filing our lawsuit to fight for your right to be free from overly-burdensome and unconstitutional compliance burdens.

As a result of the Supreme Court’s decision in the Wayfair case this spring, states have moved quickly to expand sales tax collection and filing obligations. What many sellers don’t realize is that sales tax collection also implies an even greater burden of complying with income and other tax complexities in most states. Undue burdens are now impacting many more companies that sell products or services online. Any web-based company that does more than 200 transactions in a particular year in a state may be impacted. Of course, the details are state specific.

October 1st is the deadline for new requirements in 12 states: Alabama, Indiana, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, North Dakota, South Carolina, Washington, and Wisconsin.

What does this mean for companies that sell online?

1. It’s a mess – Because of Wayfair, sales tax has become an issue for every business with an online component, where previously businesses that sold physical goods using fulfillment networks like Amazon FBA were the primary targets. Some sellers have expressed interest in registering with all the states.  At the same time, some of the largest sellers that are in the midst of trying to register have expressed to us how difficult it is for them to get registered and absorb all of the state tax complexity by Oct 1st, especially while trying to run a business at the same time.

2. More and more states are adopting marketplace collection laws, which could eventually steer burdens away from small businesses. These states are realizing that marketplace collection is not only a more reasonable burden, but may be the only way to achieve high compliance rates. Now this doesn’t mean a state would say you are off the hook for not collecting in the meantime, but it may offer perspective in terms of how to prioritize your collection analysis.

3. Economic Nexus may not apply to you in an FBA state (this is a bad thing): Many sellers have been so wrapped up in Wayfair that they’ve forgotten about last year’s Multistate Tax Commission amnesty program, and the aggressive pursuit of back taxes by California and Washington. It was just over a year ago when a collective of states got together and told you that if you are an FBA seller you have nexus under the physical presence rule. Because of that, states may not view pursuing you for back taxes as being retroactive. Therefore, registering with the Amazon FBA states based on economic nexus could come back to bite you in terms of states seeking to pursue back taxes from you.

4. Certain states, like Massachusetts, passed their economic nexus laws pre-Wayfair. Massachusetts believes that remote sellers should have been collecting once their economic nexus went into effect on October 1, 2017. But, see the point above about whether this even applies to you. Massachusetts’ position is that FBA sellers had nexus the moment their inventory was placed into an Amazon distribution center, however many years that was.

5. The Court didn’t say that 200 transactions or $100,000 rule was constitutional carte blanche, it anticipated the possibility of a challenge by smaller businesses. The Court’s main concern in Wayfair was about large multi-billion dollar companies like Wayfair trying to escape sales tax collection by relying on the antiquated physical presence rule from 1992. The question of whether the application of these laws to small sellers would be constitutional was left open for further challenge.

This is where the Online Merchant’s Guild has a critical role, and why sellers of all sizes need to support it.  Most sellers do not have the resources to fight even a single state, let alone all of them.  But through your support, our organization can fight on behalf of all sellers to preserve our constitutional rights.  We believe there is a strong basis for challenge on several fronts, including fighting the undue burdens being imposed on small merchants, and fighting to have states interpret their own laws correctly as to who is the retailer when small companies offer products on marketplaces like Amazon.

We believe states need to be taken to task. We are working nonstop to fight back. We started with the Amicus brief filed in the Wayfair case. The next step is taking on the states directly in Federal court. The first filings in this new case are expected in the coming weeks. That said, our fight is far from over at that point. We need your voice and your engagement in the Online Merchants Guild to move this legal case and the larger fight forward. Your questions and voice are welcome.

Please join us!