Bensalem PA Business Owner Receives $1.6 Million Sales Tax Bill from California
It was reported by the Philadelphia Inquirer that Brian Freifelder, who sells clothing, shoes, and groceries on Amazon.com out of a small warehouse in Bensalem, received an assessment notice from California that he could owe as much as $1.6 million for sales tax (just for the first six months of the year). CA says he is liable for the tax that he didn’t collect from consumers who bought his goods through Amazon. His tax attorney called this “an interstate commerce speed trap.”
Freifelder is among what is believed to be hundreds of thousands of third-party merchants on Amazon who were informed by the CA Department of Tax and Fee Administration that they should have been collecting taxes on sales to CA residents as far back as 2012.
When Amazon opened its first warehouse in California in 2013, it escaped the obligation to collect the taxes on sales by third-party merchants on the company’s site, apparently by convincing state officials that it was not the retailer obligated to collect sales tax in those cases — a distinction that has since been undermined by court decisions in South Carolina, Pennsylvania, and elsewhere.
CA’s position is that when Freifelder’s goods showed up at an Amazon warehouse in CA, he had the same obligation to collect sales tax as any retailer with a store there — even if he had no idea where Amazon was storing his goods.
Current Tax Rule
CA and other states now require “marketplace facilitators” to collect sales taxes. PA has issued its rules in Sales and Use Tax Bulletin 2019-01 which became effective for transactions that occurred on or after July 1, 2019. We discussed the revised economic nexus standards for PA and Philadelphia in our August 7, 2019 blog and NJ and PA’s reaction to the Wayfair court case in our December 19, 2018 post.
The Wayfair nexus standard not only affects sales taxes. PA Updated its corporate income tax nexus standard as we discussed on November 7, 2019.
We discussed the 2018 U.S. Supreme Court Wayfair decision on July 24, 2018 which did away with the decades-old standard that states could force retailers to collect sales tax only if they had a physical presence in the state, making marketplace facilitator laws possible.
Tax Planning Tip:
If you are a seller of tangible goods and you have not already contacted your tax professional to evaluate your nexus tax exposure, do so today rather than wait to receive your $1.6 million tax assessment notice.
If you would like to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.
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About F. Bryan Haarlander, EA, CTRS:
Bryan Haarlander is an IRS licensed Enrolled Agent and who owns and operates a specialized tax services firm serving clients in the western suburbs of Philadelphia, PA, which includes the cities of Chester Springs, Coatesville, Collegeville, Devon, Downingtown, Exton, Frazer, King of Prussia, Paoli, Philadelphia, Phoenixville, Pottstown, Radnor, Reading, Wayne, West Chester in Berks, Chester, Delaware, Montgomery and Philadelphia Counties, as well as clients in Delaware, New Jersey, New York and throughout the continental USA.
A Certified Tax Resolution Specialist, Bryan is well-known for his IRS tax resolution expertise and his book How to Resolve Your IRS Tax Debt Problems.