Dave and I spent about 40 minutes today talking on his YouTube channel about sales tax and how it works in the U.S.
This was prompted by one of his subscribers asking the question recently, but that is not the first time he got this questions, so we decided to attack the issue head-on.
Specifically the question was on how a U.K. seller would deal with collecting sales tax if they use Amazon FBA, or other such fulfillment centers in the U.S.
This year, several states took some positions that Amazon, eBay, and other marketplace sellers do not necessarily agree are legally correct. The fundamental issue is one of Nexus.
In the U.S., if your business has a warehouse or office, your business has Nexus in that state and must collect sales tax to any shipments to an address in that state.
States are now arguing that having product in a state satisfies Nexus and therefore products located in a warehouse, even if not owned or operated by the product’s owner, is Nexus and the business must collect the proper sales tax.
It is very likely this legal interpretation will need to be resolved at the U.S. Supreme Court level, but when that might happen is unclear.
A decision could still be years away. But in the meantime states are going to try anything to get some piece of the sales tax pie they believe is owed to them.
It is murky legal issue for which there is no definitive answer. We are not tax experts but we believe if you asked 5 accountants (CPAs) here in the U.S., you probably would get 5 different answers.
With this in mind, here is the video we recorded today. We hope you find it interesting and insightful and it helps you understand the issues a little better.
If you have any questions, please feel free to use the comments section below. We are happy to provide you with answers as best as we can.
And if you disagree with anything we say, we especially would like your thoughts on why. This is a complicated problem for international sellers, so any opinion, even if it doesn’t match ours, is welcome.