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Amazon's Battle Over Vendor Sales Tax Begins in Massachusetts

By George Khoury, Esq. on October 02, 2017 | Last updated on March 21, 2019

Although many people were slow to give in to the temptation and convenience that is online shopping when it first debuted, the reluctance often disappeared when a person realized they could avoid paying sales tax by buying from an out of state retailer.

However, the honeymoon of tax free online shopping soon came to an end, and sites like Amazon now charge sales tax on the items they sell. One little, multi-million dollar hiccup, however, involves Amazon's seller marketplace, which allows independent merchants to sell online.

MA Dept. of Revenue Frustrated by Amazon's Response

The Massachusetts Department of Revenue issued an official request for Amazon to turn over their records, going all the way back to 2012, covering nearly every third party marketplace seller that operated in the state. Even though the records request is seemingly based on legitimate state needs, the department commissioner only gave Amazon three weeks to comply.

Naturally, Amazon responded in the only way you'd expect a major corporation to respond when asked for five years of records with only a three week notice. After three conference calls, Amazon told the taxman that they did not plan on complying. The taxman then filed a lawsuit seeking a court order to compel compliance.

While few details are known as to why Amazon refused the requests, it doesn't take much to realize that simply responding to such an expansive request would likely cost Amazon quite a bit of money. Additionally, it's not like the state is offering to pay, or even offering to cover the cost of the paper to print it out (and yes Amazon was told to mail or email the docs). Furthermore, the department of revenue isn't trying to collect money from Amazon, but rather the third parties that use the site.

Friend or Lawsuit?

Interestingly, Amazon is considering the state of Massachusetts, potentially, as a site for a new permanent corporate office. However, detailed proposals are due in middle of October, and getting sued by a state's tax department might not help win that bid, which could bring upwards of 50,000 new jobs to the state.

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