Imagine having an online business. One day, you decide to use Amazon’s Fulfillment By Amazon (“FBA”) services. Unbeknownst to you, your inventory is stored by Amazon in several states. One day, you get a letter from the Department of Revenue. The letter says that because you have nexus with that state, you must collect sales tax on sales to customers of that state. Your first thoughts are “what is nexus” and “why does that mean I have to collect sales tax, especially when my store is not in that state?”
Many states assert a business has nexus (that is, a connection) with that state merely by having inventory present in the state. It is irrelevant there are no employees, independent contractors, or office locations in the state. Rather, you, like many other online sellers, used Amazon’s FBA services.
Amazon’s FBA service stores your inventory across the country. Consequently, these states declare you, and any other seller with inventory in the state through Amazon’s FBA service, have nexus. Thus, you must collect sales tax on sales to customers located in the state. This article discusses nexus and the application to remote sellers that only have inventory stored in these other states by Amazon. The article goes on to explain the sales tax implications for sellers using Amazon FBA services.