Dustup Between California Tax Authority and FBA Sellers, Explained

The California Department of Tax and Fee Administration (CDTFA) is being sued for holding Fulfillment by Amazon (FBA) sellers liable for back sales tax. The plaintiff in the case is The Online Merchants Guild, a trade association for thousands of small ecommerce sellers. The issue concerns tax liability for inventory stored in California by Amazon, which in many cases the individual sellers many not even be aware of.

Thanks to SCOTUS’ South Dakota vs. Wayfair decision in 2018, out-of-state sellers are responsible for sales tax even without a physical presence, but does having inventory stored in an FBA facility constitute tax nexus? Scott Peterson, Vice President of U.S. Tax Policy and Government Relations at Avalara, helps us unpack the issue.