Amazon FBA Sellers Can’t Pull Inventory Reports Over 18 Months
Amazon FBA sellers cannot pull inventory reports beyond 18 months, creating an issue to learn their accurate nexus date. Unfortunately, the states are taking a different position, which will prove to be costly.
Amazon FBA sellers who have been selling for 2-3 years and never registered for sales tax likely have a tax liability due to several FBA states (up to 30 of them).
During this time, the thought process for most sellers is not to worry about sales tax during these time frames, because Washington, in January 2018, became the first state to enact marketplace nexus, where the marketplace facilitator (in this case, Amazon) would be responsible for collecting and remitting sales tax.
The challenge is that many states did not enact marketplace nexus until later in 2019, and many sellers had physical nexus via FBA stock before Amazon took over collecting and remitting sales tax.
The challenge is that many states did not enact marketplace nexus until later in 2019, and many sellers had physical nexus via FBA stock before Amazon took over collecting and remitting sales tax.
The challenge for sellers now looking to get into compliance, especially in the wake of California’s aggressive stance to freeze the seller’s bank account to collect one-time sales tax, had sent thousands of sellers scrambling to determine when they first had FBA stock to determine their exposure.
Unfortunately, sellers are finding out Amazon made a change in 2020, and you are no longer able to pull your inventory reports beyond 18 months.
This puts sellers in a position that they can, at best, pull data as far back as August of 2019, when they may have been selling since June of 2017.
You might be thinking, “Doesn’t Amazon collect and remit sales tax in about 43 states now?” The answer is yes, but if you had physical nexus before a state had marketplace nexus (when Amazon collects), you had exposure or owe past sales tax.
For example, Texas became a marketplace nexus state in October of 2019. If you were selling on Amazon FBA with stock in Texas prior to October 2019, you have exposure for sales tax. What did you start selling in December of 2018? That is over two years ago. How do you determine when you first had nexus or FBA stock? That is the problem.
We reached out to several states in writing to ask them what nexus start date they would use if a seller cannot pull inventory data beyond 18 months.
Here are some of the states’ answers, which may be shocking and expensive to some sellers upon an audit.
Texas Comptroller’s Office:
Our default position will be that the Taxpayer has inventory in Texas as soon as they enter the FBA program. We are willing to discuss any taxpayer’s specific situation and documentation that can be provided.
Washington State Department of Revenue – Audit Division
Although Amazon may limit their available reporting to the past 18 months, it is still the Taxpayer’s responsibility to keep business records within the state’s statute of limitation period (which may be up to 7 years, plus the current year). Suppose the Taxpayer does not have supporting documentation. In that case, it is presumed the Taxpayer would have physical presence nexus through storage of goods in Washington as of the date the company began to have sales through Amazon.
We have reached out to several other states and are waiting for their responses.
Amazon now only allows you to pull inventory data for the past 18 months. If you have been selling since early 2018 or before, we cannot currently determine an accurate physical nexus date based upon FBA stock.
We have reached out to our contacts that work directly with Amazon, and the response has been:
The statute of limitations for inventory reports is only 18 months. What does this mean? This creates a real issue when getting into compliance with past sales tax due prior to the states taking over with marketplace nexus.
We have reached out to the global tax director at Amazon and are waiting for input on what can be changed about pulling inventory reports beyond 18 months. Stay tuned for updates.
In the meantime, your best approach for 2022 is to find out your total exposure from when you first started selling and your best guess as to when you first had inventory. Learn more about how we can help you with that process using our sales tax nexus analysis. We will be providing continuous Amazon updates to our clients regarding the 18-month inventory challenge.
We will be providing our client’s updates from Amazon for the 18-month inventory challenge as they are provided.
