The Hustle

The days of tax-free Amazon purchases are growing nigh

Earlier this year, Amazon started charging tax on goods from its own inventory in all 45 states that have sales tax. Goods sold by third-party sellers, which make up half of Amazon’s platform, are still largely tax-free -- but that...


November 17, 2017

Earlier this year, Amazon started charging tax on goods from its own inventory in all 45 states that have sales tax.

Goods sold by third-party sellers, which make up half of Amazon’s platform, are still largely tax-free — but that could all change soon: under mounting pressure from legislators, many of these merchants are expected to start collecting tax.

A little backstory

For many years, Amazon sold goods tax-free. Under the 1992 Supreme Court Case, Quill Corporation v. North Dakota, they argued that “states cannot collect taxes from companies that did not have a physical presence there.”

But as the e-commerce giant established warehouses across the US, that argument lost clout — and states came knocking. Today, any item from Amazon’s own inventory is taxed.

Here’s the catch: third-party vendors are still tax-free

Until now, Amazon has allowed third-party sellers to choose whether or not to charge sales tax. 

For vendors in most states, this is a gray legal area. But certain states, including CA, MA, SC, and WA, are coming down hard on sellers, threatening to charge millions in back taxes — and as a result, vendors are increasingly (and begrudgingly) implementing sales tax on their products.

Consumers are likely to bear the brunt of these new fees, to the tune of 5-10% the cost of an order. So, don’t be shocked if your tub of Uranium Ore costs $44 instead of $40 in the near future.

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