In a letter explaining its treatment of remote sellers and marketplaces under state law, the Texas Comptroller of Public Accounts (“Comptroller”) provides that a remote seller operating below the annual “$500,000 safe harbor threshold” and having tangible personal property temporarily stored in Texas at a facility owned by a marketplace provider/facilitator does not need to obtain a sales tax permit and does not have a collection obligation if the marketplace provider has certified that it will assume the duties of a seller.

Typically, we think of having inventory located in state as establishing physical presence-based nexus for sales and use tax purposes. However, from a remote seller’s perspective with respect to marketplace providers, oftentimes the sellers have no idea where their inventory is located. As it relates to Amazon, Amazon moves its FBA sellers’ inventory wherever it wants, generally without the knowledge or approval of the seller. A recent Pennsylvania case that was decided in favor of the taxpayer ruled that merely owning inventory located in a marketplace’s warehouse within the state was not enough of a connection to allow the state to impose past due sales taxes on the remote sellers, namely because the sellers had no control over whether their inventory was actually located in the state. The aforementioned Texas letter appears to fall in line with that line of reasoning.

However, that letter stops short of explaining what should happen when (1) the remote seller’s gross sales fall below the annual $500,000 threshold, (2) the remote seller has inventory located in the state in the marketplace provider’s warehouse, but (3) the marketplace provider/facilitator does not provide the necessary certification that it will assume the duties of the seller. Should that really change the decision around whether the remote seller has a requirement to obtain a sales tax permit? It is still under the annual $500,000 threshold. Furthermore, it would seem to be faulty logic for the state to say that owning inventory in a marketplace provider’s warehouse doesn’t require a sales tax permit for the remote seller when the marketplace provides the necessary certification that it will step into the shoes of the seller, but that it will require a permit if the marketplace does not provide that same certification.

Brian Hollingsworth, Partner

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