Online Merchants Guild Secures Court Victory Over the Pennsylvania Department of Revenue

MINNEAPOLIS – September 19, 2022 – A Pennsylvania Commonwealth Court opinion (No. 179 M.D. 2021) released on September 9, 2022, issued a victory for the Online Merchants Guild (OMG), which represents Amazon FBA sellers, against the Pennsylvania Department of Revenue. The department sought to collect information and back taxes from approximately 11,000 out-of-state sellers with inventory stored in Amazon warehouses located in Pennsylvania.

In 2012, Amazon and the Pennsylvania Department of Revenue agreed that Amazon would collect sales tax on internet sales. This agreement did not include sales by third-party sellers that use Amazon’s Fulfilled by Amazon service. FBA sellers ship their inventory to a warehouse designated by Amazon; they cannot select the warehouse. Amazon then collects payment from the customer and ships the merchandise directly from its warehouse.

In 2017, the department developed a strategy for collecting tax from FBA sellers on the basis that goods flowing through Amazon’s warehouse network was sufficient to require tax filings by the owners of those goods. The department sent letters to thousands of FBA sellers requiring that they register with the department and begin collecting and remitting Pennsylvania tax. Other states have followed a similar approach, resulting in hundreds of thousands of small businesses facing separate tax filing obligations from dozens of states.

In Friday’s ruling, Pennsylvania’s Commonwealth Court struck down this approach, ruling that having goods flowing through an Amazon warehouse network is not sufficient justification for an out-of-state company to take on all the tax and legal burdens of another state. The company must also be given something in return from the state for it to be able to impose these obligations.

For Empowery, a cooperative for Amazon sellers that supports the Online Merchants Guild, the case is a major victory for Amazon sellers. Empowery’s CEO, Steve Simonson, remarked, “With this victory, Pennsylvania no longer has the power to compel out-of-state companies to jump through costly burdens. So, sellers should reevaluate their positions in Pennsylvania.”

He added, “Furthermore, the states of New York and Wisconsin are next on the list to push back against these overreaching state policies, and the OMG needs help with more funding to keep the fight going. We recommend sellers contribute to to help reverse the injustice that impacts sellers across America. This issue is a big one and will continue to be a fight for some time to come.”

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