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Imagine owning an online business. The business has inventory in several states via Amazon’s Fulfillment By Amazon (“FBA”) services. This inventory is stored in warehouses across the country base on Amazon’s prerogative. One day, you get a letter from the Florida Department of Revenue. The letter says that because you have nexus with Florida, you have to collect sales tax on sales to Florida customers. Your first thoughts are “what is nexus” and “why does that mean I have to collect sales tax, especially when my store is not in Florida?”

Florida asserts a business has nexus (that is, a connection) with Florida merely by having inventory present in the state. It is irrelevant there are no employees, independent contractors, or office locations in Florida. Rather, you, like many other online sellers, used Amazon’s FBA services.

Amazon’s FBA service, on its own and in its sole discretion, stores inventory in various states, including Florida. Consequently, Florida declares you, and any other seller with inventory in Florida through Amazon’s FBA service, have nexus and must collect sales tax on sales to customers located in Florida. This article will discuss nexus and the application to remote sellers that only have inventory stored in Florida by Amazon, and the sales tax implications for sellers using Amazon FBA services.

Nexus is a legal concept that determines whether a seller must collect sales tax on a taxable transaction. The United States Supreme Court (“SCOTUS”) has determined that if certain requirements are met, then a seller must collect sales tax. What is interesting about these requirements is that SCOTUS has defined one requirement as entailing “substantial nexus.” This term has two requirements. First, whether you, as the seller, have been put on notice that what you are doing could cause you to be sued in that state. Second, whether there is a connection with the state forcing you to collect sales tax.

In one ruling, SCOTUS provides examples that seem to indicate that a state can only force a seller to collect sales tax in certain examples. These examples are whether the seller has salespeople, a plant, or an office in the state. All of these examples have one thing in common –the seller purposefully established a connection (physical presence) in the state. That is, his or her presence in the state was not by accident. Rather, the seller purposefully told his or her salespeople to go into the state to sell to customers in the state. Or, the seller purposefully signed a lease for or purchased a plant or office. None of these examples show the present situation of when a third party brings your inventory into the state without you having a say as to where your inventory goes.

The interesting part of this is whether Florida (or any state) has the legal authority to say nexus is established when Amazon, through its FBA services, brings your inventory into Florida. Florida may have a statute on point; however, that statute is not the supreme law of the land. Florida Statutes cannot overrule the United States Constitution.

If one were to expand Florida’s argument for nexus to other states (which other states do follow suit with Florida) then we could get ridiculous results. For instance, assume you had 40 items of inventory. Amazon’s FBA service shipped each item of your inventory to a different warehouse in a different state. According to Florida’s argument, you would magically have nexus with 40 different states. Suddenly, you have to collect sales tax in states in which you never imagined. The outcome would prevent a seller from structuring his conduct in strategic ways. Based on how SCOTUS has ruled in the past, it seems likely SCOTUS would agree this outcome would be ridiculous.

Nevertheless, Florida’s position on nexus is the law of Florida until statutorily overturned or struck down by a court. The latter is the more likely option.

Knowing the above, what options does a seller using Amazon’s FBA services have if the seller is not located in Florida? These sellers have two options – (1) register with Florida and collect/remit sales tax on sales to customers in Florida, or (2) do nothing and wait for Florida to audit and assess you.

If the first option is taken, this action has very real costs. First, there are the added administrative burdens. The seller may have to hire someone to handle the sales tax returns. The seller must keep an accounting of the sales tax collected in order to fully and properly remit the tax. Sellers also must maintain documentation to show where the sale was shipped to, or Florida could say all sales were Florida sales. It may not be worth it for a seller to register if he or she would only collect a few hundred dollars of tax, as the tax could be paid out of pocket instead of incurring the increased administrative costs.

If the tax is collected but is not fully remitted, Florida could charge the seller with a felony for theft of state funds, if the amount is only $300. Furthermore, being registered with Florida also subjects the seller to audit by Florida. This results in Florida possibly asserting more taxes are due than what was collected. Florida could also assess interest and penalties. In other words, paying the assessment would come from the business’s bottom line instead of in small increments from customers! However, a plus of being registered is the lookback period – which is usually three years.

If all of this was not bad enough, a seller collecting a tax, which should not have been collected, may find himself or herself being sued by his customers.[i] However, if the seller has had nexus for several years, has a large tax liability, and has yet to register, he or she may wish to not register through traditional channels. Rather, the seller may want to consider the Voluntary Disclosure Program, as this could save the seller a large amount of money in penalties. This would be the case because the Voluntary Disclosure Program normally waives penalties. Voluntary Disclosure could also help prevent criminal charges in cases of collecting sales tax but not remitting sales tax.

Should the seller choose the second option, the seller may or may not come up on Florida’s radar. Assuming the seller gets audited by Florida, then Florida could still assert taxes, penalty, and interest are due. If not timely appealed, then the seller would have to pay all of this out-of-pocket. Furthermore, the lookback period by Florida could be unlimited.

In conclusion, Florida’s position that a seller has nexus with Florida merely by Amazon storing the seller’s inventory in Florida will remain the law of Florida until challenged in court or statutorily amended. Any taxes assessed under this theory may be unconstitutional. A seller can choose whether to the register with Florida and voluntarily collect and remit sales tax. If a seller choses to do so, there are risks with potentially being audited and assessed by Florida. If a seller opts for not registering, the seller may never be audited by Florida. Alternatively, the seller could exacerbate its sales tax problems with Florida.

At the Law Office of Moffa, Sutton, & Donnini, PA, our primary practice area is Florida taxes, with a very heavy emphasis in Florida sales and use tax. We have defended clients against Florida sales and use taxes for more than 25 years with over 100 years of cumulative experience working for our firm. Our partners are both CPAs/Accountants and Attorneys, so we understand both the accounting side of the situation as well as the legal side. We represent taxpayers and business owners from the entire state of Florida. Call our offices today for a FREE INITIAL CONSULTATION to confidentially discuss how we can help put this nightmare behind you.


International Shoe Co. v. Washington, 326 U.S. 310 (1945).

Complete Auto Transit v. Brady, 430 U.S. 274 (1977).

World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980).

Quill Corp. v. North Dakota, 504 U.S. 298, 312 (1992).


FL SALES TAX ON DROP SHIPMENTS, published March 24, 2016, by Amanda Levine, Esq.

FL SALES TAX CLASS ACTION ON PIZZA HUT DELIVERY FEE, published December 9, 2015, by Jerry Donnini, Esq.

FLORIDA USE TAX AUDIT LETTER?, published June 14, 2015, by James Sutton, CPA, Esq. and Jerry Donnini, Esq.

AMAZON STARTS CHARGING SALES TAX IN FLORIDA - MAY 1 2014, published May 2, 2014, by James Sutton, CPA, Esq.

GOING TO JAIL FOR NOT PAYING FLORIDA SALES TAX?, published November 3, 2013, by James Sutton, CPA, Esq.

[i] Pizza Hut faced a class action lawsuit over erroneously charging sales tax on a delivery fee. Papa Johns has defended similar law suits in other states as well.

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