By Peter Mantell
FOR IMMEDIATE RELEASE
September 30, 2019
Earlier this year both Kohl’s and Amazon made a joint statement that, effective July 2019, Kohl’s would accept “eligible Amazon items, without a box or label, and return them for customers for free”. For the average consumer this was great news. Instead of dealing with the hassles of finding a suitable box and shipping it back to Amazon, the consumer can simply take the item(s) to their nearest Kohl’s store and drop the item(s) off. However, for the retailers selling through Amazon and subject to this new program, the new return option has MAJOR nexus, or sales tax responsibility, implications.
When the Supreme Court came out with their initial ruling on Quill in 1992, it was deemed that “sales alone” into a state without the seller having a “physical presence” (a person, agent, employee, inventory, business assets, an address, etc.) did not trigger “nexus” (sufficient grounds for a retailer to collect and remit sales tax within the state). The Supreme Court was clear that states must prove a retailer has a physical presence within the jurisdiction to assert nexus and the obligation to collect and remit sales and use taxes to be Constitutionally valid. However, in the Wayfair decision in June 2018 struck down the physical presence requirement in Quill. Instead, the Court opined that nexus could be triggered by the out-of-state retailer simply by the volume of sales (minimum number of transactions or a minimum dollar amount of sales) delivered into the state. So now a state can impose nexus on retailers with a physical presence or retailers who reach a minimum number of transactions or sales volume.
In many cases, a physical presence was established by having a third-party’s such as a marketplace, Amazon for example, would store the retailer’s inventory within the state and then ship the inventory to a potential client once an order was made. But now there’s a new problem on the horizon for eCommerce retailers. In states where Amazon does not hold inventory and the retailer doesn’t meet the minimums under Wayfair, when a costumer returns an item back to Amazon it is considered returned to the eCommerce retailer; meaning that over 1,150 different Kohl’s locations throughout the U.S. could establish nexus for eCommerce retailers pending on where the inventory is returned and the states sales tax laws. This means that eCommerce retailers could trigger a sales tax responsibility in any and all applicable states that an item is returned to through Kohl’s. This will give the states another avenue to pursue eCommerce retailers over sales tax.
If you think you have returns coming in through the various Kohl’s network, you should contact your accountant or a state and local tax expert to better understand your options.
About Ampersand Accounting: Ampersand Accounting, LLC is a full-service sales tax management and compliance service provider, based in Staunton, Virginia. Ampersand’s extensive experience as e-commerce retailers provides the frame for the application of uniquely qualified talents to meet the needs of e-commerce businesses large and small. Ampersand’s mission is to make expert advice regarding sales tax management strategy including tactics readily available to all eCommerce retailers at an affordable price. To this end, business owners experience minimized risk, and through ongoing services for compliance, and Ampersand clients have a point of contact to assist with their sales tax compliance needs.
Ampersand employs the best and brightest to serve our clients, including CPAs, MBAs, and even the highest designation for sales tax professionals, CMIs. The firm has 100 years of experience, sales tax, and tax technology. Ampersand specializes exclusively in working with eCommerce businesses small and large.