Amazon announced on Tuesday that it was giving information about its merchants to authorities in Massachusetts as part of the state’s effort to collect unpaid taxes.
The e-commerce giant informed its sellers that it agreed to give the state data including federal tax ID numbers and the estimated value of inventory stored in Amazon warehouses.
This is the first time Amazon has acknowledged giving information about its sellers to government officials, according to CNBC.
Massachusetts officials hope that the information they receive from Amazon will help them collect more taxes.
Amazon’s decision could spell trouble for other third-party sellers who do not collect sales tax in various states as required by law.
More states could now ask Amazon to provide data about vendors operating in their jurisdictions so that they, too, could collect unpaid taxes.
Amazon announced on Tuesday that it was giving information about its merchants to authorities in Massachusetts as part of the state’s effort to collect unpaid taxes. A clerk is seen above in the Amazon Prime warehouse in New York this past December
Amazon does charge sales tax to customers who buy directly from the company.
But independent vendors who use the site are responsible for charging sales tax according to the state in which they physically hold their products.
Half of all items sold on Amazon are purchased through third-party vendors.
The Seattle-based company initially refused to cooperate with Massachusetts, but it backed down after it received a ‘valid and binding legal demand’ from the commonwealth’s Department of Revenue.
Amazon has informed its sellers to consult a tax adviser since ‘each seller’s business and tax needs are unique.’
For years, states have claimed that they are owed tens of millions of dollars because of vendors who do not charge sales tax.
Amazon has long resisted forcing vendors to charge the tax since keeping prices low has kept customers coming back to the site for their shopping needs.
South Carolina says that Amazon owes it $57 million in unpaid sales taxes on products purchased through the site from 2016, according to The New York Times.
The state took Amazon to court last year and the two sides are awaiting a judge’s ruling.
Washington, Minnesota, and Rhode Island have recently passed laws that require online vendors like Amazon to collect sales tax on behalf of third-party sellers.
Massachusetts doesn’t have a similar law. Instead, it is going after the independent merchants, a far easier target than Amazon.
Amazon is currently in the process of selecting the location of its planned second headquarters – HQ2.
One of the 20 finalists in the running is Boston.