California’s Retroactive Sales Tax Grab

  • November 26, 2019

With apologies to LL Cool J, Cali is going all the way back to 2012 as it retroactively seeks sales tax from online sellers.

As Accounting Today Senior Editor Roger Russell notes in a new article, “The move is seen as a bellwether, as other states are watching to see how California fares.”

The move also appears, well, a little uncool given that California previously indicated that it would not apply post-Wayfair sales taxes to online merchants retroactively. But the state has done just that.

“They’re doing the same thing that South Carolina did to Amazon, and Louisiana did to Walmart, running the same play out of the same playbook,” says Vertex Chief Tax Officer - Transaction Tax Michael Bernard, who Russell cites throughout his article. “There are some differences, but they are essentially the same. These states have the determination that they would go back to pre-Wayfair and would make facilitators collect tax from third-party sellers using their platform.”

Back Taxes for Online Sales?

The tax landscape just became more complicated. Here is the verdict in California.

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While the Supreme Court’s Wayfair decision did not assert that states could not retroactively collect tax on past online sales, an amicus brief filed during the case by every state that imposes a sales and use tax indicated that new taxes applied to remote sellers’ online transactions would only be applied prospectively.

Russell cites that portion of the amicus brief in his article, reports that a legal challenge likely will materialize once California targets a specific online seller or marketplace facilitator for back taxes, and concludes with this parting insight from Michael: “The most advantageous way for the small seller to meet the compliance requirement in a post-Wayfair world is to get on the platform of a facilitator, or actually procure your own cloud-based solution.”

Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.

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