Amazon is a juggernaut of constant change, innovation, and growth. From humble beginnings, Amazon has always had an eye towards the future, with a relentless drive to empower shoppers and make it easier for sellers to conduct their business without the complexities of needing to worry about logistics and fulfillment.
In this update, we discuss three interesting trends that are changing the eCommerce landscape for Amazon FBA businesses. These trends are:
- US States Sales Tax collection
- Amazon’s entry into Australia.
- The new Amazon Marketplace Developer Council, which will provide input towards the future evolution of Amazon’s marketplace APIs.
US states are becoming much more aggressive towards sales tax collection
For many years, a large proportion of Amazon sellers have slipped under the radar when it comes to paying sales taxes outside of their home jurisdiction. Tax collectors have stepped up their game, and are now employing cunning tactics to find those who aren’t compliant. For example, California and Washington have started acting like customers by placing orders on vendors stores. If sales tax is being collected, they abandon the cart and move on. However, if taxes aren’t being collected, they put on their investigator caps, and start chasing the seller.
Rhode Island and Massachusetts recently removed the “seller use tax notice and reporting requirements”, which is set to result in serious consequences for merchants who sell in these states that aren’t registered for sales tax.
Now that Amazon is handing over seller information to states, it is likely that many more states will jump on the bandwagon. This is a dangerous path for FBA merchants that haven’t complied with sales taxes in the past, as the states will soon have much more information and ability to identify and pursue people who owe backdated taxes.
In a recent development, the US Supreme Court overruled the 1992 Quill case through the South Dakota vs. Wayfair case. The ramifications of which throws the traditional definition of physical nexus completely out the window for state sales tax purposes. It no longer matters whether a company has ties to the state. States can tax them anyway.
If there are sales in that state, the state can create its own rules about who is subject to collecting and filing. Several states have already been dipping their toes into the concept of “economic nexus” by forcing companies to file based on dollars sold and/or the number of sales in that state. The ruling in South Dakota v. Wayfair just made economic nexus a-okay.
It’s not all bad news for US-based sellers though. International vendors who have traditionally undercut local FBA merchants will find it much harder to avoid paying sales taxes moving forward. This is likely to make compliant US sellers more competitive in the long run by forcing foreign merchants to factor the cost of sales tax into their prices.
Amazon Enters Australia
In December last year, the Amazon marketplace officially launched in Australia. On February 27th, Amazon opened their first FBA logistics center in Melbourne. Last month, they announced that they are going to open a new FBA logistics center in Sydney during the second half of 2018 to support their growing operations. By offering Prime subscriptions to shoppers around Australia, Amazon is asserting their influence on the local retail landscape and presenting a serious challenge to traditional brick and mortar stores.
Compared to other regions of the world, Australian consumers have high disposable incomes, widespread mobile usage, and are comfortable with online shopping.
By embracing the Australian marketplace while it is still relatively new, FBA sellers have the opportunity to establish a presence in this marketplace before the competition really begins heating up.
Amazon Marketplace Developer Council
Amazon has put together a group of software developers and organizations that regularly use the marketplace APIs to make integrations for Amazon sellers. The marketplace developer council will provide input towards the roadmap and future development priorities for the Amazon marketplace APIs.
By allocating resources towards developing comprehensive APIs and soliciting guidance from strategic players in the industry, Amazon is affirming their commitment towards a more automated and integrated future. This is likely to result in the emergence of more interactive add-ons that make the role of being a seller easier.
- Jeremiah Kovacs, Muse Minded
During the next 5-10 years, big data, blockchain technology, and artificial intelligence will play a significant role in changing the nature of online shopping and payments. Developers and entrepreneurs who embrace these golden opportunities to connect more deeply with the existing e-commerce infrastructure are likely to reap the rewards.