Hawaii business could lose everything over Amazon taxes dispute
HONOLULU (HawaiiNewsNow) - Some states have started going after small businesses that sell their products through the Amazon, saying they owe years of back taxes.
And some Hawaii sellers have found themselves targeted.
Ren Wu, the founder of the Remi Collection in Kalihi, says he has been a third-party seller for Amazon since 2009. That means he sends different products to Amazon warehouses where they're stored until they're purchased online.
Wu says earlier this year, he started receiving letters from Washington state's Department of Revenue.
He says they're trying to collect six years of back taxes on products he supplied to Amazon.
"Of course, they want to get money and, of course, I don't want to pay something that I don't feel I'm responsible for," Wu said.
Wu says paying the back taxes could be detrimental to his company. Plus, he says he already gives Amazon a 15-percent cut on each sale, plus an additional 15-percent commission for storage, packing, and shipping.
"Washington says it should collect from small businesses like us. They had all the chances in the past to deal with it, but after all these years, they're trying to revisit a topic that should have been taken care of a long time ago," said Wu.
Even though, Amazon will begin collecting sales tax on behalf of its third-party merchants in Washington starting next month, Wu's attorney says small business owners are still being told to pay up for previous years.
He says for Wu, that could mean hundreds of thousands of dollars and, potentially, his business.
"If that's all you do is put something in a box and ship it UPS you're not supposed to have that tax burden. That's too big a tax burden to put on you. For Mr. Wu to assert his constitutional rights -- for him to say its a problem -- he can't afford to do that," said attorney and state tax professor Paul Rafelson.
Other states are offering to waive back taxes if third-party sellers begin collecting sales tax on their own, but Rafelson says that would be too costly and time consuming for many.
"This all could be solved if the states simply asked Amazon to collect. What can be done in Hawaii to prevent states like Washington, like California, like Massachusetts, from taking these positions against small businesses," said Rafelson.
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