Amazon – US_TenNessee_ Class Action Suit Against Amazon Services LLC 

There is an interesting US case pending before the Washington State Court that concerns an incorrect sales tax calculation for marketplace sales. The case concerns the overcharging of sales tax by the Amazon Marketplace. Plaintiff Cullen Duke filed a class action lawsuit against Amazon.com Services LLC, claiming that Amazon overcharges sales tax on third-party sales made through its marketplace. 

Case Proceedings

The filed class action lawsuit seeks to prove that Amazon overcharges sales tax on third-party sales made through its marketplace to customers residing in Tennessee (dispatch ends in the state). Amazon, as a marketplace facilitator, is responsible, under state law, for calculating, collecting,  and remitting sales tax to the responsible revenue administrator. 

The same sales tax responsibility applies to possible refunds, such as a tax refund when the operator overcharges sales tax. Plaintiff argues that Amazon overcharges sales tax by 0.25% on third-party sales made through its platform to customers based in Tennessee, and that this violates Tennessee sales tax laws. 

Plaintiff emphasizes that even after reaching out to the responsible personnel of Amazon and notifying it about the “mistakes” in the tax calculation logic, nothing changed; the same rate still applies. Now the plaintiff calls other consumers who experienced a similar case of sales tax overcharging under the Tennessee sales tax framework. 

Considering that, under the Tennessee sales tax law framework, the marketplace facilitator is responsible for refund claims and is negatively responding to customers’ requests, customers are mandated to initiate court proceedings as the only way to seek their “refund”. 

Cross-border sales tax

Wrongful sales tax calculations in online sales processes through marketplaces could lead to class-action lawsuits in the US. This case is just one in a thousand examples of how the “wrongful” VAT calculation on online sales of goods or services could lead to expensive trials, refunds, and potential penalties. 

For cross-border transactions, understanding the place-of-supply rules is already tricky, but when you add the intricacies of different product codes and the variation in tax rates, which differ categorically between the US and Canada, the level of complexity multiplies significantly. Cross-border sales tax compliance is a challenging task even for e-commerce giants with specialized VAT departments; for SMEs, it is even more so.

If you need customized VAT advice, don’t hesitate to reach out.