California has rightly developed a reputation for aggressively pursuing whatever taxes it can legally get away with assessing. From taxes on out of state businesses with only a tangential connection to the Golden State to a proposal to keep taxing Californians even after they leave the state, California has repeatedly demonstrated that it puts maximum revenue extraction above good tax policy and the interests of taxpayers. Yet in attempting to claim up to eight years in retroactive taxes from small businesses, the state has managed to reach a new low.
According to a lawsuit filed by a group of small businesses under the name of the Online Merchants Guild, California’s Department of Tax and Fee Administration (CDTFA) is enforcing tax remittance obligations on small businesses using Amazon’s platform and its “Fulfilled By Amazon” (FBA) program going back to 2012. The legal claim behind this enforcement is so specious that even the state’s own Treasurer has urged the CDTFA to drop its claims.
Prior to the 2018 Supreme Court decision in South Dakota v. Wayfair, states could only require businesses to collect and remit sales taxes to a state if that business had some form of physical