By Gina Rodriquez

As reported earlier this year , the Second Appellate District of the California Court of Appeals ruled that the California Department of Tax and Fee Administration ( CDTFA ) had broad discretion in tax matters , including the legal discretion to determine who is responsible for sales and use tax — i . e ., who owes and collects the tax , and how and when it is collected .

On April 26 , 2023 , the California Supreme Court denied the appellant ’ s petition for review of the appeals court ’ s decision , allowing Amazon to keep its sales tax win . ( Stanley E . Grosz v . California Department of Tax and Fee Administration ( Amazon Services ), Cal . No . S278685 ).

Within the framework of Amazon ’ s Fulfillment by Amazon ( FBA ) program , the appellant sought to require the CDTFA to treat Amazon as the retailer responsible for sales tax under California Sales and Use Tax Law . The California Court of Appeals determined that taxpayers have no authority to instruct the CDTFA on this matter .

The appellate court concluded : “[ T ] here is no statute or regulation that conclusively establishes that the [ C ] DTFA must pursue Amazon for sales and use taxes related to FBA transactions . Indeed , the language of Revenue and Taxation Code section 6015 , subdivision ( a ), makes it clear that there may be multiple ‘ persons ’ ( as that term is statutorily defined ) who the [ C ] DTFA may regard as ‘ retailers ’ for the purposes of a single transaction . The statutory framework of the Sales and Use Tax Law and the statutes vesting the [ C ] DTFA with authority to administer that statutory framework also generally lead us to conclude that whether a taxpayer is a retailer for purposes of the Sales and Use Tax Law is a discretionary determination and not a ministerial task .” ( Stanley E . Grosz v . California Department of Tax and Fee Administration ( Amazon Services ) ( Jan . 9 , 2023 ), 87 Cal . App . 5th 428 , 448-449 ).

The issues in this case predate California ’ s Wayfair-inspired ( South Dakota v . Wayfair , Inc ., 138 S . Ct . 2080 , June 21 , 2018 ) marketplace facilitator rules , which likely would have resolved sales-tax-responsibility issues had they been in force .

However , since a retailer is responsible for applicable sales tax , ( Cal . Rev . & Tax . Code § 6051 ) the appellate court ruling — and the California Supreme Court ’ s pass — has seemingly created an uphill battle for third-party FBA program participants where CDTFA ’ s discretion treats them as retailers responsible for multiple years of sales tax . — Gina Rodriquez is a principal at Ryan and a member of the CalCPA Committee on Taxation . You can reach her at gina . rodriquez @ ryan . com .

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