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California Court of Appeals Upholds Sales Tax on Fulfillment by Amazon Retailers

Tax Development Feb 07, 2023

Man checking inventory in warehouse - California Court of Appeals Upholds Sales Tax on Fulfillment by Amazon Retailers

Third-party sellers were responsible for sales tax on sales made through Amazon’s Fulfillment by Amazon (FBA) program, according to a California appellate court decision1 that upheld the lower court decision. As the sales at issue preceded Wayfair,2 the imposition of sales tax required physical presence, which the California Department of Tax and Fee Administration (CDTFA) claimed was established by the presence of inventory in Amazon’s storage facilities in California. Several of these third-party sellers have filed suits claiming that Amazon was the true seller.

One of these cases involved Stanley Grosz who operated a camera store in California and claimed that Amazon acted as a consignment seller and should be liable for the sales taxes on the sales prior to California’s enactment of the Marketplace Facilitator Act [AB 147 (Ch. 19-5)] that became operative October 1, 2019. Grosz argued that Amazon met the three requirements of a consignment seller by 1) having possession of another party’s goods, 2) having the power to transfer title, and 3) exercising the power to transfer ownership of goods. The CDTFA argued that California Code of Regulations, Title 18, Section 1569 did not require any entity to be considered “the” retailer but merely to consider entities as “a” retailer.

The court ruled that the CDTFA had broad discretion in tax matters to determine any questions related to the sales and use tax law that included who owes the tax, who collects the tax, how it is collected, and when it is collected. As written, Section 1569 does not dictate to the CDTFA which party is responsible for the tax. Grosz sought to require the CDTFA to collect sales tax for products sold through the FBA program. Taxpayers have no authority to instruct the CDTFA on this matter. The court concluded that there is no statute that dictates that the CDTFA must impose sales and use taxes on Amazon for sales through its FBA program, and the lower court decision stands.

1 Stanley E. Grosz v. California Department of Tax and Fee Administration, Et Al., Court of Appeal of California, Second District, No. B309418, January 9, 2023.

2 South Dakota v. Wayfair, Inc., 138 S. Ct. 2080, June 21, 2018. 


Gina Rodriquez

Brian Stromen

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