A Charlotte Amazon FBA seller had unknowingly created sales tax nexus in 11 states through warehouse storage. VDAs filed in all 11 states, $38K in penalties fully waived.
01The Situation
The seller had been using Amazon FBA for four years growing to $2.4M in revenue. He had been collecting sales tax in North Carolina, his home state, and assumed that was sufficient. He had never considered that Amazon had been storing his inventory in warehouses across 11 states, creating physical nexus in each.
An IRS audit of a fellow seller, publicized in an Amazon seller forum, prompted him to look into his own situation. Potential exposure: $44,000 in back taxes plus $17,600 in estimated penalties.
02What We Did
We ran a full nexus analysis using his Amazon inventory placement reports for four years, identifying every state where Amazon had stored his inventory. All 11 states had voluntary disclosure programs that waive penalties for taxpayers who come forward before being contacted by the state. We filed VDAs in all 11 states simultaneously.
Back taxes of $44,000 paid (unavoidable) but all $17,600 in penalties were waived. Going forward, an automated sales tax compliance software integration handles all 11 states automatically.
03Client Impact
The seller came to us when he found out, before any state found him. That timing made everything possible. The VDA programs exist precisely for this situation. The automated compliance system means this will never happen again.
Breakdown
| State | Nexus Type | Back Tax | Penalty Waived | VDA Filed | Status |
|---|---|---|---|---|---|
| Texas | FBA Warehouse | $8,400 | $3,360 | Yes | |
| Pennsylvania | FBA Warehouse | $6,200 | $2,480 | Yes | |
| Ohio | FBA Warehouse | $5,800 | $2,320 | Yes | |
| New Jersey | Economic Nexus | $4,800 | $1,920 | Yes | |
| Illinois | FBA Warehouse | $4,200 | $1,680 | Yes | |
| 6 Additional States | Various | $14,600 | $5,840 | Yes, all 6 | |
| TOTAL | 11 states | $44,000 | $17,600 waived | All filed |
What changed
VDA Filed in All 11 States
Voluntary disclosure accepted in every state. Treated as new account rather than delinquency.
$17,600 in Penalties Waived
All penalties waived under VDA programs. Back taxes paid on agreed installment plans.
Automated Compliance Implemented
Sales tax software integrated with Shopify and Amazon. All 11 states filed automatically.
Zero Future Nexus Risk
Ongoing nexus monitoring included. New state triggers flagged automatically.
The seller came to us when he found out, before any state found him. That timing made everything possible. The VDA programs exist precisely for this situation. The automated compliance system means this will never happen again.
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