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Eseller Café featured Haub Law Professor Paul Rafelson in "lass Action Lawsuit Alleges Amazon is Exploiting Consumers During COVID-19"

04/24/2020

Eseller Café featured Haub Law Professor Paul Rafelson in "lass Action Lawsuit Alleges Amazon is Exploiting Consumers During COVID-19"

“Amazon is the only party to the transaction that can control prices on a state by state basis, taking into account each state’s price gouging law, and imposing the appropriate price ceilings, so it’s Amazon’s responsibility as the world’s largest ecommerce store to ensure the laws are being followed, not to earn 15%-30% from each high-priced sale, cause panic in the marketplace, claim willful blindness, and turn their sellers into scapegoats.”

Read the full Eseller Café article.

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eSellerCafe featured Adjunct Law Professor Paul Rafelson in "Online Merchants Guild Blasts States’ Attorneys For Failing to Hold Amazon Accountable on Price Gouging"

04/10/2020

eSellerCafe featured Adjunct Law Professor Paul Rafelson in "Online Merchants Guild Blasts States’ Attorneys For Failing to Hold Amazon Accountable on Price Gouging"

As OMG’s Executive Director, attorney and adjunct law professor at Pace University in New York, Paul Rafelson, explained:

Despite what Amazon claims to avoid liability, Amazon is a national store, and its merchants are its suppliers.

Amazon is the only party to the transaction that can control prices on a state by state basis, taking into account each state’s price gouging law, and imposing the appropriate price ceilings, so it’s Amazon’s responsibility as the world’s largest ecommerce store to ensure the laws are being followed, not to earn 15%-30% from each high-priced sale, cause panic in the marketplace, claim willful blindness, and turn their sellers into scapegoats.

Amazon even admitted under oath to a House Antitrust Subcommittee last year, it’s their store, it’s not a marketplace, so it makes sense they should be held accountable as the store, and The Supreme Court made quick work of marketplaces like Amazon claiming otherwise in the 2019 case Apple v. Pepper.

Read the full eSellerCafe article.

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"Forbes" featured Haub Law Professor Paul Rafelson in "Supreme Court Tax Ruling Will Not Help Main Street, Despite Popular Opinion"

07/11/2018

"Forbes" featured Haub Law Professor Paul Rafelson in "Supreme Court Tax Ruling Will Not Help Main Street, Despite Popular Opinion"

US states have interpreted last week’s Supreme Court ruling as meaning that they can now collect taxes on sales from all out of state merchants. Currently, in most states, merchants need a physical presence to create a tax liability.

A lot of media coverage in the past week has commented that this is a victory for small businesses, and a blow to Amazon. But that reasoning is fundamentally wrong.

Here’s why Amazon will be a net beneficiary of this ruling, and why small businesses will need to bear significant costs to administer future sales tax requirements.

1. Amazon already collects and remits sales taxes for its retail business. At inception, Amazon avoided establishing a physical presence in certain states so they could avoid tax liability. But eventually Amazon gave up avoiding sales tax in these states, realizing that it would be more beneficial to expand their fulfillment network to virtually every US state, than to save money on administering sales tax. It is estimated that half of Amazon’s gross merchandise value comes from its retail business (i.e. inventory that Amazon owns and sells).

2. Third party sellers who use Amazon’s fulfillment service will be required to collect taxes in each state. This is because Amazon’s fulfillment network distributes inventory amongst its network, so sellers have no control over where their inventory is held. There are approximately 12,000 tax jurisdictions in the US, comprised of various states, counties, and even cities who set their own tax rates and requirements. So these sellers, who are generally small to medium sized businesses, will bear the burden of calculating, collecting, and remitting taxes in all these jurisdictions.

Paul Rafelson, a Law Professor at Pace University and the Executive Director of the Online Merchant’s Guild, says that “Instead of encouraging and supporting these businesses, state politicians and tax administrators have become public enemy number one to small businesses.”

Rafelson believes the cost of compliance for small online businesses who start an FBA business will be significant.

“In addition to sales tax, online sellers must also pay income tax, and while the tax cost may not be much more than what they currently pay, the cost of filing returns for their LLCs and personal income taxes collectively will be substantial, as states have made it clear that they believe FBA sellers have an income tax responsibility as well.”

3. Amazon will generate more fee income from sellers. Amazon charges a 2.9% fee to third party sellers on all sales to calculate and collect tax. So Amazon will benefit from additional fee income. In 2017, Amazon made $31.88 Billion in fee income from marketplace sellers.

4. Foreign FBA sellers will have an advantage over US businesses.  Rafelson believes that if the states continue to pursue individual Amazon sellers, it will deter businesses from establishing themselves in the U.S. He uses the example of Chinese sellers shipping directly to consumers in the US, since the states will find it very difficult to enforce the law and collect taxes.  “Chinese sellers who are caught by the states can disappear and re-appear as a new Amazon business, and the states will be back to square one. It’s not plausible that states will ever be able to track these sellers down, and even if they do, they have little recourse.

Although the ruling has been interpreted differently by the states, the public, and lobby groups like Rafelson’s Online Merchant’s Guild, the battle is far from over. Small and medium businesses who will be most affected by a significant tax compliance burden still have an opportunity to bring a case forward. “The Court punted on the question of whether fifty state tax collection and compliance burdens would be too much for the small business, and made it clear that a case addressing that issue could be brought,” Rafelson says.

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"CNBC" featured Law Professor Paul Rafelson in "Why Amazon is the winner of the Supreme Court sales tax ruling"

06/22/2018

"CNBC" featured Law Professor Paul Rafelson in "Why Amazon is the winner of the Supreme Court sales tax ruling"

Paul Rafelson, a law professor at Pace University, says the Supreme Court decision doesn't really address this issue, "punting" most of the questions related to marketplace sellers.

In the marketplace, Amazon facilitates the sales of third-party merchant products, so it's unclear whether Amazon or the third-party seller should be responsible for collecting tax.

"Amazon can hide behind its marketplace to claim tax exemption because it's still going to pretend it's not a retailer — and not responsible for collecting sales taxes," Rafelson said. "There's still a lot of legal questions that need to be answered."

Read the full article.

 

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"CNN" featured Pace Law School Professor Paul Rafelson's piece in "Why Amazon Prime should be free to everyone"

05/31/2018

"CNN" featured Pace Law School Professor Paul Rafelson's piece in "Why Amazon Prime should be free to everyone"

Paul Rafelson is a tax attorney representing online merchants. He is an adjunct professor at Pace Law School in New York and the executive director of Online Merchants Guild. The opinions expressed in this commentary are solely those of the author.

If you were looking for proof that Amazon is leveraging its ever-expanding shipping and distribution capacity to clobber every last competitor and become the go-to seller of everything, here is some: The tech giant announced in April that Prime, its $119-per-year subscription service that offers unlimited two-day shipping on most orders, has surpassed 100 million members. 

At the same time Bed Bath & Beyond, among the major retailers buckling under the online competition led by Amazon, saw its stock hit a nearly 10-year low in April.

How did Amazon's delivery-on-demand subscription service get so big so fast?

The answer: taxpayer dollars and the decimation of our local economies.

State governments have diverted vast sums of money from local education initiatives, infrastructure projects and small businesses to help Amazon build warehouses, data centers and just about every other pillar of the Prime network.

After more than a decade of states fueling Prime's expansion, helping Amazon pad its coffers and protecting its price advantage, it is time to explore whether the Prime shipping and distribution network should be open to all without fees. 

Since it was launched in 2005, Prime has become the retail equivalent of the "Death Star," capable of obliterating decades-old businesses. The platform is under the exclusive control of the Amazon empire, a remarkable feat for CEO Jeff Bezos, who cut his teeth on Wall Street. But while many like to attribute the growth of Prime to Bezos' business acuity, the true story of its success is the unprecedented taxpayer support Amazon has gotten from all levels of government.

Prime was able to spring into existence because states and even the federal government allowed Amazon to be the exception to seemingly every rule. For example, the publicly subsidized US Postal Service had a rule that it would not deliver mail on Sundays -- that is, until 2013, when Amazon cut a deal with the post office to get the Sunday delivery restriction lifted, at least for Amazon and Priority Mail Express parcels.

At the state level, Amazon has scored a staggering $241 million in subsidies since 2015, according to research done by Thomas Cafcas and Greg LeRoy for Good Jobs First, an advocacy group that tracks public subsidies. These have come in the form of property tax abatements, corporate income tax credits and, perhaps most importantly, sales tax exemptions.

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"Retail Dive" featured Law Professor Paul Rafelson in "What's at stake in the e-commerce sales tax debate"

04/17/2018

"Retail Dive" featured Law Professor Paul Rafelson in "What's at stake in the e-commerce sales tax debate"

...For smaller retailers and marketplace sellers "disruptive" might not begin to cover it. To Paul Rafelson, Pace University law professor and co-founder of the newly formed trade association Online Merchants Guild, the debate represents an "existential crisis."

"There's so much of the community that is not going to be around, and I don't think people realize that, in six months, maybe a year when the full force of what is happening is realized," he told Retail Dive. Rafelson and the members of his association are concerned about a tangential problem that SCOTUS may or may not weigh in on: What does a decision mean for marketplace sellers? Should marketplaces collect state sales tax on behalf of third party sellers?

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