HighUS
California Sales Tax Audit of E-Commerce Seller
California audited an e-commerce seller for unpaid sales tax across multiple years.
What Happened
California's Board of Equalization conducted a sales tax audit of an e-commerce seller who had nexus through Amazon FBA inventory stored in state warehouses. The seller had not registered for California sales tax. The audit covered 3 years of back taxes, penalties, and interest.
When
2023-2024 (audit period)
Cause
Amazon FBA inventory stored in California created sales tax nexus, but seller did not register or collect California sales tax.
Resolution
- 1Received audit notice from California BOE
- 2Hired California tax attorney to represent in audit
- 3Compiled all Amazon sales data for California customers
- 4Calculated back taxes owed for 3-year audit period
- 5Negotiated settlement including back taxes, penalties, and reduced interest
Timeline
6-12 months for full audit resolution
Cost
Back taxes + 30% penalty + interest + legal fees ($10,000-50,000+)
Lessons Learned
- •Amazon FBA inventory in a state creates sales tax nexus
- •California actively audits e-commerce sellers with FBA presence
- •Penalties can reach 30% of unpaid tax, plus interest compounding daily
Prevention
- ✓Determine sales tax nexus in all states where you have FBA inventory
- ✓Register for sales tax in nexus states before making sales
- ✓Use sales tax automation tools to manage multi-state compliance