Pennsylvania Commonwealth Court Sides with Amazon FBA Sellers

On September 9, 2022, the Commonwealth Court of Pennsylvania granted summary relief to the Online Merchants Guild (“Guild”) in its dispute with the Pennsylvania Department of Revenue (“Revenue”). The Guild is made up of members that participate in Amazon’s Fulfillment by Amazon (“FBA”) Program. Merchants (“FBA Merchants”) participating in FBA commit their inventory to Amazon warehouses in Pennsylvania or other states and do not control where the inventory is stored. Revenue viewed participation in FBA by merchants as creating state tax obligations on the basis that inventory stored in the state constitutes physical presence.

Revenue began pursuing FBA Merchants through business activity questionnaires that implied enforcement actions were pending for FBA Merchants that did not respond to Revenue’s requests or take advantage of the voluntary compliance program offered in the letter. The Online Merchants Guild filed a petition for review in June 2021 asking the Court to determine whether FBA merchants were subject to Pennsylvania’s tax statutes.

One of the primary questions addressed by the Court was whether participation in FBA gave Revenue jurisdiction and authority to investigate the participating merchants and determine their tax liability. The Court concluded that Pennsylvania statutes, under Section 272, applied to “taxpayers, not individuals or entities Revenue suspects may be taxpayers”. The Court went on to address Due Process Clause concerns that effectively limit Revenue’s ability to request business information from entities. A taxing authority cannot, under due process, subject an entity to taxation unless there is a connection between the entity and the taxing authority (state) and the entity has availed itself to that state’s market (“protections, opportunities, and services”). The Court determined participation in FBA did not come with the expectation by the merchant that its goods “would be purchased by a customer located in the Commonwealth, or has availed itself of the Commonwealth’s protections, opportunities or services.”

The Court ruled in the Guild’s favor on two points essentially providing that Revenue did not have jurisdiction or authority to pursue the FBA Merchants. First, the Commonwealth had not provided anything to the merchants, “for which it can ask [in] return.” Second, the Department of Revenue does not have statutory authority over “persons or records located outside the Commonwealth”. The Court’s ruling is affirmation of the due process clause and may impact other states’ ability to pursue businesses with similar circumstances. Taxpayers should always exercise caution and check with their state and local tax advisor when responding to state tax questionnaires or state tax inquiries.

The full text of the Commonwealth Court ruling can be viewed here.

If you have questions on Pennsylvania’s ruling or other SALT matters, please contact the HBK SALT Advisory Group at

About the Author(s)
Matt Dodge is a Senior Manager, State and Local Tax, HBK CPAs & Consultants. He has more than 20 years of experience in state and local tax (SALT) with a focus on sales and use tax. He has served clients in various industries, including construction, manufacturing, oil and gas, retail, service providers, and transportation. He can be reached by email at
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