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will be made in the taxing state may be BAR was merely a demand for in-
purposeful availment. However, it is not formation; rather, its language clearly The court interpreted
enough that the taxpayer might have suggested the existence of pending the DOR to be
predicted that its goods would reach enforcement actions. Also, the due pro-
the taxing state. cess claim was not premature, the court arguing that simply by
The guild argued that the DOR found, because it was unclear what, joining Amazon’s FBA
could not establish that sufficient if any, administrative processes were
minimum contacts existed with Penn- available to FBA merchants other than program, taxpayers
put themselves
sylvania that would satisfy due process strict compliance with the reporting
and make FBA merchants subject to requirements in the BAR. in Pennsylvania’s
Pennsylvania tax. In the guild’s view, The court determined the DOR’s
jurisdiction.
Amazon, not the FBA merchants, con- third argument failed because the only
trols the storage and shipment of goods administrative process the DOR identi-
in the FBA program, and an FBA mer- fied as available to taxpayers would
chant’s mere participation in the FBA be to appeal an adverse assessment, availed itself of Pennsylvania’s protec-
program does not create meaningful which a taxpayer can only do after a tions, opportunities, and services. Thus,
contacts with Pennsylvania. At most, determination of a liability. The court the court held that FBA merchants
the guild argued, it creates the possibil- interpreted the DOR to be arguing were not subject to sales tax (and under
ity that Amazon would “unilaterally that simply by joining Amazon’s FBA similar reasoning, the PIT) just because
decide to store goods in Pennsylvania, program, taxpayers put themselves in Amazon, as part of the FBA program,
as opposed to” a facility located in an- Pennsylvania’s jurisdiction, and they stored their merchandise in warehouses
other state. could not challenge the DOR’s author- located in Pennsylvania.
The DOR conceded that a non- ity to investigate their records and
resident business must have minimum determine their tax liability until after Reflections
contacts with a state before the state the DOR had investigated their records In its opinion, the court reiterates im-
can require the nonresident business and determined their tax liability. portant and taxpayer-friendly precedent
to pay taxes. It contended, however, The court found that this “line of regarding the scope of Section 272. In
that the BAR sent to FBA merchants reasoning is unsupported by the statu- L.L. Bean, Inc. v. Pennsylvania Depart-
was not a demand for tax payments. tory framework and controlling juris- ment of Revenue, 516 A.2d 820 (Pa.
Rather, it was a “demand for informa- prudence.” The court noted that Section Commw. Ct. 1986), the court held that
tion concerning potential tax liability,” 272 allows the DOR to investigate Section 272 did not grant the DOR
which the DOR has the authority to taxpayers, not suspected taxpayers, and broad power to obtain the records of a
seek under Section 272 of the Pennsyl- the law did not give the DOR unfet- nonresident. In Bloomingdale’s by Mail,
vania tax code (72 Pa. Stat. §7272). The tered power to seek business information Ltd. v. Pennsylvania Department of
DOR denied that its compliance pro- from any person or entity it chooses for Revenue, 516 A.2d 827 (Pa. Commw.
gram violates an FBA merchant’s due purposes of determining that person or Ct. 1986), relying on L.L. Bean, the
process rights, as any FBA merchant entity’s status as a taxpayer. court held that the DOR could only use
declining to participate will receive no- Rather, according to the court, due its subpoena power under Section 272
tice of any adverse decision made by the process required a connection between within the borders of Pennsylvania.
DOR and be given an opportunity to the taxing state and the person or entity Online Merchants Guild v. Hassell,
appeal that decision. It also contended it seeks to tax and an act by the alleged No. 179 M.D. 2021 (Pa. Commw. Ct.
that the guild’s due process claim was taxpayer availing itself of the taxing 9/9/22) ■
premature because no FBA merchants state’s protections, opportunities, and
had been assessed tax based on the services. After reviewing the description Contributor
BAR. It further asserted that the FBA of Amazon’s FBA program in the record,
merchants could not press a federal the court concluded that an FBA mer- James A. Beavers, CPA, CGMA, J.D.,
due process claim because they had not chant, by participating in the program, LL.M., is The Tax Adviser’s tax techni-
first taken advantage of any available had not placed its merchandise in the cal content manager. For more infor-
administrative processes. stream of commerce with the expecta- mation about this column, contact
The court rejected all of the DOR’s tion that it would be purchased by a thetaxadviser@aicpa.org.
arguments. It did not agree that the customer in Pennsylvania and had not

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