Five years after launching its operations in New Jersey, Amazon now has five fulfillment centers in the state, with plans to open three additional New Jersey locations in the future. The fulfillment centers not only house Amazon’s own inventory, but also the inventory of independent online sellers whose product shipments are fulfilled by Amazon. For out-of-state sellers, it is important to understand how Fulfillment by Amazon (FBA) may trigger nexus for New Jersey income tax purposes.
The New Jersey Division of Taxation recently provided informal guidance pertaining to FBA sellers where the State explained that although the storage of inventory creates nexus for corporation business tax (CBT) purposes and the receipts for tangible property sold by a corporation are sourced on a destination basis, the same is not true for the inventory of a partnership or a sole proprietor. For partnerships and entities taxed as partnerships, the mere presence of inventory in New Jersey does not trigger nexus for gross income tax purposes, and as a result, out-of-state partnerships participating in the FBA program with no other physical presence in the State of New Jersey have no income tax filing requirements.