Constitutional Lawsuit: The Block Firm Files Federal Lawsuit Against the State of California for Unlawful Pursuit of Back Taxes from Small Business Owners

In Online Merchants Guild v. Nicolas Maduros, No. 2:20-at-00954 (E.D. Cal.), the Block Firm, Rafelson Schick PLLC, and Candice Fields Law filed a federal lawsuit in the United States District Court for the Eastern District of California challenging California’s unlawful pursuit of nearly 10 years of back taxes from hundreds of thousands of small, out-of-state businesses who supply goods sold by Amazon through the Fulfilled by Amazon program.

For nearly all of the last decade, Amazon refused to collect California sales taxes on retail sales it made through its store. California has not looked to Amazon to pay any back sales taxes because the retail giant has tremendous political leverage that the smaller businesses do not. Instead, California is aggressively pursuing small, out-of-state businesses for taxes stretching back nearly a decade—and often totaling millions of dollars—supposed tax obligations that could bankrupt them. California’s demand for these businesses to pay the uncollected taxes on sales by Amazon violates the Due Process Clause, other constitutional guarantees, and the federal Internet Tax Freedom Act. Billions of dollars and countless small enterprises are at stake in this matter.

Read the complaint, drafted by Aaron Block, here.

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