Marketplace facilitator laws impose tax duties on marketplace facilitators like Amazon and Etsy, but the indirect sales clearing through these marketplaces can expose sellers to sales tax risks.
Marketplace facilitator laws impose tax duties on marketplace facilitators like Amazon and Etsy who collect and remit sales tax on behalf of their third-party vendors. These facilitators enable sales by listing products, exchanging payments, and in some cases, shipping goods.
Most states have begun to legislate or already have in place marketplace facilitator laws. For sellers, this means no registration, collection and remittance for transactions taking place on the marketplace platform. This protocol assumes, however, that the marketplace facilitator is compliant with state and local sales tax laws. Marketplace facilitators that step out of line put their sellers at risk. Furthermore, if a marketplace seller sells direct using its own website and sales channels in addition to indirectly through a marketplace facilitator, the seller could still have a filing requirement in the same state in which the facilitator is remitting taxes.
Tracking these direct and indirect sales further complicate compliance. On July 1, 2020, Mississippi became the latest state to enact a marketplace facilitator law requiring marketplace facilitators with nexus in Mississippi to collect and remit sales tax on taxable sales. Out-of-state marketplace sellers that only sell indirectly into Mississippi through a marketplace facilitator do not have economic nexus in Mississippi. Indirect sales through the marketplace facilities does not require the seller to register or file sales tax returns under the marketplace facilitator law. Sellers need to be sure, however, that the facilitator is properly remitting tax on its sales, in case of future liability and audits.
In other words, Wayfair nexus is triggered in Mississippi on remote sellers with direct sales over $250,000 in any consecutive 12-month period. In calculating transactions that count toward the threshold, a sale made through a marketplace is considered the marketplace facilitator’s sale and not the sale of a marketplace seller.
The existence of marketplace facilitator laws does not ensure that either a marketplace facilitator or its remote sellers are following sales tax laws. As a remote seller, be sure you understand how you are selling and what your marketplace facilitators are doing to abide by sales tax laws and be certain they are not indirectly creating sales tax liability for you.
Let’s Talk Tax
Judy Vorndran can be reached at firstname.lastname@example.org or 720.227.0420.
Latest Tax News
- State Tax on Digital Services and Data: Who Pays?
- Troubling State of State Tax and Cannabis
- Colorado ranks 20th on The Tax Foundation 2022 Index
- Is there any such thing as a self-operating machine?
- Filing an R&D Refund Claim? Get Ready for Audit