In the heavyweight ring of ecommerce, savvy entrepreneurs recognize the potential and power of utilizing established online marketplaces such as Amazon, eBay, and Walmart, to gain an edge over their competition. Opting to sell through these venues can elevate the visibility of their products to millions of potential customers, while also streamlining the selling process, (albeit for a modest percentage of each sale).
However, this convenience does carry an added layer of complexity when it comes to tackling tax affairs. Operating across many platforms – from running your exclusive website to leveraging bigger marketplaces – raises several questions surrounding the collection and reporting of sales tax.
Are businesses mandated to report sales made through marketplace facilitators on their sales tax returns? Is there an obligation for businesses to collect sales tax on transactions made via these marketplaces? Navigating these questions is crucial for entrepreneurs aiming to operate in the digital landscape while avoiding the bad side of tax jurisdictions. But to address any of these queries, we first need to understand what a marketplace facilitator is.
What is a Marketplace Facilitator?
To fully make sense of what a marketplace facilitator is, it’s useful to examine the individual components of the term.
The Indiana Department of Revenue defines a “marketplace” as a platforms or a business that does one or all of the following activities:
- Listing, promoting, or advertising products.
- Transmitting or mediating an offer or acceptance of a retail transaction involving products between a seller and a purchaser.
- Providing or offering fulfillment or storage services to a seller.
- Setting prices for a seller’s products.
- Offering customer support to a seller or their customers, managing order placement, returns, or exchanges of products sold.
- Branding sales as those of the marketplace facilitator.
The term ‘facilitator’ stems from the verb ‘facilitate’, which means to make easier or to help bring about an outcome. Thus, a Marketplace Facilitator works in tandem with sellers to streamline transactions and bolster their customer base.
Examples of Marketplace Facilitators
Various online marketplaces exemplify the concept of Marketplace Facilitators. Some examples are:
- Food Delivery Services (such as Uber Eats)
- Tradeshows and Conventions
Distinguishing Between Marketplace Facilitators and Other Platforms
Understanding why certain platforms, like Shopify and BigCommerce, are not considered Marketplace Facilitators can appear challenging. The key is to recognize the role they play in collecting customer payments.
Marketplace facilitators collect payments directly from customers before transferring the proceeds to sellers, effectively becoming the ‘final retailer’ in these transactions. On the other hand, platforms such as Shopify and BigCommerce provide sellers with a sales space but do not collect customer payments. As a result, they are not classed as marketplace facilitators since the original seller remains the final retail point.
Do Marketplace Facilitators Need To Collect Sales Tax?
As with most answers in the sales tax sphere: it depends. Ever since the Supreme Court’s Wayfair decision in 2019, states have been enacting their unique versions of marketplace facilitator laws, some of which may bear resemblances, but none of which perfectly mirrors another.
While the specifics vary, there’s a common thread among most states – if a marketplace facilitator meets the nexus thresholds defined by a particular state, they are usually required to collect and remit sales tax on behalf of their sellers.
The rationale behind this is linked to the role of marketplace facilitators in the transaction process. As we discussed previously, facilitators who collect payments from the customer are considered the final retailer, and are therefore responsible for sales tax collection and remittance.
Marketplace Facilitator Laws By State
Every state levying sales tax has its own set of marketplace facilitator laws. These laws can range significantly concerning the reponsibilities and thresholds for marketplace facilitators and sellers. Here is a detailed breakdown of the state marketplace facilitator laws.
Note: Unless otherwise specified, all nexus thresholds apply to the current or previous calendar year.
|State||Do Marketplace Facilitators Collect and Remit Sales Tax?||Marketplace Facilitator Nexus Threshold||Are Sellers required to Report Marketplace Facilitator Sales on Their Sales Tax Returns?||How To Report Marketplace Facilitator Sales on Your Sales Tax Return|
|Alabama||Yes||$250,000 or more in retail sales||No||N/A|
|Alaska||Yes||$100,000 or 200 separate transactions||No||N/A|
|Arizona||Yes||More than $100,000 in sales||Yes||Include gross amount (including facilitator sales) for each city/county line. Deduct facilitator sales uner code 804.|
|Arkansas||Yes||Over $100,000 or 200 separate transactions||No||N/A|
|California||Yes||More than $500,000 sales||Yes||Included facilitator sales in Gross Sales and then deduct them under “Other Nontaxable Sales – Marketplace Facilitator Sales.”|
|Colorado||Yes||Sales exceeding $100,000||No||N/A|
|Connecticut||Yes||$250,000 or more retail sales||Yes||Report gross sales including facilitator sales (Line 1). Deduct facilitator sales (Line 15 – Sales for Resale or Through a Registered Marketplace Facilitator).|
|Florida||Yes||Over $100,000 in taxable sales||No||N/A|
|Georgia||Yes||At least $100,000 in taxable retail sales||No||N/A|
|Hawaii||Yes||$100,000 in gross income or 200 transactions||No||N/A|
|Idaho||Yes||Over $100,000 in sales||No||N/A|
|Illinois||Yes||Over $100,000 or 200 transactions||No||N/A|
|Indiana||Yes||Over $100,000 in sales or 200 or more transactions||Yes||Report gross sales including facilitator sales on Line 1, deduct facilitator saels on Line 2.|
|Iowa||Yes||Taxable sales exceeding $100,000||Yes||Report gross sales including facilitator sales under Sales Information – Gross Sales.|
Report marketplace sales under Exemptions – Other (including Government).
|Kansas||Yes||Gross receipts exceeding $100,000||No||N/A|
|Kentucky||Yes||$100,000 or 200 or more transactions||Yes||Report gross sales and marketplace facilitator sales under Total Receipts – click on Deductions worksheet – write Marketplace Facilitator on a blank line – report the amount next to it.|
|Louisiana||Yes||Sales or transactions that exceed $100,000 or 200||No||N/A|
|Maine||Yes||Over $100,000 in gross sales or 200 or more transactions||Yes||Report marketplace facilitator sales in Gross Sales on line 1 – put facilitator sales under Deductions: exempt sales on line 2.|
|Maryland||Yes||Over $100,00 in sales or 200 transactions||No||N/A|
|Massachusetts||Yes||Sales exceeding $100,000||No||N/A|
|Michigan||Yes||Sales or transactions that exceed $100,000 or 200||No||N/A|
|Minnesota||Yes||200 or more transactions or over $100,000 in retail sales||Yes||Report marketplace facilitator sales and gross sales under Gross Receipts at the top – only report taxable sales in Minnesota locations, not including facilitator sales.|
|Mississippi||Yes||Sales exceeding $250,000||No||N/A|
|Missouri||Yes||Sales exceeding $100,000||No||N/A|
|Nebraska||Yes||Over $100,000 in sales or 200 transactions||Yes||Include marketplace facilitator sales on Gross Sales and Services in Nebraska – omit marketplace sales on Net Nebraska Taxable Sales.|
|Nevada||Yes||Over $100,000 in sales or 200 transactions||No||N/A|
|New Jersey||Yes||Marketplace facilitators are required to collect and remit sales tax regardless of sales or transaction volume||Yes||Include marketplace facilitator sales in gross sales. Deduct marketplace facilitator sales under deductions.|
|New Mexico||Yes||Over $100,000 in taxable sales||Yes||Select Yes for gross sales and Yes for deductions. Report gross receipts including marketplace sales in each applicable jurisdiction. Enter marketplace sales by Deductions to omit them from taxable sales.|
|New York||Yes||Gross receipts exceeding $500,000 and more than 100 transactions in the previous four sales tax quarters.||Yes||Include marketplace facilitator sales in Gross sales – deduct marketplace sales in Total non-taxable sales.|
|North Carolina||Yes||Exceeding $100,000 in sales or 200 or more transactions||Yes||Report marketplace sales in total sales on the first line – deduct them from taxable sales under Exemptions on the second line.|
|North Dakota||Yes||Taxable sales exceeding $100,000||No||N/A|
|Ohio||Yes||Exceeding $100,000 in sales or 200 transactions||Yes||Include marketplace sales in Gross Sales on the first line – deduct marketplace sales in Exempt Sales on the second line.|
|Oklahoma||Yes||Taxable sales exceeding $10,000||Yes||Include facilitator sales under Sales Price of Tangible Personal Property – deduct marketplace sales by listing them under Other – Marketplace Facilitator.|
|Pennsylvania||Yes||Meeting or exceeding $100,000 in gross sales||No||N/A|
|Rhode Island||Yes||Meeting or exceeding $100,000 or 200 transactions||No||N/A|
|South Carolina||Yes||Sales exceeding $100,000||No||N/A|
|South Dakota||Yes||Sales exceeding $100,000||Yes||Include marketplace facilitator sales in Gross Sales Amount on line 1 – deduct them in exemptions on line 3.|
|Tennessee||Yes||Sales exceeding $100,000||No||N/A|
|Texas||Yes||Sales exceeding $500,000||Yes||Report marketplace facilitator sales in Gross Sales – omit them from Taxable sales in the second column.|
|Utah||Yes||Sales exceeding $100,000 or 200 transactions||No||N/A|
|Vermont||Yes||Meeting or exceeding $100,000 in sales or 200 transactions||No||N/A|
|Virginia||Yes||More than $100,000 in gross sales or 200 transactions||No||N/A|
|Washington||Yes||Exceeding $100,000 in sales||Yes||For Business and Occupation tax: Include marketplace facilitator sales, do not deduct them. Do the same for litter tax.|
Gross amount for Excise Tax will include marketplace facilitator sales, but are deducted from taxable sales.
|West Virginia||Yes||Sales exceeding $100,000 or 200 or more transactions||Yes||Include marketplace sales in Gross Sales on line 1 column A – Deduct them on line 1 column B.|
|Wisconsin||Yes||Sales exceeding $100,000||Yes||Include marketplace sales in Gross on line 1 – deduct them in Exemptions on line 5 – Other.|
|Wyoming||Yes||Sales exceeding $100,000 or 200 or more transactions||No||N/A|