We talk a lot about nexus and compliance processes in our content, but what about marketplace facilitators? For many small businesses that sell exclusively through a marketplace, sales tax is often handled by the facilitator. However, there are still plenty of situations where you may need a sales tax professional to guide your compliance process. In this blog, we answer the top questions we hear from businesses.
What is a Marketplace Facilitator?
A marketplace facilitator is a business or organization that contracts with third-party sellers to offer goods and services on its platform, while also facilitating retail sales.
Marketplace facilitators enable these sales by listing products, taking payments, issuing receipts, and in some cases, managing shipping and logistics.
Well-known examples include Amazon, eBay, Walmart Marketplace, and Etsy.
Why Do States Have Marketplace Facilitator Laws?
States began adopting marketplace facilitator laws to close gaps in sales tax collection. Initially, some platforms collected sales tax only on their own direct sales, but not for third-party sellers using their marketplace. This created compliance gaps and lost revenue for states.
By requiring marketplace facilitators to collect and remit sales tax on behalf of third-party sellers, states streamlined compliance and ensured more complete tax collection.
Do All States Have Marketplace Facilitator Laws?
Nearly every state with a sales tax now has marketplace facilitator laws in place. The specifics, however, vary greatly by state.
Each state defines “marketplace facilitator” differently, and thresholds for economic nexus (based on sales or transaction counts) may also apply.
In short, while the overall concept is consistent, making marketplaces responsible for sales tax, the details differ. Consulting with a sales tax professional or CPA is often the best way to confirm your exact obligations.
What Are Your Responsibilities?
In most cases, if you are selling exclusively through a marketplace facilitator, the facilitator will collect and remit sales tax on your behalf in states with these laws.
However, there are situations where you may still have responsibilities. If you sell on multiple channels, you need to consider combined sales when evaluating whether you’ve crossed a state’s economic nexus threshold. Some states may still require you to file a “zero return” even if all your marketplace sales tax is being handled for you.
And in certain states, you may be required to register even if you aren’t directly collecting sales tax.
What if I Sell on My Own Website Too?
If you sell directly to customers through your own website, in addition to selling on marketplaces, you may create nexus in more states than you realize. Even if a facilitator is handling sales tax for marketplace transactions, you’ll need to collect and remit tax on your direct sales once thresholds are met.
For example, if Amazon collects sales tax on your behalf in California, but you also sell directly through your own site to California customers, you’re responsible for collecting and remitting on those direct sales.
Don’t Forget About Warehouses
Many marketplace facilitators, like Amazon with its FBA (Fulfillment by Amazon) program, store sellers’ inventory in warehouses across multiple states. Storing inventory creates physical presence nexus in those states—even if you never make a direct sale there. That means you may need to register, file, or remit tax separately.
The Bottom Line
Marketplace facilitator laws simplify sales tax for many businesses, but they don’t eliminate all compliance responsibilities.
If you sell across multiple channels, store inventory in different states, or operate in states with unique filing requirements, you may still need to register, file returns, or work with a sales tax professional.
At TaxConnex, our goal is to take sales tax off your plate while also serving as a resource to help you stay compliant. Marketplace facilitator laws continue to evolve, making it more important than ever to have an expert on your side.
If you have questions about your responsibilities, reach out to us, we’re here to help.
Disclaimer: This story is auto-aggregated by a computer program and has not been created or edited by finopulse.
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