A B2B Online Platform Does Not Meet Florida’s Definition of a Marketplace Facilitator

March 1, 2023

By: Betsy Goldstein, SALT Manager

At a glance

The main takeaway: Does your online marketplace qualify you as a marketplace facilitator thus requiring you to collect and remit sales tax? Recent Florida guidance illustrates the different requirements among states.
Assess the impact: Marketplace facilitator rules are not uniform from state-to-state. Businesses need to carefully review each state’s rules as they may be considered a marketplace facilitator in one state but not another.
Take the next step: Aprio’s State and Local Tax (SALT) team can assist your business in addressing state marketplace facilitator rules and ensure you comply with sales and use tax obligations.

Schedule a free consultation today to learn more!

The full story:

All states that impose sales tax have rules that require “marketplace facilitators” to collect and remit sales tax on sales occurring through their marketplace. Essentially, these rules place the burden of sales tax compliance on marketplace facilitators, even though they are not actually selling the product (e.g., Amazon). Whether a business qualifies as a “marketplace facilitator” is dependent on each state’s rules, which are not uniform (no surprise there).

In an April 2022 SALT newsletter article, we discussed a North Carolina Private Letter Ruling in which the state determined that a taxpayer was a marketplace facilitator due to its private business-to-business (B2B) online marketplace.

Recently, Florida published a Technical Assistance Advisement (TAA) that examined a similar online platform and determined that the taxpayer did not meet the state’s definition of a “marketplace provider.” _[1]

A closer look at the case

The taxpayer created a B2B online platform where qualified businesses can list inventory of certain parts for sale to other businesses. The taxpayer owns and administers the electronic infrastructure of the platform and provides the necessary support to enable connection to the platform.

Only qualified customers that receive log-in credentials can access the platform, which can occur in two ways:

A customer may request an invitation from the specific dealer whose parts it purchases, or
The dealer may automatically create accounts for its customers.

In both cases, customers will receive log-in credentials, but once logged-in, they can view and order parts only from the specific company that invited them.

Through the platform, a customer selects its inventory to be added to the order and chooses a delivery option (pick up at a physical location, delivery, or shipment). When the customer places an order, they must pay via a “dealer account” which is set up with the dealer directly.

The platform will “ping” the dealers through the Dealer Management System (DMS) software that then approves or rejects the order. Once approved, the sale will progress through the DMS, and the taxpayer’s online platform is no longer involved in the transaction.

Thus, the taxpayer does not collect the customer payment. The taxpayer receives a commission from the dealers’ sales made through the taxpayer’s online platform.

There is another scenario where customers may pay through a credit line with a financial services company, but in this case the dealer is still the one who is submitting the invoice and collecting the receivable.

The ruling explained

Florida defines “marketplace provider” as “a person who facilitates a retail sale by a marketplace seller by listing or advertising for sale by the marketplace seller tangible personal property in a marketplace and who directly, or indirectly through agreements or arrangements with third parties, collects payment from the customer and transmits all or part of the payment to the marketplace seller, regardless of whether the marketplace provider receives compensation or other consideration in exchange for its services.” _[2]

A “marketplace” is “any physical place or electronic medium through which tangible personal property is offered for sale.” _[3]

Based on these rules, the TAA concluded that the taxpayer is not a marketplace provider. Even though the taxpayer facilitates a retail sale through listing the dealers’ products online, the taxpayer never collects payment from customers nor transmits any part of the payment to the dealers. One notable distinction between Florida’s definition of “marketplace provider” and North Carolina’s definition of “marketplace facilitator,” is that North Carolina’s definition included marketplaces that “Makes payment processing services available to purchasers for sales of a marketplace seller’s items.” _[4] Thus, to be a marketplace facilitator in North Carolina it was not necessary to collect payment. Perhaps if Florida had a similar definition, the taxpayer in this case would have been viewed as a marketplace provider.

The bottom line

Marketplace facilitator rules are not uniform from state-to-state, and businesses need to examine each state’s rules closely, since a business may be considered a marketplace facilitator in one state but not another. Aprio’s SALT team has experience addressing state marketplace facilitator rules, and we can assist your business to ensure that it complies with its sales and use tax obligations, so that it does not incur unexpected tax liabilities and penalties. We constantly monitor these and other important state tax topics, and we will include any significant developments in future issues of the Aprio SALT Newsletter.

[1] Florida Technical Assistance Advisement No. 22A-012 (June 16, 2022). Florida uses the term “marketplace provider” as opposed to more commonly used term “marketplace facilitator.”

[2] Fla. Stat. § 212.05965(1)(b)

[3] Fla. Stat. § 212.05965(1)(a).

[4] N.C. Gen. Stat. § 105-164.3(133). In the North Carolina ruling, it was determined that the marketplace made payment processing services available when the platform “pinged” a software system to accept pre-existing credit accounts or when it opened a pop-up window to a credit card processor’s payment gateway.