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South Carolina: Online Peer-to-Peer Vehicle Rental Platform Business is a Marketplace Facilitator

With approximately 40 states imposing sales tax obligations on marketplace facilitators, guidance such as this private letter ruling from South Carolina makes clear that these rules don’t just apply to Amazon, Etsy, and Walmart.

By:  Tina M. Chunn, SALT Senior Manager

As states have enacted sales tax economic nexus rules in the last two years in response to the Wayfair decision, they have also enacted marketplace facilitator sales tax rules. Initially designed to force online marketplaces such as Amazon, Etsy, Walmart, etc., to collect and remit sales tax on behalf of their marketplace sellers, these rules are broad enough to capture other types of online marketplaces, such as Uber Eats.[1]

Approximately 40 states have rules that impose sales tax collection and remittance obligations on marketplace facilitators and, as is typically the case with state sales tax rules, the devil is in the details.  These rules can differ based on how the state defines a marketplace facilitator, the interplay of sales tax economic nexus rules, whether the marketplace seller can choose to remit the tax, and the reporting requirements, to name a few.

On March 31, 2020, the South Carolina Department of Revenue (“DOR”) issued a private letter ruling addressing the sales tax obligations of a taxpayer that planned to operate an online peer-to-peer, short-term motor vehicle rental program.[2]

ABC is a motor vehicle rental company that plans to operate an online peer-to-peer short-term motor vehicle rental program, whereby third-party owners and lessors of motor vehicles are to provide listing information to ABC and set the base rental for their vehicles. These listings of available vehicles are viewed by prospective renters on ABC’s website or mobile application. After a vehicle is selected, ABC approves the transaction and collects rental fees and any other charges (e.g. – taxes, insurance, protection plans, and other optional services) from the renter. The total receipts are then remitted by ABC to the third-party vehicle owner or lessor, less charges for taxes and additional services provided by ABC.

For South Carolina sales tax purposes, a “retailer” and “seller” include any person operating as a marketplace facilitator.[3] “Gross proceeds of sales” includes proceeds from the sale of property sold on consignment by the taxpayer (including property sold through a marketplace by a marketplace facilitator) from the sales, lease, or rental of tangible personal property.[4]

A “marketplace facilitator” means any person engaged in the business of facilitating a retail sale of tangible personal property by:

  • listing or advertising, or allowing the listing or advertising of, the products of another person in any marketplace (physical or electronic) where sales at retail occur; and
  • collecting or processing payments from the purchaser, either directly or indirectly through an agreement or arrangement with a third party.[5]

Based on this statutory guidance, the DOR ruled that it would treat ABC as a marketplace facilitator, and therefore, a retailer. Accordingly, ABC is responsible for remitting the applicable sales tax on all peer-to-peer, short-term motor vehicle rentals in South Carolina facilitated through ABC’s online platform.

Marketplace facilitator rules add further complexity to an already complex multistate sales/use tax system by making parties that aren’t legally/technically selling anything comply with state and local sales tax rules as if they are. Therefore, businesses that are involved in assisting with a taxable sale, whether as an advertiser, fulfiller, or otherwise, need to examine the marketplace facilitator rules to understand if they, or someone else, are responsible for collecting/remitting sales tax.

Aprio’s SALT Team is up to date on state marketplace facilitator guidance, and we can assist your business to ensure that you are in compliance with your sales tax obligations and do not incur unexpected tax liabilities and penalties. We constantly monitor these and other important state tax topics, and will include any significant developments in future issues of the Aprio SALT Newsletter.

Contact Tina Chunn, SALT Senior Manager at tina.chunn@aprio.com or Jeff Glickman, partner-in-charge of Aprio’s SALT practice, at jeff.glickman@aprio.com for more information.

This article was featured in the May 2020 SALT Newsletter.

[1] For more information about marketplace facilitator rules, see our Nov/Dec 2019 SALT Newsletter article and our January 2020 SALT Newsletter article.

[2] South Carolina Private Letter Ruling No. 20-2,

[3] S.C. Code Ann.§12-36-70.

[4] S.C. Code Ann. §12-36-90.  SC Revenue Ruling # 93-1.

[5] S.C. Code Ann. §12-36.71.

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