State Marketplace Facilitator Rules Adding Complexity to Sales Tax Compliance Landscape
January 29, 2020
State marketplace facilitator rules have created added complexity to sales tax compliance, and marketplace facilitators and marketplace sellers need to pay attention to state guidance in order to understand their respective obligations.
By Jeff Glickman, SALT Partner
The November/December 2019 issue of the SALT Newsletter contained an article noting the rise in state marketplace facilitator rules and the different definitions that states are using to define a marketplace facilitator. This article looks at some of the particular issues that are being addressed by states as they provide guidance on marketplace transactions.
Marketplace Sales and Economic Nexus
Whether you are a marketplace facilitator, marketplace seller, or both, keep in mind that it is likely your total sales made to a state that will determine whether you have nexus pursuant to state economic nexus rules enacted following the Wayfair decision.
For example, California’s Tax Guide for Marketplace Facilitator Act states that “[t]o determine if your sales exceed the $500,000 sales threshold, you must include all sales of tangible merchandise for delivery in this state, including sales made on your own behalf and those of related persons, as well as sales facilitated through a marketplace facilitator’s marketplace.” Thus, if you have $300,000 of California sales made through a marketplace and $300,000 of direct California sales (e.g., your own website or other means), you are required to be registered for California sales tax and to collect tax on your direct California sales, even if the marketplace facilitator is collecting and remitting tax on your California sales made through the marketplace.
Marketplace Facilitator vs. Marketplace Seller – Whose Obligation is It?
If a sale is made though a marketplace, and both the marketplace facilitator and marketplace seller are registered for sales tax, who is required to collect and remit the sales tax on that sale? That answer depends on the state.
New Jersey Technical Bulletin No. 83 initially puts the obligation to collect and remit sales tax on the marketplace facilitator, but then states, “However, a marketplace facilitator and marketplace seller are permitted to enter into an agreement with each other regarding the collection and remittance of Sales Tax.”
Iowa takes a different approach according to its guidance for marketplace facilitators, which states:
If a marketplace facilitator makes or facilitates $100,000 or more in Iowa sales, the marketplace facilitator must collect and remit Iowa sales tax and applicable local option sales tax on all taxable sales made through its marketplace. The marketplace facilitator must collect Iowa sales tax on all taxable Iowa sales, regardless of the location or sales volume of the marketplace seller. Some states have enacted laws that allow marketplace facilitators and marketplace sellers to agree which party will collect and remit on sales of the seller’s items. Iowa law does not allow for this arrangement.
What this means is that marketplace sellers must communicate with each of its marketplace facilitators so that it knows on which sales it is required to collect sales tax.
According to New York’s marketplace facilitator guidance, the state has a new form, Form ST-150, which marketplace facilitators provide to marketplace sellers certifying that the marketplace facilitator will be collecting and remitting sales tax. This form also serves as audit support for the marketplace seller if it ever needs to substantiate why it didn’t collect and remit on certain marketplace sales. This form is not necessary, however, if the marketplace facilitator has a publicly-available agreement with its marketplace sellers that includes that following statement:
[Marketplace provider name] is registered to collect New York State sales tax and will collect sales tax on all taxable sales of tangible personal property that it facilitates for marketplace sellers for delivery to a New York State address.
Are Facilitated Sales Reported on the Same Sales Tax Form as Direct Sales?
Again, this will depend on the state. According to Maryland’s Sales and Use Tax Alert issued in September 2019, a marketplace facilitator’s direct sales are reported on Form 202, while its facilitated sales are reported on Form 202F.
These are just a few of the issues that states are addressing as a result of these new marketplace facilitator laws. Marketplace facilitators and marketplace sellers need to pay special attention to the guidance issued by the states so that they make sure that they are following the new requirements. Aprio’s SALT team is following the guidance closely and can assist businesses to ensure that they remain in compliance with their sales tax obligations. 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.
This article was featured in the January 2020 SALT Newsletter.
 New York TSB-M-19(2)S, May 31, 2019.
Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.
About the Author
Jeff Glickman is the partner-in-charge of Aprio, LLP’s State and Local Tax (SALT) practice. He has over 18 years of SALT consulting experience, advising domestic and international companies in all industries on minimizing their multistate liabilities and risks. He puts cash back into his clients’ businesses by identifying their eligibility for and assisting them in claiming various tax credits, including jobs/investment, retraining, and film/entertainment tax credits. Jeff also maintains a multistate administrative tax dispute and negotiations practice, including obtaining private letter rulings, preparing and negotiating voluntary disclosure agreements, pursuing refund claims, and assisting clients during audits.