Uber Eats is a Marketplace Facilitator….Are You?
December 10, 2019
Almost as many states impose sales tax obligations on marketplace facilitators as they do on businesses with economic nexus, and the reach of these marketplace rules goes beyond Amazon, Etsy and eBay. Just ask Uber Eats.
By Jeff Glickman, SALT Partner
Somewhat lost in the quick and expected proliferation of sales tax economic nexus laws following the United States Supreme Court’s Wayfair opinion has been the almost equally fast expansion of marketplace sales tax laws. As of the publication of this article, 39 states have enacted laws or issued guidance imposing marketplace sales taxes, compared with 43 states that have sales tax economic nexus rules (only Florida and Missouri have no guidance).
Interestingly, marketplace sales tax guidance actually predates the Wayfair decision. In 2016, the Arizona Department of Revenue issued Transaction Privilege Tax Ruling 16-3, which addressed treatment of online marketplaces as “retailers.” That ruling has since been withdrawn following the enactment of formal marketplace sales tax laws by the Arizona legislature that became effective on Oct. 1, 2019.
On Sept. 10, 2019, a South Carolina Administrative Law Judge held Amazon Services liable for sales tax on sales of third-party products through Amazon’s website. This case began with an audit by South Carolina in 2017 and covered sales made on Amazon’s website for the first quarter of 2016. This also pre-dated the Wayfair decision as well as South Carolina’s formal marketplace sales tax laws, which went into effect on April 26, 2019.
Among the states that have enacted marketplace sales tax rules, the definition of a “marketplace facilitator” or “marketplace provider” has generally taken one of two forms. The first is a short-form definition as adopted by jurisdictions such as Minnesota, New York and the District of Columbia. This definition is typically as follows:
“Marketplace facilitator/provider” means any person who facilitates a retail sale by a retailer by:
(1) listing or advertising for sale by the retailer in any forum, tangible personal property, services, or digital goods that are subject to tax under this chapter; and
(2) either directly or indirectly through agreements or arrangements with third parties collecting payment from the customer and transmitting that payment to the retailer regardless of whether the marketplace facilitator/provider receives compensation or other consideration in exchange for its services.
The second type of definition is longer and has been adopted by states such as Alabama, California and Massachusetts. This definition is typically as follows:
“Marketplace facilitator/provider” means a person who contracts with marketplace sellers to facilitate for consideration, regardless of whether deducted as fees from the transaction, the sale of the marketplace seller’s products through a marketplace operated by the person or a related person and who does both of the following:
(1) Directly or indirectly, through one or more related persons, engages in any of the following:
- Transmitting or otherwise communicating the offer or acceptance between the buyer and seller
- Owning or operating the infrastructure, electronic or physical, or technology that brings buyers and sellers together
- Providing a virtual currency that buyers are allowed or required to use to purchase products from the seller
- Software development or research and development activities related to any of the activities below, if such activities are directly related to a marketplace operated by the person or a related person
(2) Directly or indirectly, through one or more related persons, engages in any of the following activities with respect to the marketplace seller’s products:
- Payment processing services
- Fulfillment or storage services
- Listing products for sale
- Setting prices
- Branding sales as those of the marketplace facilitator
- Order taking
- Providing customer service or accepting or assisting with returns or exchanges
What is clear from these definitions is that a marketplace facilitator isn’t just the Amazons and eBays of the world. In fact, a marketplace facilitator doesn’t even have to be online – it can be a physical location, catalog, etc.
Earlier this year, Uber Eats announced that it qualified as a marketplace facilitator and will begin complying with sales tax collection and remittance requirements in a certain jurisdictions. Every business should ask itself if it assists, in any way, the sale of someone else’s taxable goods or services. If so, you may be a marketplace facilitator required to collect and remit sales tax.
Aprio’s SALT team has experience with economic nexus and marketplace facilitator rules and can assist businesses to determine their sales and use tax obligations so that they do not incur unexpected 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.
Contact Jeff Glickman, partner-in-charge of Aprio’s SALT practice, at firstname.lastname@example.org for more information.
This article was featured in the November/December 2019 SALT Newsletter.
 Amazon Services, LLC v. South Carolina Department of Revenue, No. 17-ALJ-17-0238-CC (Sept. 10, 2019). To access the decision, click on the link above and enter the “17-ALJ-17-0238-CC” in the “Docket Number” field.
 See, e.g., Minn. Stat. § 297A.66, subd. 1(d); N.Y. Tax Law § 1101(e)(1); D.C. Code Ann. § 47-2001(g-5). Note that the specific language in each jurisdiction will differ slightly based on state-specific terminology.
 See, e.g., Ala. Code § 40-23-199.2(a)(2); Cal. Tax Law § 6041(b); Mass. G.L. c. 64H, § 1. Note that the specific language in each jurisdiction will differ slightly based on state-specific terminology.
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.