Marketplace Facilitator Changes in 2023
If you sell on a Marketplace facilitator such as Amazon, as you know, they now collect and remit sales tax in over 47 Marketplace nexus states (including D.C. and Alaska at the local level). Missouri will add marketplace nexus by January 2023.
An updated whitepaper was produced in the recent MTC.gov meeting, making recommendations to state legislators and tax agencies considering such laws or amendments during their 2020 legislative sessions.
When does a Marketplace Seller (you) Get Audited for Marketplace Sales?
Here is the situation: If the marketplace facilitator/provider can show that the failure to collect was due to the marketplace seller (you) providing erroneous information to the marketplace facilitator/provider, then the audit risk and liability can shift to the marketplace seller for those transactions.
Erroneous information may be just inaccurate information. The wrong EIN, spelling errors, address issues…from your seller account.
What is involved in the Marketplace seller economic nexus threshold calculation?
Most states include marketplace facilitator sales and direct sales toward threshold calculations, but 8 states only include direct sales. This is good news because most of your sales are on Amazon, not your own website or Shopify.
Other marketplace facilitator items clarified in this MTC whitepaper include:
- Definition of marketplace facilitator/provider. This is not an issue for companies such as Amazon, eBay, and Walmart, but what about payment processors, advertisers, and car rentals…? The companies are up in arms attempting to figure out if they need to collect sales tax on behalf of their customers or clients.
- Who is the retailer? This definition has changed over the last couple of years, and now the marketplace facilitator steps into the retailer’s shoes. Does this mean that if you have the previous nexus, you may argue you were not the retailer and should not be liable for sales tax? It sounds good, but the big question becomes, will the state change how they handled the definitions of nexus 2-3 years ago from today? Probably not. Tax laws, cases, and situations always evolve and change over time. And it will change again 2-3 years from now, especially sales tax.
- Collection responsibility determination. This would seem to point to the marketplace facilitator, but other issues arise, including who is responsible for collecting other state fees and taxes.
- Certification requirements. This is the reverse of what you may think. This is where the marketplace facilitator needs to provide documents to the marketplace seller in an audit. It allows the seller to point the finger at the facilitator for the audit.
- Information Sharing. This is in place, but will the states use the information against you if required?
Overall, it appears that most sales tax requirements are going in your favor as a marketplace seller. Don’t assume that means you have zero responsibilities in any 45 states collecting and remitting sales tax.Did you have physical or economic nexus to marketplace nexus in several states? If so, you will have a potential sales tax liability. Learn how we can help you determine when you first had nexus and what states to register. A sales tax nexus analysis will help you determine when you first had nexus. Learn more here.
Selling on your own website or Shopify (NOT a marketplace facilitator) will create more compliance as your sales and transactions increase. Does that mean you don’t sell on your own website or sites like Shopify? No. You have to track sales and data.