In part one of this article we described the difference between marketplace facilitators and marketplace (remote) sellers. We also considered how this works for Alaska through Nevada. In part two of this article, we will discuss how this works for the states of New Jersey through Wyoming.
Marketplace facilitators generally own, operate, or control a physical or electronic retail location and assist third-party sellers with selling their products. Typically, through some sort of contractual agreement with the third party, they collect payments from purchasers and/or send the payments to the seller. Whether or not the marketplace facilitator collects and/or remits sales tax to the various states into which products or services are sold will depend on the specific laws of each state. On the other hand, marketplace sellers sell their products and/or services direct to customers and are responsible for collecting and remitting sales tax to the applicable taxing entity.
Bear in mind that this information is given as general guidance and not legal advice. For specifics applicable to your business (or your clients' businesses) across the various states, contact that state directly or consult with your CPA/attorney.
In this article we will describe how this works for the states of New Jersey through Wyoming.
New Jersey
New Jersey requires marketplace facilitators to collect and remit sales tax on any sales made through any marketplace owned, operated, or controlled by the marketplace facilitator even if the marketplace seller is registered with the state. Marketplace facilitators and sellers are allowed to enter into an agreement with regard to collection and remittance of sales tax. Marketplace facilitators are not required, but are requested, to file a separate return to report sales facilitated for marketplace sellers.
North Carolina
North Carolina keeps it simple. Marketplace facilitators are required to collect and remit sales tax when they exceed $100,000.00 in gross sales or 200 or more separate transactions in the prior or current calendar year. They do not require marketplace facilitators to identify sales made on behalf of marketplace sellers separately on a return (but it is allowed), nor do they require certification that they will collect and remit on behalf of marketplace sellers.
North Dakota
North Dakota requires marketplace facilitators to collect and remit sales tax with a threshold of $100,000.00 in the current or prior year. They do not require them to identify sales made on behalf of marketplace sellers separately on their own return. They allow marketplace facilitators to file a separate report if the marketplace facilitator has a separate Nor Dakota sales tax account for facilitated sales. They do require certification to state that they will collect and remit sales tax on behalf of marketplace sellers.
Ohio
Ohio requires marketplace facilitators to collect and remit sales tax with a threshold of $100,000.00 or 200 transactions. They request that marketplace facilitators have two seller’s use accounts; one for remittance of tax the marketplace facilitator makes directly, and a second that would include a marketplace facilitator indicator for remittance of tax on sales collected on behalf of marketplace sellers. This allows them to file separate returns for third party sales it facilitates.
Oklahoma
Oklahoma also does things a little differently. For sales made through the marketplace facilitator’s forum by or on behalf of a marketplace seller, the marketplace facilitator is required to elect to collect and remit sales and use tax or meet the notice and reporting requirements outlined 68 O.S. Sections 1393 through 1395. The threshold is significantly lower at $10,000.00 in the preceding 12 months.
Pennsylvania
Pennsylvania keeps it simple. Marketplace facilitators are required to collect and remit sales tax with a threshold of $100,000.00. They are required to certify that they will collect and remit sales tax on behalf of marketplace sellers.
Rhode Island
Rhode Island also keeps it simple. They require collection and remittance when the threshold of $100,000.00 in gross sales or 200 sales is met for the preceding year. They do not require separate reporting or certifications.
South Dakota
The state where it all started. They require marketplace facilitators collect and remit sales tax. The threshold is a combined marketplace facilitated sales exceeding $100,000.00 in gross sales or 200 or more separate transactions in the previous or current calendar year. They do not require additional reporting for sellers, but do require marketplace facilitators to provide to marketplace sellers a notice that South Dakota sales tax is being reported and remitted on marketplace sales. The notice must include the date that the marketplace facilitator began complying with the state law. The notice must be conspicuously posted on their website and provided directly to marketplace sellers.
Tennessee
The state of Tennessee does things a little differently than most others. Marketplace facilitators are required to collect and remit sales tax. However, they are not required if the marketplace facilitator receives authorization from the commissioner to not collect and remit because all its sellers are collecting and remitting Tennessee sales tax and the marketplace facilitator and seller (registered for Tennessee sales and use tax with annual gross sales in excess of 1M dollars) contractually agree seller will collect and remit the tax and the commissioner is notified. The threshold is $100,000.00 in the previous 12 months. Marketplace facilitators are required to identify sales made on behalf of marketplace sellers separately from its own direct sales. Marketplace facilitators will report and remit taxes on marketplace sellers’ sales under a separate location ID from the location ID used to report and remit their own sales. More information can be found at www.tn.gov/revenue.
Texas
Texas keeps it simple as well. Marketplace facilitators are required to collect and remit sales tax when a threshold of $500,000.00 has been met. They require the marketplace facilitator to provide certification that they will collect and remit tax on behalf of marketplace sellers.
Utah
Utah requires marketplace facilitators to collect and remit sales tax. The threshold is over $100,000.00 or 200 or more separate transaction sin the previous or current calendar year. They allow marketplace facilitators to file a separate return for third party sales it facilitates.
Vermont
Vermont requires marketplace facilitators to collect and remit sales tax when a threshold of at least $100,000.00 or at least 200 transactions in the previous 12 months. They allow for separate reporting and require certification for the collection and remittance of tax on behalf of marketplace sellers
Washington
The state of Washington requires marketplace facilitators to collect and remit sales tax. For exclusions, refer to RCW 82.08.010(15)(b). Beginning January 1, 2020, the threshold is $100,000.00 in cumulative gross receipts, including gross retail sales, wholesale sales, and other gross income including both facilitated sales and its own sales. Marketplace facilitators may generally file separate returns or report all retail sales on one return and take a retailing B&O tax deduction for sales made on behalf of marketplace sellers. The deduction identifies sales made on behalf of marketplace sellers. Marketplace facilitators are not required to certify that they will collect and remit tax for marketplace sellers. However, a marketplace seller may need to obtain documentation that the marketplace facilitator is registered and collecting sales and use tax.
West Virginia
West Virginia requires marketplace facilitators collect and remit sales tax when the threshold of $100,00.00 in sales or 200 transactions was met in the previous year. They allow separate reporting of a separate return for marketplace sellers.
Wisconsin
Wisconsin requires marketplace facilitators collect and remit sales tax when the threshold of $100,00.00 in gross sales the previous or current year. As of February 20, 2020, the 200 transactions threshold was removed. The separate reporting of third party sales is allowed if a reporting agreement has been executed with the Wisconsin Department of Revenue.
Wyoming
Wyoming requires marketplace facilitators collect and remit sales tax with a threshold of $100,000.00 in gross sales or 200 individual transactions into the state during the current or previous calendar year. Separate reporting for third party sales is permitted. Certification of collections is not required for third party marketplace sellers.
Given the complexity of collecting and remitting sales tax, it is recommended that both retail and service businesses subject to state sales tax employ a Certified Service Provider to verify that their tax compliance is done right.
As always, tax compliance done right…important to know the facts.