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Marketplace Facilitators - You May Have To Collect Taxes In Multiple States

With ecommerce disrupting many industries, many states are requiring marketplace facilitators to collect sales tax on behalf of companies using their platform.

A marketplace facilitator facilitates sales of a seller’s products through a marketplace and engages in other specified services

Generally, a marketplace facilitator is a business that does the following three activities:

1. Facilitates the sale of a marketplace seller’s product through a marketplace for payment.

2. Engages, directly or indirectly, in any of the following with respect to bringing the buyer and seller together:

  • 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 can use to purchase products from the seller

3. Does any of the following activities with respect to the seller's products:

  • Payment processing services

  • Fulfillment or storage services

  • Listing products for sale

  • Order taking

  • Advertising or promotion

  • Providing customer service or accepting or assisting with returns or exchanges

Websites that merely advertise goods for sale and do not handle transactions do not meet the definition of a marketplace facilitator.

For an analysis of your sales and use tax exposure to other states, please contact me for a consultation.

Richard Pon CPA, CFP