Important Updates Marketplace Facilitators Need To About New INFORM Consumers Act

Following the 2018 South Dakota vs. Wayfair U.S. Supreme Court decision that eliminated the physical presence standard for sales tax nexus, not only have most states enacted economic nexus legislation, but many have also started requiring marketplace facilitators to collect and remit sales tax on behalf of the third party sellers.

A marketplace facilitator (or MPF) is a business or organization that contracts with third parties (“sellers”) to sell goods or services on its platform, facilitating the sales that arise (large examples include Amazon or Etsy). These companies facilitate sales of goods or services between a seller and a buyer – but generally, the MPF does not take title to or even carry the inventory.

Because of the complexity that can arise for these marketplaces, we often share articles detailing the most up-to-date marketplace facilitator laws. You can read some of our past articles here and here. Today, we share what the new INFORM Consumers Act means for marketplace facilitators.

What Is The INFORM Consumers Act?

The INFORM Consumers Act, which was signed into law on December 29, 2022, is designed to reduce and ideally eliminate counterfeit sales. It was signed into law as a last-minute addition to the Consolidated Appropriations Act of 2023, a bill that authorizes federal government spending for the upcoming year. The consumers act applies to online marketplaces and requires them to collect, verify and make available to buyers certain identification information for ‘high-volume third-party sellers’ on their platform (sellers with more than 200 transactions and $5,000 in revenue in a 12-month period). The Consumers Act requirements go into effect on June 27, 2023.

What Do Online Marketplaces Need To Implement To Comply With The INFORM Consumers Act?

Online marketplaces must implement policies, procedures and controls to comply with the following new requirements:
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California- Tax Relief For Marketplace Facilitators

On the heels of the U.S. Supreme Court decision in South Dakota v. Wayfair (2018) many states enacted marketplace facilitator laws to tighten the sales and use tax collection net and reduce their tax collection costs. The marketplace facilitator laws give states one-stop collection of sales and use tax: one platform reports the tax of many sellers and the state only has to look to that one platform for uncollected tax. Why chase many debtors when one will pay for them all?

The marketplace facilitator laws are still relatively new, and anytime a law is new there will be those that are unaware of the change. So, the State of California graciously passed two laws to provide some tax relief for the unwary marketplace facilitators. Unfortunately, the tax relief laws are buried in the law books and are known to very few taxpayers. Fortunately, because of Miles Consulting Group’s careful study of California’s marketplace facilitator laws we discovered these hidden lifelines for California marketplace facilitators. We have also requested and received from the state an operations memo that was written for the California Department of Tax and Fee Administration’s tax auditors, which we will summarize in this blog.

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