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What You Need To Know: States’ Online Sales Tax And Marketplace Facilitators



Monika Miles - What You Need To Kno

Across the country, states continue to update their sales tax laws in an effort to clarify provisions and increase state income. Of course, because company sales extend beyond state borders, it’s extremely important for your business to be aware of various multi-state tax issues and how they may affect your organization.

One major trend we’re seeing (unsurprisingly) is more states’ adoption of economic nexus and online sales tax provisions based on the Wayfair Supreme Court case. In addition, states that had adopted marketplace facilitators as part of their tax code are beginning to clarify their new role. What does this mean? Keep reading for the details!

Marketplace Facilitators-Their Role In State Sales Tax

As this blog post explains, marketplace facilitators are companies that facilitate:

  1. A seller’s product and payment
  2. The transaction between a buyer and seller by bringing them together
  3. The transaction by processing payment, storing inventory, listing products, setting prices, etc.

Amazon and eBay are two prominent companies that are often designated as marketplace facilitators.

Before the Wayfair case, some states like Washington were using these marketplace facilitators to collect and remit sales tax on sellers’ behalf, or provide notice and reporting to help the state collect its taxes.

Marketplace Facilitator Legislation

In the wake of Wayfair, many states are revising their Marketplace Facilitator provisions. Here’s a quick summary of the changes you should know about:

  • Arizona’s Department of Revenue had already ruled that marketplace facilitators needed to collect and remit sales tax from sellers, but now its legislature is attempting to make it an official part of the legal code.
  • A new bill in Florida would require marketplace facilitators to collect and remit sales tax on all transactions if they and/or their sellers have a physical presence or economic nexus in the state.
  • Proposed legislation in Kansas would require marketplace facilitators to collect and remit sales tax for any transactions made by them, or by sellers that have either established physical presence or that meet the threshold requirements.
  • Nebraska introduced a bill that establishes a remote seller’s threshold and requires marketplace facilitators that surpass it to collect and remit sales tax on all purchases made through its platform. The bill specifies that the facilitators would need to report the sales tax collected on its behalf as well as on behalf of its sellers, and both the facilitators and sellers could be audited.
  • Rhode Island is attempting to close a loophole that gives marketplace facilitators the choice to collect sales tax or not, and instead make it mandatory for the facilitators to collect and remit the taxes.
  • Marketplace facilitators with economic nexus in South Dakota are required to collect and remit sales tax on sellers’ behalf, which began March 1, 2019.
  • Virginia will require marketplace facilitators with economic nexus to collect and remit sales tax in sellers’ transactions. This change goes into effect on July 1, 2019.
States Adopting Economic Nexus And Online Sales Tax Provisions

The following states are currently working on passing economic nexus and online sales tax provisions:

  • Arizona
  • Florida
  • New Mexico
  • Oklahoma
  • Tennessee
  • Virginia

These states have already enacted online sales tax legislation, but they’re working on revising their provisions:

  • Colorado (simplify the current language)
  • Georgia (lowering the economic nexus threshold that went into effect January 1, 2019)
  • Kansas (broadening online sales tax requirements on digital products)
  • Nebraska (give remote sellers additional time to apply with the new remote sales tax law)
  • Rhode Island (begin taxing streaming services)

Have a question? Contact Monika Miles.

 

Monika Miles

Monika founded Miles Consulting Group which focuses on multi-state tax consulting, helping clients navigate state tax issues such as sales tax and income tax in interstate commerce, including e-commerce.

Prior to forming the firm, Monika worked for 12 years combined in Big 4 Public Accounting and private industry. Monika has provided such services as federal and state income/franchise tax compliance and consulting, sales/use tax consulting, audit support, and credits and incentives reviews. She has served clients in a variety of industries including manufacturing, technology, telecommunications, construction, utility, retail and financial institutions.

Monika graduated from the University of Texas at El Paso (UTEP) with a BBA in Accounting/Finance and has a Masters in Taxation from San Jose State University.

One thought on “What You Need To Know: States’ Online Sales Tax And Marketplace Facilitators

  1. Avatar Lloyd J. Looram, CPA says:

    I continue to be greatly disturbed by what is occurring regarding this extremely complex and current economic issue. I understand fully that the US Supreme Court has given approval to the actions being undertaken by states all across this country through its decision concerning Wayfair. But, I believe that the states are going too far. I have dealt with states and sales tax audits and auditors for 50 years. Both in industry and in public accounting. I have represented clients as an expert witness in court cases.
    I have said and written this before. I will say it to anyone that will listen. To require companies that have no tangible connection with a state that merely sell into a state on the internet to register then collect then remit then be audited then be assessed for any tax inadvertently not paid plus a penalty and interest for having nothing in the state for which the state provides services to the company is not right. It akin to the oppressed system that existed in England more than 100 years ago.
    For, example, I believe that in at least one state the minimum threshold that requires registration is 100 sales into the state one year. So, let assume that some small company located in west somewhere New Jersey makes 100 sales of $1 each into California. According to the new law, it must register and begin filing returns. I think initially one must first file on a monthly basis before it can reduce its periodic filings if sales are not sufficient. So, it has to either itself or hire an outside sales tax compliance firm (Which you all know is not going to cost $100) to prepare and file returns. Then, the next year this company unfortunately has only 89 sales into California. Must it continue to file? What if the next year following it has 92 sales. The same question. Is Nexus in California like Herpes? Once you have it, you can never get rid of it.
    So, I urge all companies in all industries to come together through your various business associations and/or the COST organization or the Chamber of Commerce or all of them to fight this movement. Please! Both instate and out of state companies. Together. You cannot let the states do this to you.

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