Types of Marketplace Sellers
Remote Marketplace Seller
A remote marketplace seller is an out-of-state state seller who sells exclusively through a marketplace facilitator, i.e., Amazon, Etsy, eBay, etc.
Since collecting sales tax is now the responsibility of the marketplace facilitator, remote marketplace sellers must be mindful of the different requirements mandated by each state to determine whether to register. Here are some examples of various rules:
Arizona and Maryland do not require the seller to register if they sell only using a marketplace.
Nebraska and Connecticut require the seller to register, report all sales, and take a deduction for the marketplace collection of sales.
North Carolina and New York may require the seller to register if they cross the economic threshold as defined by each state.
One concern remote marketplace sellers may have is what to do if they are already registered. In this instance, the remote marketplace seller should contact the state to confirm which course of action is necessary. For example, Virginia allows sellers to login to their online services account and update as “no longer liable for sales tax.” Doing so will close the account.
In-State Multichannel/Marketplace Seller
The seller has a physical presence in the state.
If the seller has a physical presence in the state, and the seller is using multiple channels to sell their products (including a marketplace facilitator), then the seller is required to register and remit the tax, which is not collected by the marketplace facilitator.
If the seller has a physical presence in the state and only uses a marketplace facilitator to sell their products, then the seller is most likely required to register in the state. However, some states offer various ways to file, such as taking the sales as a deduction under “Sales Tax Collected by a Marketplace Provider” or having the filing frequency changed to annual to help assist with the administration of filing. A few states (e.g., Ohio) offer a seller’s use tax account for registering and reporting the marketplace sales separately from the retail sales.
In every case, we recommend contacting a trusted tax advisor at PMBA or the taxing jurisdiction before a decision is made regarding your sales and use tax compliance needs.
About the Author
Jaclyn Harris is the Indirect Tax Compliance Director at PMBA. Jaclyn has over 12 years of experience in providing tax compliance services for various Fortune 500 companies. She is an expert in the retailer industry, Canadian compliance, gross receipts tax, tire fee returns, and food tax returns.