Marketplace Facilitator Sales Tax Collection, Reporting, and Liability Risks

In recent years, virtually every state that imposes a sales tax has adopted legislation that requires marketplace facilitators to collect and remit sales tax on behalf of third-party sellers. With various conflicting state tax laws, maintaining compliance is difficult for marketplace facilitators. Third-party sellers are equally concerned with understanding the impact of shifting the collection and remittance duties to the marketplace facilitator.

In January 2024, the South Carolina Court of Appeals held that Amazon, a marketplace facilitator, was liable for sales tax prior to the Wayfair decision. This consequential ruling has led many companies and their advisers to reconsider their sales tax obligations.

Tax advisers and their client companies that operate marketplaces must grasp an understanding of recent state tax rules, nexus considerations, and reporting obligations for facilitators of sellers of third-party products and services.

Marketplace facilitators contract with third parties to sell goods and services often throughout the U.S. These facilitators enable the sales of third-party sellers by listing and offering the products or services of the seller, taking payments, collecting receipts, and managing the fulfillment of orders. This engagement with third parties may subject the marketplace facilitator to state sales tax laws requiring them to collect and report these transactions. Failure to do so can result in hefty penalties and tax liability.

An entity falling into the category of "marketplace facilitator" is not automatically subject to a state's tax collection requirements. In some states, there must be sufficient nexus with a state before it may be obligated to collect the state's sales and use tax on marketplace sales. Although there are adequate bases for economic nexus for retailers after the Wayfair decision, the same cannot be said for marketplaces due to variations of state tax rules on the economic nexus threshold.

Listen as our panel discusses key sales tax issues impacting marketplace facilitators, recent state tax legislation, nexus considerations, collection and reporting requirements, and methods to avoid penalties and ensure compliance.

1. Determining who are marketplace facilitators
2. Marketplace vs. retailer nexus standards
3. Recent state tax law developments
4. Marketplace facilitator registration, collection, and reporting
5. Impact on third-party marketplace sellers
6. Best practices for marketplace facilitators in contracting with third-party goods and service providers

The panel will discuss these and other key issues:

• What entities are considered to be "marketplace facilitators"?
• Key differences between the economic nexus standards for marketplace facilitators vs. retailers
• How marketplace facilitators can maintain compliance with various state tax collection and reporting obligations
• Whether marketplace sellers are permitted to opt out of marketplace collection and the impact on the marketplace
• What documentation requirements are imposed on marketplace facilitators?
• Additional issues that marketplace facilitators should consider in contracting with third-party goods and service providers

Learning Objectives

After completing this course, you will be able to:

• Determine if a taxpayer is a "marketplace facilitator" for sales tax purposes
• Recognize the differences of the economic nexus standards as applied to retailers vs. marketplace facilitators
• Identify variances and potentially conflicting state sales tax rules applicable to marketplace facilitators
• Understand the liability and audit exposure imposed on marketplace facilitators
• Ascertain a detailed understanding of sales tax registrations, collection, and reporting obligations of marketplace facilitators

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Prerequisites: Three years+ business or public firm experience at mid-level within the organization, dealing with complex multi-state sales and use tax collecting and reporting; supervisory authority over other preparers/accountants. Knowledge of the U.S. Supreme Court's ruling in South Dakota v. Wayfair, Multi State Tax Commission model nexus standards, and the primary nexus approaches used by most states.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.