Marketplace sales Taxes are a great way for many companies to make extra money. But, they’re not without their own challenges. Here’s a look at a few.
Marketplace Sales Taxes
In today’s digital age, online marketplaces have become an integral part of our lives. From e-commerce giants like Amazon and eBay to niche platforms, they offer a convenient way to buy and sell products. However, the complexity of sales tax regulations, particularly in the context of marketplace transactions, can be a daunting challenge for both sellers and buyers.
Washington
Unlike Washington State businesses that operate on their own, marketplace sellers make retail sales through marketplaces or marketplace facilitators. As such, the state enacted legislation to improve the marketplace tax experience. Specifically, Section 3 of D.C. Law 22-258 requires marketplace sellers to collect and remit the appropriate state tax on taxable sales made through a marketplace. This is in addition to the required business & occupation tax. Depending on the type of marketplace seller, additional reporting requirements may apply.
Using a marketplace facilitator to collect the requisite state tax may be a more efficient way to do business. To qualify as a marketplace facilitator, a company must meet certain criteria, including operating from a commercially domiciled location in Washington. The company must also be capable of estimating business and occupation taxes using approved methodologies. If the business has an existing tax reporting account with the District of Columbia, it may be a good idea to sign up for a separate marketplace account. A marketplace facilitator might even be able to get the job done better than a typical tax preparer.
In addition to estimating the requisite taxes, a marketplace facilitator should be prepared to comply with reporting and audit requirements. For example, it should be able to provide information on its gross sales in the form of a spreadsheet or online account. Additionally, it should be prepared to make tax related claims on behalf of its marketplace sellers.
New Jersey
New Jersey marketplace sales tax law is a bit different than what you might be used to from the traditional online retailers. The new law is more aimed at sellers who are not actually physically present in the state. Despite this, you will still have to register and remit the sales tax on any products or services you sell in the state.
This law was enacted November 1, 2018. Its purpose is to collect the sales tax for marketplaces, such as eBay or Amazon, who may not be a third-party seller of the product or service they are facilitating.
A marketplace facilitator is defined as a person or entity that facilitates the sale of a particular product or service on an online or offline marketplace. In addition to collecting the sales tax on the sale, they must also provide an invoice and a receipt.
Marketplace sellers can request to be placed on a non-reporting basis. However, you can’t cancel a sales tax permit without first registering. As a result, it is important to understand which sellers will be required to register.
You may want to hold on to your sales tax permit if your business is in an expansion phase. You might also consider voluntary disclosure, which is not a requirement but can resolve non-compliance before audit activity ramps up.
Whether you need to pay New Jersey sales tax or not is dependent on your specific business. While the law applies to more than traditional online retailers, you need to evaluate the specifics of your specific situation to make an informed decision.
Minnesota
The Minnesota Department of Revenue has announced that it will begin requiring remote sellers to collect sales tax. While this is a new requirement, sellers already registered in Minnesota before Wayfair will continue to collect sales tax. If you sell online, you may be wondering how the changes affect you.
Marketplaces are online shopping platforms that facilitate purchases. They include Amazon and eBay. However, retailers with less than $10,000 in total retail sales are not required to register to collect Minnesota sales tax. This is known as the small seller exception.
Marketplaces are considered marketplace facilitators under Minnesota law. In order to be a marketplace facilitator, a seller must maintain a physical location in the state. Additionally, a retailer must have a license to conduct business in Minnesota.
A marketplace provider is any person other than the seller, including an employer or service provider. A marketplace provider is not liable for failure to collect sales taxes if the retail retailer provides incorrect information. Marketplace providers must also collect use tax on the marketplace sales.
Remote sellers are not required to register and begin collecting sales tax until they have been registering in Minnesota for at least 12 months. Marketplaces that do not have a physical location in the state must still register by October 1, 2018.
To be a marketplace facilitator, a retailer must have a license in Minnesota, as well as be registered with the Minnesota Department of Revenue. During this 12-month period, a retailer must have 10 retail sales taxable in Minnesota totaling more than $100,000.
Nebraska
Marketplace sales in Nebraska are a particular tax category that requires specific guidelines and rules. Sellers in this category must certify that they collect sales tax from their customers and submit their sales to the state. If not, they may be held liable for uncollected taxes.
To qualify as a marketplace seller, a business must have a physical presence in the state. This could include a retail store or warehouse.
In addition to a physical presence, sellers in this category must collect sales tax from their buyers. They may also be required to obtain a resale certificate. A resale certificate is a document that states the buyer has a valid exemption to pay the tax.
For businesses that do not have a physical presence in the state, there is a threshold that determines if they are required to collect sales tax. Retailers in this category must exceed $200 in Nebraska sales in a calendar year.
The sales tax rules for marketplace sellers are regulated by the Nebraska Department of Revenue. Sellers in this category are also required to remit the appropriate amount of sales tax per sale.
Sellers with nexus in the state must register with the Department of Revenue. They must then file returns and remit the tax. Failure to do so can result in penalties and interest.
As previously mentioned, the physical presence rule was overturned by the US Supreme Court. However, it is still important to have a significant connection to the state.
