How does marketplace facilitator sales tax work?
A marketplace facilitator is a business that operates as a service that connects sellers with buyers. It manages all transactions between store owners and customers within the platform.
Some of the most popular marketplaces in the US include:
- Etsy
- eBay
- Walmart
- Zalando
- Wayfair
Across the US, these companies are responsible for collecting and remitting sales tax for transactions on their platform. Don’t stop reading now, though! In many states, sellers are still required to register for a sales tax permit and submit sales reports to the authorities.
Nexus for marketplace sellers
Nexus rules determine when a business has a sufficient physical or economic presence in a jurisdiction to be subject to its tax laws, including the obligation to collect and remit or report sales tax.
Each state sets its own rules and thresholds, so even if you sell exclusively through marketplaces, you may have nexus in various locations.
- Physical nexus: If you store products in a warehouse within a state, you may be required to register and report your sales there. You’re still off the hook for collection and remittance, though!
- Economic nexus: If you sell products from your own website too, your marketplace sales may still contribute towards the economic nexus threshold in some states. That would make you responsible for reporting your total sales and for collecting sales tax from your direct sales.
Omnichannel sales tax rules
If you sell through a marketplace (like Amazon or eBay) but also directly from your own website or store, you are an omnichannel seller. You are responsible for collecting and remitting sales tax for all your non-marketplace sales. You’ll need to check if your marketplace sales contribute to economic nexus in the states where you sell and ensure your filings are clearly broken down into direct and third-party sales.
Amazon Sales Tax
Amazon is considered a marketplace facilitator in most states. This means Amazon is responsible for calculating, collecting, and remitting sales tax on behalf of sellers. Even though Amazon collects the tax, you might still need to register for a sales tax permit in your home state or any state where you have a significant presence. Amazon offers tools to configure your tax settings in Seller Central, allowing you to specify tax rates and jurisdictions if needed.
Amazon seller tax information
- Amazon Sales Tax Reports: Amazon provides sales tax reports summarizing the tax it has collected and remitted. You can access these reports through Seller Central.
- Filing Requirements: You can use these reports to help you file sales tax returns as required by each state where you are registered.
eBay Sales Tax
eBay automatically calculates, collects, and remits sales tax for orders shipped to states with marketplace facilitator laws. You can set custom tax rates for any states where you need to collect tax but eBay does not automatically do so.
If you’re just selling personal items on eBay, taxes don’t apply. Only items sold for a profit are subject to sales tax. As with all marketplaces, you will still need to pay income tax on eBay sales, assuming the items are sold for a profit.
Etsy Sales Tax
Etsy is another popular marketplace facilitator. The company collects and remits sales tax on your behalf. Just make sure to download your Etsy sales tax reports through your account for filing purposes.
Facebook Marketplace Tax
Despite what the name might suggest, Facebook Marketplace does not act as a marketplace facilitator. This means Facebook does not automatically calculate, collect, or remit sales tax on behalf of sellers. You are responsible for understanding and complying with your own sales tax obligations.
If you are just selling personal items on FB Marketplace, tax rules don’t apply, as you are likely to be taking less than you paid for them. When it comes to profitable sales though, you’ll need to follow the typical sales tax process:
- Monitor your nexus obligations
- Register for a tax permit in states where you reach the threshold
- Calculate the correct tax rates in each state and apply them to your sales
- Collect sales tax and keep detailed records of all your taxable and tax-exempt sales
- File your tax returns by the correct date in each state
- Remit the sales tax you’ve collected to the appropriate tax authorities
Walmart Sales Tax
Walmart also operates as a marketplace facilitator. That means you are only responsible for registering and reporting in the states where you have nexus, not for collecting and remitting tax.
If you sell products directly or via other platforms, though, it’s important to check your sales tax obligations for those. You’ll want to keep detailed records of your Walmart sales so you can prove compliance.
Automate Your Sales Tax as a Marketplace Seller
Sales tax rules can become complex when you operate on more than one marketplace or as an omnichannel seller. Many businesses use automated software to streamline the process.
A solution like Yonda Tax manages everything for you:
- Automatic nexus monitoring
- Registration in each state where you have obligations
- Accurate calculations for each state and jurisdiction
- Reporting that automatically separates marketplace and direct sales
- Integrations with your marketplace for automated filings
- Remittance of any sales tax you’ve collected
- A dedicated sales tax manager to ensure you’re compliant
Book a free consultation to understand your obligations as a marketplace seller. We take the stress out of running your business and help you stay compliant as your company grows.