What Is A Marketplace Facilitator?

Do you sell your products on marketplaces like Amazon, eBay, Facebook, and Instagram? Online shopping has boomed since the pandemic and has caused a rise in various online marketplaces and marketplace facilitators.

A marketplace facilitator is a business that forms contracts with third parties and sells any services or goods. You can understand a marketplace facilitator as a retailer, facilitating third-party sales of goods and services. They promote sales by listing products, keeping track of sales, and sometimes helping with the shipment. Amazon.com is a famous example where customers can discover and shop multiple products from different brands and sellers.

The marketplace facilitator contracts with businesses to facilitate retail sales. Marketplace sales are subject to sales tax regulations implemented under marketplace facilitator laws.

It can get complicated, especially with the legal compliance requirements and regulations. So, here we are, explaining what marketplace facilitators are and how they affect sales tax collection for sellers.

 

What are Marketplace Facilitator Laws?

The USA has implemented marketplace facilitator laws so that the states can simplify sales tax collection by collecting it from one entity rather than several sellers.

For instance, if you sell your products through Etsy or eBay and have a sales tax nexus, you are not responsible for collecting and remitting tax on your sales. Instead, the concerned marketplace facilitator (i.e., eBay or Etsy) is accountable and will do it on your behalf.

Marketplace facilitators are responsible for gathering and paying sales tax to the state where they do business or have customers. Marketplace facilitator laws enable states to collect sales tax from consumers while simplifying the tax collection process for states and businesses.

Marketplace facilitator laws include legislation surrounding the sales tax responsibilities of marketplace facilitators. They aim to increase sales tax compliance while reducing the time consumption and complexity of sales tax collection.

 

How do Marketplace Facilitator Laws Affect Sellers?

States have different legislatures about what constitutes a marketplace facilitator and when marketplace facilitator tax applies to your business. Taxes are easier for states and businesses with the marketplace facilitators’ laws. However, understanding how it works for your business can get complicated.

Although your marketplace facilitator is responsible for collecting and remitting sales tax, you may have to register for sales tax if you sell your products on your website in a state with marketplace facilitator laws. If you don’t sell outside the marketplace facilitators’ states, you may have to register for non-reporting tax status.

 

Marketplace Facilitator Tax Laws in Different States

Here is how marketplace facilitator law applies in different states and affects your business.

STATE SALES THRESHOLD MARKETPLACE ADOPTION Alabama $250,000 revenue Amazon eBay Etsy Walmart Alaska $100,000 gross revenue or 200 retail transactions Amazon eBay Etsy Arizona $100,000 gross revenue eBay Etsy Walmart Arkansas $100,000 gross revenue or 200 retail transactions Amazon eBay Etsy Walmart California $500,000 revenue Amazon eBay Etsy Walmart Colorado $100,000 gross revenue eBay Etsy Walmart Connecticut $250,000 revenue Amazon eBay Etsy Walmart Florida $100,000 gross revenue Amazon eBay Etsy Walmart Georgia $100,000 gross revenue Amazon eBay Etsy Walmart Hawaii $100,000 gross revenue or 200 retail transactions Amazon eBay Etsy Walmart Idaho $100,000 gross revenue Amazon eBay Etsy Walmart Indiana $100,000 gross revenue or 200 retail transactions Amazon eBay Walmart Illinois $100,000 gross revenue or 200 retail transactions Amazon eBay Etsy Walmart Iowa $100,000 gross revenue or 200 retail transactions Amazon eBay Etsy Walmart Kansas $100,000 gross revenue Amazon eBay Etsy Walmart Kentucky $100,000 gross revenue or 200 retail transactions Amazon eBay Etsy Walmart Louisiana $100,000 gross revenue or 200 retail transactions n/a Maine $100,000 gross revenue or 200 retail transactions eBay Etsy Walmart Maryland $100,000 gross revenue or 200 retail transactions eBay Etsy Walmart Massachusetts $100,000 gross revenue Amazon eBay Etsy Walmart Michigan $100,000 gross revenue or 200 direct and facilitated sales transactions Amazon eBay Etsy Walmart Minnesota $100,000 gross revenue or 200 retail transactions Amazon eBay Etsy Walmart Mississippi $250,000 revenue Amazon eBay Etsy Walmart Missouri $100,000 gross revenue Amazon eBay Nebraska $100,000 gross revenue or 200 separate sales transactions Amazon eBay Etsy Walmart Nevada $100,000 gross revenue or 200 separate sales transactions Amazon eBay Etsy Walmart New Jersey $100,000 gross revenue or 200 sales transactions Amazon eBay Etsy Walmart New Mexico $100,000 revenue Amazon eBay Etsy Walmart New York $500,000 revenue or 100 in-state transactions Amazon eBay Etsy Walmart North Carolina $100,000 revenue eBay Etsy North Dakota $100,000 revenue Amazon eBay Etsy Ohio $100,000 revenue or 200 sales transactions Amazon eBay Etsy Walmart Oklahoma $10,000 revenue Amazon eBay Etsy Walmart Pennsylvania $10,000 revenue Amazon eBay Etsy Walmart Puerto Rico All mail-order sales of goods and services Amazon eBay Etsy Walmart Rhode Island $100,000 revenue or 200 sales transactions Amazon eBay Etsy Walmart South Carolina $100,000 revenue Amazon eBay Etsy Walmart South Dakota $100,000 revenue or 200 sales transactions Amazon eBay Etsy Walmart Tennessee $500,000 revenue Amazon eBay Etsy Texas $500,000 revenue eBay Etsy Walmart Utah $100,000 revenue or 200 in-state sales transactions eBay Etsy Walmart Vermont $100,000 revenue or 200 in-state sales transactions Amazon eBay Etsy Walmart Virginia $100,000 revenue or 200 in-state sales transactions Amazon eBay Etsy Walmart Washington $100,000 revenue Amazon eBay Etsy Walmart West Virginia $100,000 revenue or 200 in-state facilitated sales transactions Amazon eBay Etsy Walmart Wisconsin $100,000 revenue or 200 transactions Amazon eBay Etsy Walmart Wyoming $100,000 revenue or 200 transactions a year Amazon eBay Etsy Walmart

 

Need Help with Marketplace Facilitator Tax Laws in your State?

It is important to know the details about marketplace facilitator laws in your state to ensure compliance with all legal requirements. Book a call with TaxHero and let experts take care of your state’s latest compliance laws and requirements.