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Sales tax guide for marketplace sellers

Navigate the complex world of marketplace sales tax with confidence. We’ll help you understand your obligations and maintain compliance across multiple platforms and states.
Sales tax experts helping businesses manage compliance and reporting

Understanding marketplace sales tax basics

Before diving into platform-specific requirements, it’s essential to understand the fundamental concepts that affect marketplace sellers.

What is marketplace facilitator legislation?

Marketplace facilitator laws require online marketplaces—such as Amazon, eBay, Etsy, etc.—to collect and remit sales tax on behalf of third-party sellers. These laws have revolutionized how sales tax is handled in the ecommerce space.

Definition

A marketplace facilitator is a business that contracts with third parties to sell goods and services through a physical or electronic marketplace.

Purpose

These laws simplify tax collection and ensure that states capture revenue from online sales.

Impact

Reduces individual seller burden while increasing overall tax compliance.

Coverage

All states, except the NOMAD states, have marketplace facilitator laws in place.

Platform-specific requirements

Sales tax experts helping businesses manage compliance and reporting

Amazon marketplace

As the largest ecommerce platform, Amazon has comprehensive sales tax collection systems in place.

  • Automatic collection
    Amazon collects and remits sales tax in all states with marketplace facilitator laws.
  • Seller responsibilities
    - Maintain accurate product tax codes
    - Handle tax for any direct sales outside of Amazon
    - Keep records of all transactions
    - Monitor threshold limits in nonmarketplace states
  • Special considerations:
    FBA (fulfillment by Amazon) inventory can create physical nexus in multiple states. This may affect your business’s nexus if selling outside of the Amazon platform as well (e.g., private website).

eBay marketplace

eBay handles most sales tax obligations automatically but requires seller attention to certain details.

  • Automated collection
    eBay manages tax collection and remittance in applicable states.

  • Seller guidelines
    - Verify item categories for correct tax classification
    - Monitor international sales tax requirements
    - Keep detailed transaction records

  • Cross-border sales
    eBay makes special considerations for international transactions and state-to-state commerce.

Sales tax experts helping businesses manage compliance and reporting
Sales tax experts helping businesses manage compliance and reporting

Walmart marketplace

Walmart’s marketplace has specific requirements for tax compliance and reporting.

  • Tax collection system
    Walmart’s infrastructure offers automated collection and remittance. 

  • Seller Requirements
    - Complete tax interview during onboarding
    - Maintain accurate product categories
    - Monitor tax collection reports

  • Compliance tools
    Walmart allows access to specialized reporting and tax management features.

Etsy marketplace

Etsy’s unique platform caters to crafters and small businesses with specific tax considerations.

  • Tax handling
    Etsy performs automatic calculation and collection in applicable jurisdictions.

  • Seller responsibilities
    - Set up tax profiles correctly
    - Monitor international sales tax requirements
    - Keep detailed records of all transactions

  • Special considerations:
    Custom orders and digital products have unique tax requirements.

Essential record-keeping practices

Even if your marketplace facilitator is the one required to collect and remit sales tax on your behalf, you, as the business, still need to ensure compliance and be prepared for potential audits. The best way to be prepared is with thorough record-keeping.

Sales records

• Transaction dates and amounts
• Item descriptions and categories
• Tax collected per transaction
• Shipping details and destinations

Platform reports

• Monthly sales summaries
• Tax collection reports
• Marketplace-provided tax documents
• Settlement statements

Retention requirements

Keep records for at least three to seven years, depending on state requirements.
Sales tax experts helping businesses manage compliance and reporting

Common challenges and solutions

Sales tax is crazy, and we’ve seen it all. Understanding the common challenges a marketplace seller might run into can help you prepare and respond effectively.

Multiple platform management

  • Use centralized tracking systems
  • Implement automated reporting tools
  • Regular reconciliation of platform reports

Tax rate changes

  • Subscribe to state tax authority updates
  • Regular review of tax rates
  • Platform notification systems

Audit preparation

  • Organized record-keeping systems
  • Regular compliance reviews
  • Professional assistance when needed

Pro tip

Consider using automated tax compliance software to manage multistate obligations and keep track of changing requirements.

Frequently asked questions

Everything you need to know about outsourcing your clients’ sales tax compliance.

The requirement to collect sales tax depends on several factors:

  • When selling on platforms without marketplace facilitator laws
  • When you exceed economic nexus thresholds in various states
  • For direct sales outside of marketplace platforms
  • When selling products not covered by marketplace facilitator agreements

Managing multistate sales tax requires the following:

  • Regular monitoring of sales thresholds in each state
  • Proper registration when thresholds are met
  • Understanding varying tax rates and product categories
  • Maintaining compliant reporting systems

Simplify your
sales tax compliance

Let us simplify the complex world of sales tax compliance for marketplace facilitators and sellers. Your peace of mind is just a call away.
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