Where does a Marketplace Facilitator Have Sales Tax Nexus?

Okay, so I'm actually sitting on my deck instead of my office because it's such a nice day.

If you are thinking about launching a marketplace, and we've seen that with so many of our new clients, that they are launching marketplaces, they are becoming the marketplace provider for lots of sellers, I want to talk to you about where you need to collect sales tax.

You will have two types of nexus. First being physical presence, where you have employees, warehouses, even 3PL, where you have your office building. All of those, if they're in different states, then you need to register in all of those states.

1:08 How marketplace facilitator laws work

Second is economic nexus, and this is the second wave of Wayfair decision that happened back in 2018. And since then, all of the states except Missouri have enacted this marketplace facilitator law.

The states, instead of going after every individual seller, the sales that are facilitated, which means advertised, payment is processed by the marketplace, all of these are becoming the responsibility of the marketplace provider.

So once the marketplace provider, the marketplace facilitator, passes the economic nexus threshold in any state, meaning it's usually the same as a remote seller's nexus threshold, so like 200 transactions or a hundred thousand dollars of revenue in the current and previous calendar year for most of the states, but the bigger states like California, Texas, and New York are five hundred thousand dollars, then the marketplace has a liability to register and collect sales tax in those states.

2:18 Does your sellers' presence become yours?

I did have a very interesting question for me this morning and I want to share the answer with all of you.

So as a marketplace, you are considered a remote seller in most of the states, except your home state and except where you have physical presence. What about sellers' physical presence? Does a seller's physical presence become the marketplace physical presence?

For example, if I operate my online marketplace here in Utah and I have sellers across all the states that sell on my platform, does that mean I have to register in all the states because my sellers live in all the states, so they have physical presence in all of those states? And the answer is no.

3:05 Where the responsibility shifts

Sellers are responsible for collecting, registering, and remitting sales tax in their home state where they have physical presence, until you, as a marketplace provider, a marketplace facilitator, hit the economic nexus threshold in that state. And then the responsibility shifts from the seller to you, and you have to register and collect on behalf of the seller. But before you hit the economic nexus threshold, it's the seller's responsibility to register, collect, and remit, and it's not your responsibility.

So I want to make that very clear, that as a marketplace you need to register in the places where you have physical presence and pass the economic nexus threshold, not where your sellers have physical presence.

3:53 What's next

So I hope this video has been helpful to you. Let me know if you need more information on marketplace facilitators and remote sellers. Comment below if you have any questions and we'll meet you there.

I also want to let you guys know that we are in the first round of launching our Sales Tax for Online Sellers program, and it's been going super well. So if you want to get on the list for our next round of live courses and Q&As, let us know. I'll leave the link down there as well. Thank you so much and have a good day. Bye.