Minnesota sales tax obligations for marketplaces and marketplace sellers
Like every other state with a sales tax, Minnesota has a marketplace law requiring marketplace providers (aka, marketplace facilitators) to register with the Minnesota Department of Revenue then collect and remit applicable Minnesota sales and use tax on direct and third-party sales.
The state defines “marketplace provider” as any person who facilitates a retail sale by listing or advertising a seller’s products and directly or indirectly processing payments from customers. Businesses that advertise products for other sellers without processing payments aren’t considered marketplaces, nor are businesses that process payments but don’t advertise products or facilitate sales.
The sales tax requirement applies to any marketplace facilitator that has nexus with Minnesota, meaning a connection sufficient to establish a sales tax obligation.
Physical presence in a state establishes nexus, so any marketplace provider with a place of business in Minnesota must register. Once registered, a marketplace is liable for the tax due on all sales made through the platform, both direct and third-party.
Economic activity in a state can trigger nexus for businesses with no physical presence in a state (i.e., remote sellers). This is known as economic nexus. In Minnesota, remote sellers and remote marketplace providers establish economic nexus if during the previous 12 months they have:
- 200 or more retail sales shipped to Minnesota; or
- More than $100,000 in retail sales shipped to Minnesota
When calculating whether either of the above thresholds has been met, a marketplace provider should count all retail sales into the state, both direct sales and third-party sales, except sales for resale.
In addition to state and local sales and use taxes, marketplace providers may be liable for Minnesota’s liquor gross receipts tax, prepaid wireless E911 and telecommunications access Minnesota (TAM) fees, and more. When in doubt, reach out to the Minnesota Department of Revenue, which recently issued updated guidance for marketplace providers.
Registration requirements for marketplace sellers in Minnesota
Marketplace sellers with a physical presence in Minnesota are required to register with the Minnesota Department of Revenue, even if they only sell through a registered marketplace provider.
Remote retailers are required to register for Minnesota sales tax if their Minnesota sales meet the state’s economic nexus threshold ($100,000 in retail sales or 200 retail sales transactions). When calculating whether a threshold has been met, a remote seller must count their total retail sales in the state — direct sales, sales made through a marketplace, and any other sales.
However, a remote retailer that sells into Minnesota only through a registered marketplace is not required to register or collect Minnesota sales tax. The marketplace provider is responsible for collecting and remitting on behalf of such remote marketplace sellers. That said, a marketplace provider and marketplace seller may agree to have the seller collect and remit instead of the provider as long as:
- The remote seller is registered to collect and remit Minnesota sales and use tax and provides a copy of the registration to the marketplace provider; and
- The marketplace seller and marketplace provider enter into a written agreement under which the seller agrees to collect and remit sales and use tax on their marketplace sales
Any retailer that has nexus with Minnesota is responsible for collecting and remitting taxes due on sales made through an unregistered marketplace provider (i.e., one with no nexus with Minnesota).
As noted above, every state with a sales tax has a marketplace facilitator law, as do Puerto Rico, Washington, D.C., and some localities in Alaska. Check out this state-by-state guide to marketplace facilitator laws for state-specific details. Our state-by-state registration requirements for marketplace sellers page explains where marketplace sellers are required to register if they only sell through a registered marketplace.
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