Amazon and Etsy are complying with Washington’s marketplace sales tax law: what that means for sellers
- Sales and Use Tax
- Jan 16, 2018 | Gail Cole
Like Amazon, Etsy is now collecting and remitting sales tax on behalf of its marketplace sellers in Washington state.
Under the state’s new marketplace fairness law, marketplace facilitators that have a physical presence in the state or make at least $10,000 annually in Washington-sourced retail sales are required to either collect and pay tax on all Washington sales starting Jan. 1, 2018, or comply with use tax notice and reporting requirements. More on those below.
Amazon revealed that it would comply with the new collection requirements last November. About a month later, Etsy sellers received an email from the company reading, in part, “Starting January 1, 2018, we’ll begin collecting and remitting Washington state sales tax on your behalf for orders shipped to addresses in Washington state, as required by a new state law.”
Both sellers now have web pages explaining their new tax policies in Washington.
How tax collection and remittance in Washington affects Amazon and Etsy sellers
Amazon and Etsy are offering similar services to their third-party sellers in Washington.
Amazon’s Marketplace Tax Collection FAQ explains, “Based on applicable tax laws, Amazon will calculate, collect, and remit sales tax for orders shipped to the following state.
|| Effective Date
The company isn’t charging a fee for this service, and there’s no action required by sellers “for states where Amazon automatically calculates, collects, and remits sales tax.” As of this writing, that’s only Washington.
Individual sellers remain responsible for tax on orders shipped to all other states. However, a seller may choose to have Amazon calculate tax through its Tax Calculation Service, which is different from its Marketplace Tax Calculation Service. Under the former, sellers pay Amazon a fee to collect tax in selected jurisdictions, and it’s the seller’s responsibility to remit tax to the appropriate tax authorities.
According to Etsy’s Sales Tax for Washington State page: “Based on applicable tax laws, Etsy will calculate, collect, and remit sales tax for orders shipped to customers in the following state(s):
|| Effective Date
Etsy explains that there’s no charge for this service in Washington, and “no action is required on your part.” In fact, Etsy sellers have to sit back and let Etsy collect and remit tax on their behalf: “Sellers cannot opt out of Etsy automatically collecting sales tax for items shipped to customers in Washington state.”
For sales in other states, sellers have a choice: Either include applicable taxes in listing prices, or exclude applicable taxes from listing prices and then use Etsy’s sales tax tool to calculate the tax owed on each sale.
Use tax notification and reporting
Both ecommerce sellers have opted to comply with Washington’s collection requirements rather than its onerous use tax notice and reporting requirements.
These require non-collecting marketplace facilitators, sellers, and referrers selling their own goods in Washington to notify Washington customers, on websites, catalogs, invoices, order forms, and receipts, that they don’t collect Washington tax and that the purchaser may be required to file a use tax return and pay the tax.
Furthermore, non-collecting retailers must:
- Send an annual report to each purchaser no later than Feb. 28, 2019, (and each following year) stating that:
- The seller didn’t collect Washington sales or use tax
- The purchaser may be required to remit use tax directly to the Department of Revenue (DOR)
- A list, by date, of the type of products purchased or leased during the preceding year
- The price of each product
- Send an annual report to the DOR by Feb. 28 of each year (starting in 2019), that includes:
- The purchaser’s name and billing address
- The shipping address for each product
- The total amount of all the purchaser’s Washington purchases
Since Amazon and Etsy are complying with Washington’s collection and reporting requirements, they don’t need to worry about these use tax notification and reporting requirements.
However, Amazon or Etsy sellers that make sales into Washington through other means (e.g., through independent websites) and meet the sales threshold may now be required to either collect and remit tax or comply with the above use tax notification and reporting requirements.
Like Washington, many states are aggressively going after remote sales tax revenue. A similar marketplace sales tax law is set to take effect in Pennsylvania on March 1 of this year and in Minnesota by July 1, 2019. Rhode Island has had a similar law on the books since last August.
Other initiatives include efforts to kill Quill, the seminal Supreme Court case. The Quill Corp. v. North Dakota ruling prevents states from taxing businesses not physically located in the state. On Jan. 12, 2018, the Supreme Court agreed to consider a South Dakota case that directly challenges Quill.
Additional information about how states are working to tax sales by out-of-states sellers at the Avalara Resource Center.
Learn about simplified sales tax filing options for online sellers of all sizes at Avalara Trustfile.