2020 sales tax changes

3: Are marketplace seller laws the new Wayfair?

Who’s responsible for collecting the tax due on marketplace sales? The marketplace facilitator or the marketplace sellers? That’s a question more and more states are working to sort out.

More than 39 states (including Washington D.C.) have adopted marketplace facilitator laws that require marketplace facilitators like Amazon and Etsy to collect and remit sales tax on behalf of third-party sellers. But some of the biggest marketplaces are fighting these requirements in some states.

Here’s a look at what’s making news:

Carolinas gear up for sales tax showdown

Marketplace facilitators in many states are already required to collect and remit sales tax on their sellers’ behalf, but Amazon is “vigorously” fighting a sales tax assessment for marketplace sales tax in South Carolina.

In September of 2019, a South Carolina administrative law judge (ALJ) found Amazon liable for approximately $12.5 million in unpaid sales tax on its third-party sales in the state from January 1, 2016, through March 31, 2019. The final assessment could be much higher; Amazon didn’t start handling sales tax for third-party sellers until South Carolina’s marketplace facilitator law took effect on April 29, 2019.

Meanwhile, North Carolina is getting closer to making marketplace facilitators liable for the tax on third-party sales made through the marketplace. In fact, the North Carolina Legislature already tried doing so in 2019, but it’s now in political limbo. Governor Roy Cooper called the bill he vetoed “a bad budget with the wrong priorities” (his objections weren’t tied to the marketplace sales tax collection requirement). 

Louisiana to tax marketplace sales. But who’s on the hook to collect?

The Louisiana Supreme Court is currently deliberating a case that could have an enormous impact on marketplace facilitators in Louisiana. The state’s highest court has been asked to decide who’s responsible for collecting and remitting Jefferson Parish sales tax on marketplace sales (essentially, who’s the “dealer”). Is it the marketplace facilitator, Walmart? Or is it the individual marketplace seller? Jefferson Parish claims the responsibility lies with Walmart. Walmart begs to differ and is challenging the assessment in court. We’ll likely hear the outcome in 2020.

The Empire State contradicts itself in guidelines on remote sales

The New York State Department of Taxation and Finance has at last updated its sales tax collection guidelines for remote sellers. For months, the department’s website contained conflicting information. Most notably, the department failed to explain that the New York State Legislature changed the small-seller exception from a threshold of $300,000 to $500,000 in annual sales in June 2019.

Aloha sales tax; Hawaii to enact marketplace sales tax laws

Hawaii will require marketplace facilitators to collect and remit the tax due on all sales made through the platform, including those by third-party or marketplace sellers. The new requirement takes effect January 1, 2020.

The collection requirement applies to marketplace facilitators based in the state of Hawaii, as well as out-of-state marketplace facilitators that have economic nexus with Hawaii.

In other U.S. marketplace tax news:

  • Wisconsin will require marketplace facilitators to collect tax on third-party sales beginning January 1, 2020. Of course, this new law doesn’t come without some confusion.
  • Illinois and Michigan are also set to enforce marketplace facilitator laws beginning January 2020.

Marketplace facilitator laws expand beyond the U.S.

Marketplace laws aren’t just in effect in the U.S. In 2020, France will become the first member of the European Union to make marketplaces responsible for value-added tax (VAT) collections and remittances on sales by American, Chinese, and other non-EU third-party merchants. Similar proposals will likely be adopted by the remaining EU member states in 2021.

Don’t try memorizing every marketplace law

We’ve covered the major headlines with recent and forthcoming marketplace laws, but new changes happen quickly. Get the latest details on every state by accessing our state-by-state guide to marketplace facilitator laws and state-by-state guide to registration requirements for marketplace sellers.

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