2020 sales tax changes: Midyear update

5: Marketplace laws

Like economic nexus, marketplace facilitator laws are now the norm. They’re also evolving.

Four states still give marketplaces a break … for now

New sales tax collection requirements for marketplace facilitators took effect in parts of Alaska as early as February 3, 2020, and are gradually being adopted by other boroughs and cities in the state. A marketplace facilitator law took effect in Georgia on April 1, 2020, the same day marketplace facilitator legislation in Tennessee was signed into law. Puerto Rico also enacted a marketplace facilitator law. As of this writing, its effective date is up for grabs: It could be October 1, 2020, or it could be retroactive to January 1, 2020.

A marketplace bill approved on the last day of the Louisiana session was signed into law on June 11, 2020. It takes effect July 1, 2020.

As we move into the second half of 2020, only four states with a general sales tax don’t have a marketplace facilitator law: Florida, Kansas, Mississippi, and Missouri. All considered marketplace facilitator legislation during their 2020 legislative sessions, most of which were interrupted by COVID-19. Expect marketplace facilitator legislation to resurface in these states when lawmakers next convene.

Fine dining: Refining marketplace laws

As with economic nexus, states are starting to hone their marketplace facilitator laws. They’re taking into consideration the effect of these laws on franchises and marketplaces that facilitate sales for large sellers. For example, under Georgia’s new law, facilitators are not responsible for the tax due on sales by certain sellers with $500 million or more in annual gross sales in the Peach State during the prior calendar year.

Some states are also working to determine how marketplace laws affect food-delivery network companies. Marketplace laws were created with Amazon and eBay in mind. Should they also apply to DoorDash and Grubhub?

California’s marketplace facilitator law doesn’t generally apply to delivery network companies. However, it allows them to elect to be deemed a marketplace facilitator liable for the tax. Nebraska’s marketplace law does apply to marketplace providers, thus food-delivery providers are generally responsible for collecting and remitting the tax due. That’s not the case in Tennessee, where a new marketplace law specifically excludes delivery network companies from the definition of a marketplace facilitator. 

It’s not just about sales tax

Until recently, marketplace facilitator laws focused only on sales tax: They make marketplace facilitators responsible for collecting and remitting tax on third-party sales.

States may soon ask more from marketplaces. Louisiana would require marketplaces to work to prevent sales of counterfeit products, which have exploded. This issue is also being discussed in Congress. A measure introduced in early March (Shop Safe Act of 2020) would make marketplace platforms “contributorily liable” for counterfeit sales by third-party sellers.

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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2020 sales tax changes: midyear update