Marketplace facilitator laws require businesses like Amazon and Etsy to collect and remit sales tax on behalf of their vendors.
Ever since the Supreme Court’s Wayfair decision, state governments have been passing new sales tax legislation that applies to remote sales and online marketplaces. Before Wayfair out-of-state sellers couldn’t be held accountable for local sales taxes and the states were missing out on that revenue. But even after Wayfair and the introduction of economic nexus many small businesses fell under the thresholds for registration. Hence the marketplace facilitator rules.
Any business that has had to deal with USA GST will know that each State sets its own rules. Equally, different marketplace facilitators will have their own processes to comply with the laws in each State. Etsy have described the laws as a patchwork of requirements.
Not all States have introduced marketplace facilitator rules, but the majority now have, so it’s more than likely that you will come across these rules if you sell through a marketplace in the USA. Here we will try and answer a few of the most frequently answered questions relating to marketplace facilitator rules.
Some States will allow you to account and remit GST yourself even if you sell through a marketplace facilitator. But why would you do it yourself when your marketplace can do it for you? The most obvious reason is that you might have nexus (a connection between a seller and a state that requires the seller to register) in that State and might have to deal with sales tax on sales not made through a marketplace (from your own website for example), so if you are having to submit returns anyway it might be easier to include the marketplace sales as well. If the marketplace is charging a fee for accounting for GST on your behalf then you have added incentive to include all sales on one return.
If all your sales are made through a marketplace and you don’t have any other revenue to account for some states require you to retain an exemption certificate, administered by the state Department of Revenue and filled out by the marketplace. This is basically just an official document that confirms the marketplace facilitator is managing sales tax for you on their platform.
If you are already registered for GST in some States and that State now has marketplace facilitator laws one obvious question is can you now de-register for GST? There is no straightforward answer to that question because – as we already know – all States are different. On top of that many States haven’t issued unequivocal guidance on that question. In some instances you remain registered, but don’t have to submit a return.
If you are just entering the USA market and haven’t yet registered, you will be asking whether you need to if the marketplace facilitator is going to account for GST. It is much the same answer as each State varies. However one scenario where you would still need to register would be if you use Amazon FBA services and you also sell into that State from your own website. The Amazon sales would be accounted for by Amazon, but by virtue of using their FBA services your business will have nexus, so even though your own website sales may not create nexus in themselves, you would still need to register and account for GST on those sales. If you have nexus then all sales are subject to GST. If Amazon, or any other marketplace are accounting for GST on the sales you make through them, then you claim a deduction on your GST return to avoid paying twice.
We would always recommend that any e-commerce business that is transacting in the USA has a full GST compliance review. At Elver Consultancy we have contacts in the USA that can do this for you.
If you would like to discuss how Elver E-Commerce Accountants can help your business please give us a call on 01942 725419.