Who is the Retailer?
At the end of December, the Uniformity Committee of the re-convened Wayfair Implementation and Marketplace Facilitator Work Group (“Work Group”) released its annual white paper (“2019 White Paper”). The paper addresses issues arising from the enactment of sales/use tax laws implementing economic nexus and requiring marketplace facilitators/providers to collect sales/ use tax. It includes the Work Group’s findings concerning the Committee’s prioritized list of issues and is intended to provide guidance to state legislatures and tax agencies considering such laws or amendments during their 2020 legislative sessions. The 2019 White Paper follows up and supersedes (to the extent inconsistent with) the white paper dated November 20, 2018 (“2018 White Paper) (www.mtc.gov).
This blog is the third in a series in which I review and comment on a number of key issues raised in the white paper that will likely influence state legislation and administrative directives through the year and beyond. This blog will cover the question of “who is the retailer?”
Issue: Should marketplace facilitator/providers have the same rights as retailers under state law, such as claiming price adjustments, bad debt deductions, vendor compensation (if provided by the state), etc.?
Most states that have enacted marketplace facilitator/provider sales/use tax collection requirements treat the marketplace facilitator/provider as the “retailer” under their sales/use tax laws. The marketplace facilitator/provider “steps into the shoes” of the retailer and assumes the retailer’s rights and obligations under those laws (such as claiming bad debts, vendor compensation, handling refunds, recordkeeping, etc.). Business participants in our Work Group expressed a strong preference for that treatment. The NCSL working draft model includes suggested language.
Comment by Mark Friedlich
However, this is far from a slam dunk. Expect some state courts to go the other way. One very recent example is a highly anticipated case in Louisiana, where the state’s Supreme Court reversed the state’s lower courts and held that the taxpayer, Wal-Mart.com, who operates an online marketplace, did not contractually assume through the Marketplace Retailer Agreement the obligation of the third-party retailers to collect and remit sales tax.
This decision has potentially significant effects for businesses that participate in marketplace facilitator activities. As the first decision by a state high court to consider marketplace provider or facilitator sales tax collection obligations, it might influence courts in other states with pre-Wayfair time period cases similar to consider.
For example, another case involving the obligation of a marketplace facilitator to collect sales tax from third-party retailers is being reviewed by the South Carolina Court of Appeals for a period prior to SCOTUS’ decision in Wayfair.
The Louisiana and South Carolina decisions may go a long way in informing other states as to whether they will pursue collection and remittance requirements on marketplace providers for pre-Wayfair periods that remain open under the statute of limitations.