Wayfair Implementation and Marketplace Facilitator Work Group 2019 White Paper: What You Need to Know
Recently, the Uniformity Committee of the re-convened Wayfair Implementation and Marketplace Facilitator Work Group (“Work Group”) released the 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).
The Rise of Marketplace Facilitator Laws in Step with Economic Nexus Laws
More and more businesses continue to sell their goods to buyers all over the country on so-called marketplace platforms, e.g., Amazon, Etsy, etc. In step with the rise of economic nexus laws, states are passing what are called marketplace facilitator laws that shift the burden of collecting sales and use tax to the marketplace facilitator. At latest count, the number of states adopting marketplace facilitator laws has more than quadrupled in 2019 to over 36 and more will be added in 2020.
In a nutshell, these laws generally provide that a marketplace facilitator is responsible for collecting and paying the tax on retail sales made through their marketplace for delivery to state customers.
So, are marketplace sellers now off the hook for sales and use tax compliance? Not really. Sellers may still be liable for sales and use taxes under these new marketplace facilitator rules. Here is why:
- The seller is still responsible for collecting and remitting sales and use taxes on sales not made on the marketplace facilitator platform.
- The marketplace seller is liable for the tax if the marketplace facilitator can show that:
- It has made a reasonable effort to obtain accurate and complete information from an unrelated marketplace seller about a retail sale.
- The failure to remit the correct amount of tax was due to incorrect or incomplete information provided to the marketplace facilitator by the unrelated marketplace seller.
This blog is the first in a series of blogs in which I will review and provide guidance on a number of key issues raised in the white paper. Those issues include:
- Definition of marketplace facilitator/provider
- Who is the retailer?
- Recordkeeping, audit exposure and liability protection
- Marketplace seller-marketplace facilitator/provider information requirements
- Collection responsibility determination
- Marketplace seller economic nexus threshold calculation
- Remote Seller sales/use tax economic nexus threshold issues
- Certification requirement
- Information sharing
- Taxability determination
- Return simplification
- Foreign sellers
- Local sales/use taxes