State tax laws that require the marketplace (e.g., Amazon, Etsy, eBay) — not the individual seller — to collect and remit sales tax on transactions. Now enacted in most US states.
Understanding Marketplace Facilitator Tax
Marketplace facilitator tax laws require ecommerce marketplaces (such as Amazon, eBay, Etsy, and Walmart) to collect, report, and remit sales tax on behalf of their third-party sellers. As of 2024, all states with a sales tax plus the District of Columbia and Puerto Rico have enacted marketplace facilitator legislation.
Under these laws, the marketplace — not the individual seller — is responsible for calculating the correct tax rate based on the buyer's shipping address, collecting the tax at checkout, and remitting it to the appropriate state and local tax authorities. This significantly simplifies tax compliance for sellers.
However, marketplace facilitator laws have limitations. They only cover sales made through the marketplace. Direct sales from your own website (e.g., Shopify store) are not covered, and you must still collect and remit sales tax yourself on those transactions in states where you have nexus.
Why It Matters for Ecommerce
Marketplace facilitator laws are a major relief for ecommerce sellers, eliminating the need to register for sales tax permits in every state where a marketplace operates. However, sellers must still understand these laws for accurate accounting: the tax Amazon collects is not your revenue, and it must be excluded from your income records.
Practical Example
You sell a $50 item on Amazon to a customer in California (7.25% base rate). Amazon collects $3.63 in sales tax from the customer. This $3.63 never touches your account — Amazon remits it directly to California. In your books, you record only $50 in revenue. But if you sell the same item directly from your Shopify store to a California customer, you must collect and remit the $3.63 yourself.
Related Terms
Sales Tax
A consumption tax imposed by state or local governments on the sale of goods and services, collected by the seller at the point of sale and remitted to the taxing authority.
EcommerceNexus
A sufficient connection between a business and a state that requires the business to collect and remit sales tax in that jurisdiction. Can be established through physical presence or economic activity.
EcommerceEconomic Nexus
A sales tax obligation triggered when a seller exceeds a state's revenue or transaction count threshold (e.g., $100K in sales or 200 transactions), even without physical presence in that state.
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