Understanding Marketplace Facilitator Laws

With 26 states enacting marketplace facilitator laws in the past six months, a total of 38 states and Washington, D.C. (see below), now have laws regarding sales tax collection for transactions on online marketplaces. As these laws become more common, it is important for booksellers to understand how so-called “marketplace facilitator” laws may affect your business.

A marketplace facilitator is a third-party marketplace platform such as Amazon, eBay, Etsy, or Eventbrite that allows individual third-party retailers to sell services and products through its site. Marketplace facilitators list items posted for sale, process transactions, and may even handle shipment of goods.

Prior to the enaction of marketplace facilitator laws by many states, individual third-party retailers were potentially responsible for collecting and remitting sales tax on their transactions if they had a physical presence in a state. In states that have passed marketplace facilitator laws, third-party sellers utilizing the marketplace are no longer responsible for collecting and remitting sales tax. Instead, marketplace facilitators (Amazon, eBay, Etsy, etc.) are now required to collect and remit sales tax on behalf of third-party retailers in these states. In other words, the responsibility to collect and remit sales tax shifts from the seller to the marketplace facilitator.

Marketplace facilitator laws have been passed in part in response to the realization that third-party sales on Amazon were going untaxed, and therefore states were not collecting the appropriate tax revenue. By shifting the obligation to collect and remit sales tax to the marketplace facilitator, states believe they can more efficiently collect sales tax from a single entity instead of from individual retailers using the marketplace.

Marketplace facilitator laws vary by state; see a state-by-state guide here. As more states pass marketplace facilitator laws, be sure to continuously check for updates. Any questions regarding marketplace facilitator laws should be directed to David Grogan, director, ABFE, Advocacy and Public Policy at ABA, at [email protected].

States with Marketplace Facilitator Laws

Alabama
Arizona
Arkansas
California
Colorado
Connecticut
Hawaii
Idaho
Illinois
Indiana
Iowa
Kentucky
Maine
Maryland
Massachusetts
Michigan
Minnesota
Nebraska
Nevada
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Pennsylvania
Rhode Island
South Carolina
South Dakota
Texas
Utah
Vermont
Virginia
Washington
Washington, D.C.
West Virginia
Wisconsin
Wyoming