Marketplace Tax Collection has been with us since January 2018 with Washington being the first state to require it from marketplaces for their own sales and those of marketplace sellers (third-party sellers/merchants). On September 1, 2019, Ohio will become the 24th jurisdiction (includes Washington DC) to require this of Amazon, eBay, Walmart, Etsy, and other qualifying marketplaces. As shown below, there are currently 39 jurisdictions (38 states) with such laws in place, with 15 of those still be to implemented.
What our customers see is always the same, all non-exempt products (and most services) for shipping to a destination are taxed as required by those destination jurisdictions, right down to the local levels, which can be several hundred in some states (key examples include California, Texas, Colorado, Utah) and over 10,000 across USA. To the customers buying our products via marketplaces, all products are taxed equally no matter which seller is selected.
To the sellers, there are two primary models, and in all cases the marketplace charges, collects, files, and remits the sales-type taxes (has varying names).
Model One: Third-party seller does not count MTC sales and only registers in that jurisdiction if it otherwise qualifies for nexus (usually economic and/or physical nexus because of FBA and, possibly, because of Amazon’s recently added relationship with Kohl’s). Several jurisdictions specifically state that a remote seller does NOT count marketplace sales made on a collecting marketplace, and that seller should not register unless it has direct sales. New Jersey is a variant here because they want remote sellers with nexus to register and then request “non-reporting” status.
Model Two: 3P seller has to count MTC sales in determining nexus, registers when required, and includes all sales in the gross sales reported in tax filings, but then has a line to exclude those from payment (because marketplace(s) have that obligation) of sales-type taxes. Washington is a variant here, requiring “B&O” Business and Occupation Excise Tax based upon gross sales, sort of an easy method of taxing at the corporate level in part because there is no personal income tax, and there is a small business seller exemption on a sliding scale.
38 jurisdictions will have MTC in effect by 1-January-2020 (37 states plus WDC). 39 jurisdictions by July 1, 2020, counting Louisiana.
23 right now: Alabama, Arkansas, Connecticut, District of Columbia (a.k.a. “WDC”), Idaho, Indiana, Iowa, Kentucky, Minnesota, Nebraska, New Jersey, New Mexico, New York, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Vermont, Virginia, Washington, West Virginia, and Wyoming.
Add Ohio 1-September-2019 (total 24);
Add these 1-October-2019: Arizona, California, Colorado, Kansas, Maryland, Massachusetts, Nevada, North Dakota, Texas, Utah, and Wisconsin (total 35). It should be noted that Kansas sets no objective economic nexus thresholds, so this might get delayed in litigation.
Add Maine for a total of 36 on 1-November-2019.
Add these for a total of 38 on 1-January-2020: Hawai’i and Illinois.
And Louisiana on 1-Jul-2020 makes it 39 jurisdictions. Note that Louisiana is allowed to implement MTC prior to July 2020 with sufficient notice.
5 states have no form of “sales tax”: Alaska, Delaware, Montana, New Hampshire, and Oregon. That addresses “sales tax” by any name in 44 jurisdictions, 43 of those being states, by 1-July-2020.
That leaves 7 states without an MTC plan on the books: FL, GA, MI, MO, MS, NC, and TN. Missouri has a lot of activity and will probably find success soon. North Carolina passed HB 966 (budget) but Gov issued complete Veto; probably will find success soon and would be implemented quickly.
That leaves 5 states sitting on the sidelines and without a plan to stop losing millions on a daily basis (relying on the antiquated idea of use tax filed and paid by individual residents): Florida, Georgia, Michigan, Mississippi, and Tennessee. Do not be surprised if these 5 states makes their own political ineptness become your (remote sellers) problem with eventual audits.