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What is a marketplace facilitator and do I still need to collect sales tax?

A marketplace facilitator is a platform that connects buyers and sellers and also handles payment processing. Amazon, Etsy, eBay, Walmart Marketplace, and similar platforms all qualify. What makes them “facilitators” in the legal sense is that they don’t just list your products. They process the transaction on your behalf.

Most states now have marketplace facilitator laws that require these platforms to collect and remit sales tax for sales made through their marketplace. When someone buys your product on Amazon, Amazon calculates the sales tax, collects it from the customer, and sends it to the appropriate state. You don’t have to do anything for those transactions.

The catch is that marketplace facilitator laws only cover sales made through the marketplace itself. If you also sell through your own website, at craft fairs, or through any channel where you process the payment directly, you’re responsible for collecting and remitting sales tax on those sales.

Here’s where it gets tricky. Your marketplace sales can create nexus in states where you wouldn’t otherwise have a tax obligation. Most states have economic nexus thresholds, typically $100,000 in sales or 200 transactions in a year. Once you cross that threshold, you have nexus in that state. Even though Amazon handled the sales tax on those marketplace transactions, those sales still count toward your nexus calculation. If you then make a direct sale to a customer in that state through your own website, you need to collect sales tax on it.

So the answer to “do I still need to collect sales tax” depends on whether you have any direct sales channels and whether your total sales volume has created nexus in states where you’re selling directly.

If you only sell through marketplaces and have no direct sales channel, you probably don’t need to register for sales tax anywhere. The marketplace handles everything. But the moment you add a Shopify store or start selling at local markets, you have collection obligations based on where you’ve established nexus.

Tracking where you have nexus and which sales require collection can get complicated quickly. Sales tax compliance becomes essential once you’re selling across multiple states through multiple channels. Many e-commerce sellers don’t realize they have obligations until they receive a notice from a state they’ve never registered with.

The smart approach is to understand your nexus situation before expanding to direct sales channels. An Andover, MA accounting service familiar with e-commerce can help you track sales by state, identify where you’ve crossed thresholds, and make sure you’re registered and filing where required. Getting this right from the start is far easier than cleaning up years of missed filings later.

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