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.
The Merrimack Valley's Trusted Accounting Partner
The Next Step:
A 15-Minute Call
Tell us about your business and what you're dealing with. We'll listen, ask a few questions, and give you a straightforward quote.
More Questions
Can a bookkeeper fix years of disorganized financial records?
Yes, a qualified bookkeeper can reconstruct and organize years of neglected financial records. The process involves gathering bank statements, sorting through documentation, and systematically rebuilding your books month by month.
Read answerWhat are the sales tax obligations for Shopify store owners?
Your sales tax obligations depend on where you've established nexus, usually through sales volume. Most states require collection once you exceed $100,000 in sales or 200 transactions, and you'll need to register, collect, and file returns in each state.
Read answerWhat financial reports do investors want to see from startups?
Investors expect to see your income statement, balance sheet, and cash flow statement along with burn rate and runway calculations. They also want key metrics specific to your business model and projections showing how you'll use their capital.
Read answerHow do I catch up on months of neglected bookkeeping?
Gather all your bank and credit card statements, then work month by month starting with the oldest incomplete period. Bank reconciliation is your foundation. Match every transaction to what actually happened before moving forward.
Read answerWhat should I look for when hiring a virtual bookkeeper?
Look for industry experience, clear communication practices, strong data security, transparent pricing, and verifiable references. The best virtual bookkeepers treat your business as a partnership and understand your state's specific requirements.
Read answerHow do I set up invoicing in QuickBooks Online?
Start by setting up your products or services list and customizing your invoice template with your logo and payment terms. Connect online payments to get paid faster, and use recurring invoices and automatic reminders to save time on repetitive tasks.
Read answer
