Amazon and Etsy Collect Sales Tax… So Why Should You Still Pay Attention?
If you sell on Amazon, Etsy, Walmart Marketplace, or another online marketplace, you've probably heard that the marketplace "takes care of sales tax."
For the most part, that's true. Marketplace facilitators are generally responsible for collecting and remitting sales tax on sales made through their platforms.
So why should you care?
Because marketplace sales may still affect your sales tax responsibilities in ways many sellers don't realize.
What Is a Marketplace Facilitator?
A marketplace facilitator is a company that connects buyers and sellers and, in most states, collects and remits sales tax on behalf of third-party sellers.
Some common marketplace facilitators include:
- Amazon
- Etsy
- Walmart Marketplace
- eBay
If you make a sale through one of these platforms, the marketplace usually handles collecting and sending the sales tax to the state.
That's a huge benefit for sellers.
Here's Where Things Get Confusing
Many business owners assume that because the marketplace collected the tax, those sales no longer matter.
In some cases, that's true.
In others, those sales may still count toward a state's economic nexus threshold.
Economic nexus thresholds vary by state, but many are based on the amount of sales you make into that state over a certain period of time.
That means your marketplace sales could contribute toward reaching a threshold—even if you never collected the tax yourself.
Because every state has its own rules, it's important not to assume that all marketplace sales are treated the same everywhere.
What Should You Do?
If your business is growing, start by understanding your sales data.
Review:
- Which states you're selling into
- How much you've sold into each state
- Which sales came from your own website
- Which sales came from marketplaces
Having this information makes it much easier to understand your potential sales tax responsibilities and decide whether any additional action is needed.
The Bottom Line
Marketplace facilitators have made sales tax much easier for ecommerce sellers—but they haven't eliminated the need to understand your own business.
As your sales grow, keeping track of where your sales are happening and how each state treats marketplace sales can help you stay ahead of potential issues.
If you're just getting started, my Sales Tax Starter Guide walks through the basics of economic nexus, marketplace facilitators, registration, and common mistakes in plain English. It's a great place to start if you're trying to make sense of ecommerce sales tax without getting overwhelmed.