If you sell through an online marketplace, someone else can collect sales tax on your behalf. Marketplace facilitator laws, a set of state statutes passed after the 2018 Wayfair ruling in the US, shifted sales tax collection from individual sellers to the platforms hosting them.

Below, we'll cover what qualifies a platform as a facilitator, which states have these laws, and what changes for sellers once a marketplace takes on that role.

Key takeaways

• Marketplaces that list products and process payments handle sales tax calculation, collection, and remittance for third-party sellers.

• Coverage is nearly universal, although the sales and transaction thresholds that prompt it vary by state.

• Sellers can still prompt nexus through inventory storage or direct sales, separate from whatever the marketplace is already collecting.

What is a marketplace facilitator?

A marketplace facilitator is a business that contracts with third-party sellers to list, advertise, or process sales. It also collects payment from the customer on the seller's behalf.

How do marketplace facilitator laws work?

Generally, when a marketplace facilitator crosses an economic nexus threshold in a state, usually based on total sales or transaction volume, it has to register there and take over the sales tax duties that individual sellers previously carried.

Here's how the collection cycle works:

• Tax calculation: Determines the correct rate for each transaction based on the ship-to address and how that state classifies the product. Clothing, digital goods, and groceries are often taxed differently from general merchandise.

• Collection: Adds the calculated tax to the customer's total at checkout on behalf of every seller on the platform.

• Remittance: Files returns and pays the collected tax to each state where the facilitator has nexus, on that state's filing schedule.

• Record-keeping: Maintains transaction-level records that break down sales by seller. Both sellers and auditors can request that data later.

The seller no longer calculates or remits tax on those particular sales. However, a seller's own website, if they have one, isn't covered by the marketplace's facilitator status. Sales made through the seller's website still fall under the seller's own registration and collection obligations in any state where the seller has nexus.

Which states have marketplace facilitator laws?

Every state that imposes a general sales tax has a marketplace facilitator law in place. The five states without a statewide sales tax, often called the NOMAD states (New Hampshire, Oregon, Montana, Alaska, Delaware), don't have statewide marketplace facilitator requirements. Alaska is a partial exception; it has no state sales tax, but many of its municipalities do, and those localities coordinate marketplace facilitator collection through the Alaska Remote Seller Sales Tax Commission.

The economic nexus thresholds that prompt marketplace facilitator tax obligations vary by state.

Here are some examples:

• South Dakota: US$100,000 in sales

• California: US$500,000 in sales

• Texas: US$500,000 in sales

• New York: US$500,000 in sales and more than 100 transactions (both conditions are required)

How do marketplace facilitator laws affect third-party sellers?

Sellers generally shouldn't collect sales tax on transactions where the marketplace has already collected it. Otherwise, they'll charge the customer twice. Marketplaces typically handle this by suppressing tax fields on the seller's own invoicing for those orders, but sellers with separate accounting software need to confirm that their records reflect the marketplace's collection rather than their own.

Nexus rules vary by state. States typically exclude marketplace-facilitated sales when a seller calculates whether it has crossed its own economic nexus threshold, although some include them. Depending on the state's rules, a seller who only sells through marketplaces could still prompt nexus obligations in a state purely from marketplace volume, even without a direct sales channel there.

Sellers who store inventory in a state through a fulfilment network or third-party warehouse can also prompt nexus based on physical presence. Marketplace facilitator status doesn't erase that. The facilitator collects tax on the sale, but the seller might still need to register in that state.

Are you a marketplace facilitator or a seller under these laws?

A platform typically counts as a facilitator when it lists or advertises products for third parties, influences the price customers pay, or processes the payment or contracts with a payment company to do so on its behalf. A business counts as a seller when it sells its own products, sets its own prices, and either collects payment directly or uses a payments provider that doesn't handle any listing or advertising.

Hybrid setups are common. A company that runs its own direct-to-consumer site and also lists products on eBay or Etsy is a seller for the first channel and relies on a facilitator for the second. That creates two different tax pictures: the business calculates, collects, and remits for direct sales itself, while the marketplace handles sales made through its platform. Mixing up the two channels in accounting software is a common source of downstream errors.

What compliance mistakes do businesses make with marketplace facilitator laws?

Many compliance mistakes happen when businesses treat marketplace and direct sales as one undifferentiated pool rather than two separate tax situations.

Common errors include:

• Double collection: If a seller's checkout or invoicing system isn't configured to recognise which orders came through a marketplace, it might charge tax on top of what the marketplace already collected.

• Threshold miscounting: Because some states exclude marketplace sales from a seller's nexus calculation and others include them, you can't apply one state's rule across the board. This might result in a business missing a required registration or registering somewhere unnecessary.

• Product taxability mismatches: A marketplace calculates tax based on how it classifies a product, and that classification doesn't always match what a seller assumes on their own site. Clothing, supplements, and digital products are common places where classification can diverge.

• Record-keeping gaps: Facilitators report what they collected, but sellers still need their own records that show which sales were marketplace-facilitated and which weren't, in case of an audit.

Multichannel sellers, in particular, need to track marketplace and direct sales separately by state rather than assume one number applies everywhere. Many lean on tax automation solutions, such as Stripe Tax, to monitor thresholds and calculate rates on direct sales, keeping that part of the business aligned with what the marketplace already handles.

How Stripe Tax can help

Stripe Tax reduces the complexity of tax compliance so you can focus on growing your business. Start collecting taxes globally by adding a single line of code to your existing integration, clicking a button in the Dashboard or using our powerful API.

Stripe Tax helps you monitor your obligations and alerts you when you exceed a tax registration threshold based on your Stripe transactions. It can also register to collect tax on your behalf in the US, automate US filings in the Dashboard, and manage global filings through trusted partners. Stripe Tax automatically calculates and collects sales tax, VAT, and GST on:

• Digital goods and services in all US states and over 100 countries
  
• Physical goods in all US states and 42 countries
  

Stripe Tax can help you:

• Understand where to register and collect taxes: See where you need to collect taxes based on your Stripe transactions. After you register, switch on tax collection in a new state or country in seconds. You can start collecting taxes by adding one line of code to your existing Stripe integration, or add tax collection with the click of a button in the Stripe Dashboard.

• Register to pay tax: If you need to register for sales tax in the US, let Stripe manage your tax registrations. You'll benefit from a simplified process that prefills application details—saving you time and simplifying compliance with local regulations. If you need help registering outside of the US, Stripe partners with Taxually to help you register with local tax authorities.

• Automatically collect tax: Stripe Tax calculates and collects the right amount of tax owed, no matter what or where you sell. It supports hundreds of products and services and is up-to-date on tax rules and rate changes.

• Simplify filing: Stripe Tax automates US filings in the Dashboard, powered by TaxJar. For global filings, Stripe Tax seamlessly integrates with filing partners, so your global filings are accurate and timely. Let our partners manage your filings so you can focus on growing your business. US tax filings can be automated in the Stripe Dashboard, powered by TaxJar.

Learn more about Stripe Tax or get started today.

FAQs about marketplace facilitators