I recently posted a blog about Texas sales tax nexus in which I laid out the basic rules for determining whether a taxpayer has nexus with the State of Texas (and thus has a permit, collection, and/or reporting requirement with respect to Texas sales and use taxes). That post is here. I also noted that there were separate rules for taxpayers who fall into the category of “marketplace providers” (e.g., Amazon, eBay, Etsy) or “marketplace sellers” (those who sell using a marketplace provider). Those rules will be the topic of today’s blog.
- Marketplace Sellers and Marketplace Providers
Texas Tax Code § 151.0242 defines a “marketplace” as “a physical or electronic medium through which persons other than the owner or operator of the medium make sales of taxable items. The term includes a store, Internet website, software application, or catalog.” [1] While this can be applied more broadly, it most commonly refers to third-party websites like Amazon, eBay, or Etsy, where individuals and businesses can market products for sale. The businesses that own and run those websites are referred to as “marketplace providers,” defined as “person[s] who [own or operate] a marketplace and directly or indirectly [process] sales or payments for marketplace sellers.” [2]
The businesses that sell using Amazon and other marketplace providers are referred to as “marketplace sellers,” defined as “seller[s], other than the marketplace provider, who [make] a sale of a taxable item through a marketplace.” [3]
Marketplace providers and marketplace sellers have different Texas sales and use tax responsibilities with respect to sales occurring via the marketplace.
- Responsibilities of Marketplace Providers
A marketplace provider is required to do the following:
- Certify to each marketplace seller that the marketplace provider will assume the rights and duties of a seller or retailer under Chapter 151 of the Texas Tax Code with respect to sales made by the marketplace seller through the marketplace;
- Collect Texas sales and use taxes on sales of taxable items made through the marketplace; and
- Report and remit Texas sales and use taxes on sales made through the marketplace. [4]
In other words – when it comes to sales through a marketplace like Amazon, all of the responsibilities for collecting and remitting Texas sales or use tax are the responsibilities of the marketplace provider, not the marketplace seller.
- Responsibilities of Marketplace Sellers
Based on the above, marketplace sellers are off the hook when it comes to Texas sales and use taxes, right?
Well, maybe.
The rules above apply to sales made through the marketplace – it’s very possible that a marketplace seller makes sales through their own website, in person, or through some other non-marketplace medium. In those cases, the marketplace seller will still be responsible for collecting and remitting Texas sales and use taxes (if they have nexus with the State of Texas). [5]
Additionally, marketplace sellers are required to furnish certain information to marketplace providers to enable them to properly collect and remit Texas sales and use taxes [6], and is required to maintain records for all marketplace sales in accordance with the Texas Tax Code. [7] Providing this information to marketplace providers is key, as the Comptroller will hold any marketplace seller liable for deficiencies resulting from failure to provide correct or complete information to a marketplace provider. [8]
- Nexus Implications
The Texas Tax Code does not delve into how marketplace seller status impacts nexus with the State of Texas, but the Comptroller’s regulations do touch on this concept. Comptroller Rule 3.286(b)(3)(B)(iii) states that a marketplace seller shall “not be required to obtain a permit if only selling through a marketplace provider that has certified that it will assume the rights and duties of a seller, as provided in this subsection.” [9]
The key language here is that no permit will be required “if only selling through a marketplace provider.” Accordingly, and as noted above, if a marketplace seller has sales made outside of the marketplace, they may be required to get a Texas sales tax permit and collect/remit taxes on sales of taxable items. Whether or not the seller is required to do so, in turn, is controlled by standard nexus rules, discussed in the post linked above.
[1] Tex. Tax Code § 151.0242(a)(1).
[2] Tex. Tax Code § 151.0242(a)(2).
[3] Tex. Tax Code § 151.0242(a)(3).
[4] Tex. Tax Code § 151.0242(c).
[5] See, e.g., Tex. Tax Code § 151.0242(d) (providing that the marketplace seller shall exclude sales made through the marketplace from its Texas sales and use tax report).
[6] Tex. Tax Code § 151.0242(f).
[7] Tex. Tax Code § 151.0242(e).
[8] 34 Tex. Admin. Code § 3.286(b)(3)(D).
[9] 34 Tex. Admin. Code § 3.286(b)(3)(B)(iii) (emphasis added).
