For years, Washington State has been one of the states passing online sales tax legislation. From statutes expanding nexus (making more businesses responsible for the state’s taxes and fees) to its five-point internet sales tax solution, the Evergreen State is quick to come up with more solutions to make the marketplace “fair.”
The latest attempt to level the playing field makes some fairly aggressive changes in the state’s sales tax collection policy for marketplace facilitators.
While the state says it will make the marketplace more fair to brick and mortar retailers, we’d actually argue it’s a compliance burden and onerous on the seller. Why? The “solution” designates three additional definitions businesses will need to examine in order to determine how they apply if the definitions do apply, the business needs to pay close attention to another piece of legislation that may change again in the future.
An Overview: Marketplace Fairness
Here’s an overview of the new marketplace fairness solution.
Beginning in the New Year, “Certain marketplace facilitators, remote sellers, and referrers have new obligations related to the collection of sales or use taxes or the providing of notifications.”
One business can be a marketplace facilitator, remote seller and/or referrer – or any combination of these three titles.
- Marketplace Facilitator: These businesses contract with sellers through a marketplace, and include companies such as Amazon or eBay. They can either have a physical presence in the state or not (of course Amazon does – as Washington houses its corporate headquarters!).
- Remote Seller: These organizations do not have a physical presence in the state, but they make retail sales within Washington. Examples would include third-party sellers using Amazon or eBay, and those selling the goods directly to customers themselves.
- Referrer: These individuals receive, “A commission, fee, or other consideration from a seller for listing or advertising the seller’s goods or services and transferring purchasers to the seller.” An example of this would be an affiliate partner.
It’s worth noting that for each of the above organizations to be responsible for sales tax, they need to make $10,000 or more in retail sales to the customers in the state for facilitators and sellers or $267,000 in income apportioned to Washington for referrers. But those are fairly low thresholds!
What are marketplace facilitators responsible for when it comes to online sales tax? Next week’s blog post will address that in more detail, but as a teaser, be on the lookout for:
- Additional sales tax collection responsibilities
- Additional reporting requirements, including a requirement to share your customer’s information with the state
Stay tuned for more details!
In the meantime, contact us if you want to know more about the online sales tax debate or other multi-state tax issues and how they may affect your business. We’re happy to help!
Miles Consulting Group, Inc. is a professional service firm in San Jose, California specializing in multi-state tax solutions. Our firm addresses state and local tax issues for our clients, including general state tax consulting, nexus reviews, tax credit and tax incentive maximization, income tax and sales/use tax planning and other special projects. To learn more, contact us today at www.MilesConsultingGroup.com.