In some states, online marketplace facilitators are required to collect and remit sales tax on your behalf when you make sales on their platforms. If your company uses marketplace facilitators, avoid overpaying on your tax returns by setting up marketplaces where you have sales as locations in AvaTax Update so you can identify and track transactions from those sources.
What is an online marketplace facilitator?
A marketplace facilitator is an online service that sells your products and services and accepts money from customers on your behalf. Websites like Amazon, Etsy, and eBay are the best known examples. Keep an eye on updates from any online marketplaces your business uses, to make sure you're keeping compliant with new laws and policies.
Set up online marketplaces in AvaTax Update
Create a location code for each marketplace facilitator that your business uses. Assign these location codes to transactions originating from those marketplaces your business uses, in order to identify and report these transactions correctly. Remember that not all states require online marketplaces to collect and remit tax on your behalf, so make sure to check the laws in the jurisdictions where you do business before setting up your locations in AvaTax Update.
To set up a marketplace facilitator as a location:
- Use the name of the marketplace as the location code (example: "Amazon")
- Enter "Marketplace" as the location description
- Set the type of location to "Marketplace"
- For the category, select whether the seller or the marketplace remits tax on sales associated with this marketplace. Check the marketplace's help documentation or call their support line to figure out which option to choose here.
- Enter your primary business address in the address information fields
If you file tax returns on your own, check if the jurisdictions you're filing in want you to include transactions from marketplaces or not. Sometimes you have to include those transactions even if you aren't remitting tax for them, while in other jurisdictions transactions where the marketplace has already collected and remitted the tax need to be excluded from the return form entirely. Either way, you can find information about your marketplace transactions on the Tax Summary by Marketplace Location report.
If you use Returns, transactions associated with online marketplaces are handled automatically once you've set up your account to keep track of them.