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What information do marketplace sellers need to provide in AvaTax?

Overview

You sell through a marketplace facilitator like Amazon, Etsy, or Walmart and they remit  sales tax directly to states with Marketplace Fairness laws. In addition Avalara remits sales tax on your behalf and you need to know the information Avalara requires so your business does not remit double liability.

Environment

AvaTax

Returns

Resolution

Certain states have Marketplace Fairness laws. If you sell through a marketplace facilitator like Amazon, Etsy or Walmart into these states, the marketplace facilitator collects and remits your sales tax for some states. Create a location and send us information so that Avalara knows your taxes are being collected and remitted by the facilitator.

If you are able to add your locations to Avatax and pass the location code Marketplace on your transactions for the applicable transactions, then no further action is required.

Note: 

Only include states in which the Marketplace facilitator is remitting on your behalf.  Please confirm with your Marketplace facilitator.  If you cannot pass the location code, then follow the steps below:

  1. Determine if you have nexus in states with Marketplace Fairness laws and then add a marketplace location in AvaTax.
  2. Follow the steps below to fill out the this simple Excel template: Marketplace Fairness Template.xls
    • This template provides information as to the state and the specific criteria for your transactions that identifies them as a marketplace transaction 
    • This may be as simple as the ship to state but may also include a specific item code, customer code, or location
    • If the marketplace legislation is not yet in effect for the state you are listing, include the start date as well
    • If the marketplace legislation is already in effect and you need to address transactions that are already in the system, please indicate this when you send the file to Avalara Support.  Use this sample file for reference: Marketplace Fairness Example.xls

Add a marketplace location in AvaTax

  1. Add a company location for the marketplace in AvaTax. 
    • Go to Organization > Locations and click New
    • All of the transactions where tax is being collected and remitted by a marketplace facilitator will be assigned to this location
  2. Use the name of the marketplace as the location code, such as “Amazon"
    • You only need a single location regardless of the number of marketplaces you use and states in which they are collecting and remitting on your behalf
  3. Set Type to Marketplace.

    Set Category to Marketplace remits tax.

    AC-MRKT.png
  4. Save the location.
     

Complete the Marketplace Fairness Template and send it to Avalara Support

Download and open the Marketplace Fairness Template.xls, and then add information about your transactions. Use this sample file for reference: Marketplace Fairness Example.xls

AvaTax references this criteria to identify marketplace transactions where tax shouldn't be remitted.

MF-Ex-Clmns.png

  1. Location_Code_Input: The existing location in AvaTax that your accounting system or API connection uses (such as "HQ").
  2. Ship_To_State: The destination state. List only states that have implemented marketplace fairness legislation AND where your Marketplace Facilitator has told you they are going to collect and remit on your behalf. Complete this field for every line. 
  3. Ship_From_State: If all of your Marketplace products are shipping from a specific state, add that information here.
  4. Customer Code: Specific customer codes for your marketplace transactions. This is a unique identifier for your customer. Enter only one customer code per line.
  5. Item Code: If specific item codes are only sold via your Marketplace facilitator, add those codes here.  Enter only one customer code per line.
  6. Ref1: A reference field if you customize your transactions at the line level. Example: "Customer would like the item..."
  7. Ref2: Another reference field if you customize your transactions at the line level. Example: "Item out of stock at x, ship from..."
  8. Company_Code: The AvaTax company code passed in a transaction.
  9. SalesPerson_Code: A reference field if you customize your transactions at the document level. Use this if you track invoice authors.
  10. PurchaseOrder-No: Another reference field if you customize your transactions at the document level. Use this if you match customer purchase order numbers.
  11. Start Date: When the marketplace facilitator begins collecting and remitting on your behalf in the applicable state.  If there is no date, AvaTax moves the transactions immediately after the rules have been implemented. 
  12. End Date: When the marketplace facilitator will no longer be remitting on your behalf.
  13. Location_Code_Output: The marketplace location name that you created in AvaTax.

Send the complete file to Avalara Support at Support@avalara.com. We'll use this information to configure your account.

If you make changes later, update your spreadsheet and send the new copy to Support@avalara.com.

NOTE:  All transactions that are moved to the location code you created in Step 1 will have the liability removed from the Liability Summary. Avalara will not be remitting those taxes to the jurisdiction on your behalf. You must complete the spreadsheet to only identify transactions where your Marketplace Facilitator is remitting on your behalf. 

FAQs

What about transactions

  • Transactions still need to come in as they normally would. Don't change how you submit transactions.  You must pass the location code on the transactions in order for Avalara to recognize it is a Marketplace transaction and not to include the liability.

How will I know the taxes are being excluded from Avalara during the correct timeframe

  • Once the rules are in place, effective dates will be used to ensure tax collection in the identified jurisdictions is excluded during the correct timeframes.

What if I need to make my liability retroactive

  • You can do a batch recalculation for retroactive collection. 

What about the liability worksheet?

  • Once the rule is in place, your liability worksheet will show total sales coming in as it should, but it will exclude the liability from the jurisdictions you identified.