Marketplace facilitator laws require marketplace facilitators to collect and remit sales tax for the sales of marketplace sellers on their platform. Put simply, if you sell goods through marketplace facilitators like Amazon, Walmart and eBay, they are responsible for sales tax on your transactions.
In some cases, this can reduce or eliminate your overall sales tax liability, enabling you to cancel your sales tax accounts.
But before you start canceling, you should conduct thorough due diligence to ensure you make the best decision for your business. Canceling an account in a state where you shouldn’t could leave you with significant liability.
Here are three questions to determine if you can cancel your account in each state.
Before you can use marketplace facilitator laws to to cancel your sales tax accounts, you’ll need to know which states have this legislation.
About 84% of states have facilitator laws in place. So, it’s actually easier to list the states that don’t have them yet.
As of July 2020, the following states don’t have facilitator laws:
(Alaska, Delaware, New Hampshire, Montana and Oregon don’t have facilitator laws because they don’t have sales tax.)
If you sell through marketplace facilitators in the states listed above, you are still responsible for sales tax on your transactions there.
If you sell through marketplace facilitators in any other states, you aren’t responsible for sales tax on those transactions. Depending on a few factors, you may be able to cancel your sales tax account.
(For a complete list of all states with marketplace facilitator laws and their respective documentation, check out Amazon’s guide to marketplace tax collection.)
There are a few reasons you might cancel your sales tax account in a state:
A good general rule is that if a state has a marketplace facilitator law, and if you’re a marketplace seller with no other sales activity in the state, you can cancel your sales tax permit there.
But there are a few exceptions. If you meet any of the following criteria in a given state, you probably cannot cancel your sales tax accounts:
Take a close look at your operations to see if there are any states where you meet these criteria. If you do, you might have the opportunity to cancel your sales tax account.
Just like sales tax regulations, the method for canceling your account depends on the state. Common methods include over the phone, online or through the mail. If you’re unsure how to proceed, check with your CPA or a state sales tax consultant.
The growing number of marketplace facilitator laws has enabled many ecommerce sellers to cancel their state sales tax accounts. By taking a careful look at your business and state regulations, you might be able to close some of your accounts and stop worrying about sales tax in those states.
Need assistance canceling your state sales tax accounts? We’re here to help. Fill out our short What’s Next questionnaire to get in touch with our consultants for a free 45-minute consultation.