States May Be Coming for Audits
As we approach the fifth anniversary of the earliest effective dates of marketplace facilitator laws, it is time for retailers making sales through marketplaces like Amazon, eBay, and Walmart to review their documentation related to these arrangements. This is also about the time states could come calling on marketplace sellers for audits since a full audit cycle of sales has passed in some states.
Review Your Documentation
Documentation is important because some states require marketplace sellers to prove that the marketplace facilitator is registered to collect and remit tax before the seller is relieved of the sales tax liability. For example, Washington requires marketplace sellers to obtain written documentation from the marketplace facilitator that clearly states the facilitator’s intention to collect sales or use tax on behalf of the seller along with the facilitator’s department issued tax ID number. Illinois has prepared a specific form that marketplace facilitators should issue to marketplace sellers when the facilitator assumes the duty to collect and remit sales taxes. Marketplace sellers should obtain and keep Illinois Form CRT-63, or similar documentation, in their records. If this information is not obtained, the seller remains liable for any uncollected tax on sales through the marketplace.
Documentation Requirements Vary by State
Washington Example
Washington requires marketplace sellers to obtain written documentation from the marketplace facilitator that clearly states the facilitator’s intention to collect sales or use tax on behalf of the seller along with the facilitator’s department issued tax ID number.
Illinois Example
Illinois has prepared a specific form that marketplace facilitators should issue to marketplace sellers when the facilitator assumes the duty to collect and remit sales taxes. Marketplace sellers should obtain and keep Illinois Form CRT-63, or similar documentation, in their records. If this information is not obtained, the seller remains liable for any uncollected tax on sales through the marketplace.
Seller Still Liable Without Documentation
Other states, such as Minnesota, shift the tax liability from the seller to the marketplace facilitator without obtaining this documentation. Even in these states, caution is warranted. Many statutes and regulations state that a marketplace seller remains liable for the tax if the marketplace facilitator fails to collect the tax, or the correct amount of tax, due to erroneous or incomplete information provided by the marketplace seller. Marketplace sellers should be sure they provide all information required by the marketplace facilitators so that tax is correctly collected on their sales made through a marketplace.
Tax Liability Shift Doesn’t Eliminate Seller Responsibility
Provide Accurate Information to Marketplace Facilitators
Marketplace sellers should be sure they provide all information required by the marketplace facilitators so that tax is correctly collected on their sales made through a marketplace.
Navigating the complexities of marketplace facilitator laws and state tax regulations can be overwhelming. Don’t risk marketplace tax audits! Contact Clarus Partners today to see how we can help ensure your business is compliant with state marketplace facilitator laws.