behind the eight ball – a look at the past and present ... · 3/18/2020 · ─ these companion...

© 2020 Eversheds Sutherland (US) LLP

Behind the Eight Ball – A Look at the Past and Present State of Marketplace Laws

March 18, 2020

Michele BorensPartner

Charlie KearnsPartner

Elizabeth ChaAssociate

Eversheds Sutherland

Agenda

The Path to Marketplace Collection

The Current State of Marketplace

Laws

Marketplace Legislation


The Path to Marketplace Collection


Marketplace Collection – Pre-Wayfair

─ Before Wayfair, states targeted marketplaces because they were unable to require remote sellers without a physical presence to collect and remit sales/use tax.

─ Even if a third-party seller had a collection and remittance obligation, compliance and enforcement were challenging, especially for smaller sellers.

─ Some of the pre-Wayfair laws contained a notice and reporting requirements option in order to avoid violating Quill.

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Marketplace Collection – Post-Wayfair

─ With the overturn of Quill, states are no longer restricted in pursuing remote sellers for sales tax collection.

─ However, states have not slowed interest in requiring marketplaces to collect tax in lieu of remote sellers.

─ The pace of marketplace legislation since Wayfair has increased dramatically.

─ States eye administrative ease of enforcing collection and remittance obligations on fewer entities.

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Marketplace Collection Laws & Effective Dates (2020)

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AK

10/1/19

10/1/19

10/1/19

7/1/19

1/1/19

2/1/2020

ME

VTNH

MANYCT

PA

WV

NC

SC

GA4/1/20

FL

ILOH

IN

MI1/1/20

WI

KY

TN

ALMS

AR

LATX

OK

MOKS

IA

MN

ND

SD

NE

NMAZ

COUT

WY

MT

ORID

NV

CAVA

MD

As of March 18, 2020

RI

NJ

DE

WA

KeyMarketplace Collection Law

No Marketplace Collection Law

No State Sales Tax

HI

CT – 12/1/18MA – 10/1/19VT – 6/1/19

10/1/19

11/1/18

7/1/19

1/1/18

6/1/19

4/26/19

10/1/19

1/1/194/1/19

10/1/19

7/1/19

6/1/19

7/1/18

3/1/18

3/1/19

10/1/19

10/1/19

7/1/19

7/1/19

10/1/19 1/1/20

8/1/19

DC 4/1/19

1/1/20

10/1/19

1/1/20

7/1/197/1/19

Local intergovernmental agreement w/ marketplace collection


The Current State of Marketplace Laws


Marketplace Collection – Summary of Laws

‒ Marketplace collection laws generally contain the following provisions:• Require marketplaces to collect and remit sales tax on behalf of

marketplace sellers.• Require marketplaces to report and remit sales tax collected on

the marketplaces’ sales tax return.• Audit of marketplaces for sales tax collected on marketplace

seller sales.• Provide marketplaces some relief if the marketplace incorrectly

determines taxability based on information provided by marketplace sellers.

• Provide marketplaces some relief from liability – subject to certain annual caps – for failure to collect sales tax.

• Limit class action lawsuits against marketplaces for overcollection of sales tax.

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Marketplace Collection – Broad Definition (e.g., New Jersey)

─ A “marketplace facilitator” is a person who facilitates taxable retail sales by satisfying both (1) and (2) (summarized below):

1. Either:• Lists, makes available, or advertises property, products or services

for sales by a marketplace seller; • Facilitates the sales of marketplace sellers’ products; OR• Provides or offers fulfillment or storage services for marketplace

sellers, AND2. Either:

• Collects the sales price of taxable merchandise or products;• Provides payment processing services;• Charges, collects, or otherwise receives selling fees, listing fees,

referral fees, closing fees, fees for inserting or making available taxable products;

• Collects payment and transmits it to the seller through an arrangement with a third party; OR

• Provides virtual currency that purchasers may or are required to use.9


Marketplace Collection – Narrow Definition (e.g., Pennsylvania)

─ A “marketplace facilitator” is a person that “facilitates the sale at retail of tangible personal property. For purposes of this section, a person facilitates a sale at retail if the person or an affiliated person:

1. Lists or advertises tangible personal property for sale at retail in any forum; AND

2. Either directly or indirectly through agreements or arrangements with third parties, collects the payment from the purchaser and transmits the payment to the person selling the property.

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Marketplace Collection – Industry Exclusions

─ Eight states provide carve outs from the definition of “marketplace facilitator” for payment processors• Arizona, Indiana, Maryland, Massachusetts, Nebraska, Utah,

Virginia, West Virginia• Private letter rulings, regulation comments, or other guidance?

─ Other common industry carve-outs:• Advertising or product listing services • Delivery services • Travel and accommodation services • Communications service providers• Commodity futures traders

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Marketplace Collection – Permissive Exceptions

Many states provide for a waiver of the marketplace facilitator provisions if the

facilitator demonstrates that substantially all of its marketplace sellers already are

registered sellers

States may also allow the marketplace facilitator and marketplace seller to contractually agree to have the

marketplace seller collect and remit all applicable taxes and fees.

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Marketplace – Under/Over Collection Concerns

─ Many states have provisions to protect marketplaces from incorrectly collecting sales tax if they receive incorrect information from sellers.

─ Increased class action risks from over collection?

• Complaint, Moore v. DoorDash, Inc., No. 1:19-cv-00636-UNA (D. Del. Apr. 5, 2019)

• Plaintiffs brought a class action against DoorDash alleging that the company unlawfully collected sales tax from customers located in states that do not have a sales tax on prepared food, i.e., Delaware, New Hampshire and Montana.

• The complaint notes that Oregon and Alaska also do not have sales tax on prepared food and it appears that DoorDash does not charge sales tax to Oregon and Alaska customers.

─ Some states have included provisions in their marketplace collection legislation which limits class action lawsuits against marketplaces.

─ Some states do not allow class action lawsuits for taxes (e.g., WI).

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Marketplace Collection – Other Taxes

─ Generally, state laws requiring marketplace facilitators to collect tax limit that collection requirement only to sales or use taxes.

─ But, some states laws are broadly written to encompass the collection of other taxes by marketplace facilitators.

─ For example, Indiana has extended marketplace facilitator collection requirements to include certain other excise taxes (e.g., food & beverage taxes, innkeeper taxes).

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Marketplace Legislation


Georgia HB 276

─ Georgia’s General Assembly enacted HB 276 which requires marketplace facilitators with sales in excess of $100,000 in the state to collect and remit sales tax on behalf of their marketplace sellers beginning on April 1, 2020.

─ Bill was signed by the Governor on January 30, 2020.

─ Bill does not contain a clear provision that excludes advertisers and payment processors.

─ Additionally, a provision allowing certain marketplace sellers to continue to collect the tax imposes a threshold of $500 million in Georgia sales instead of U.S. based sales (and does not appear to include related entities).

─ Bill also prohibits class actions against marketplace facilitators arising from the facilitator’s overpayments of sales taxes.

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Florida HB 159/ SB 126

─ These companion bills would adopt Wayfair-type thresholds for remote sellers and marketplace providers.

─ Bills would impose collection obligations on remote sellers and marketplace providers with more than $100,000 in sales of tangible personal property or 200 or more transactions into the state in the previous calendar year, effective July 1, 2020.

─ Marketplace provider does not include persons who solely provide travel agency services or a delivery network company (i.e., one who maintains a website or app used to facilitate delivery services, the sale of local products, or both).

─ As of March 14, 2020, both bills were indefinitely postponed and withdrawn from consideration.

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Mississippi HB 379

─ The bill proposes a $250,000 threshold for doing business in the state.

─ The bill contains a very broad definition of marketplace facilitator.• “Marketplace facilitator” is defined as “any person, including any affiliate

of the person, making retail sales who owns, rents, licenses, makes available, or operates any electronic or physical infrastructure, through ownership, operation, or control of a digital distribution service, digital distribution platform, or application store. Marketplace facilitators facilitate the sale of tangible personal property, taxable services, or specified digital products.”

─ There is no requirement that a marketplace facilitator must collect the payment.

─ Effective date is upon passage.

─ Was transmitted to Senate on February 28.

─ See also SB 2773.

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Missouri HB 1957─ Establishes an economic nexus standard for vendors that engage in

$100,000 or more in sales in the state in a 12-month period.• This nexus and collection and remittance standard would start on 1/1/2021.

─ Bill would also impose sales and use tax collection and remittance requirements on marketplace facilitators.

─ Bill contains carve-outs from the definition of marketplace facilitator for:• persons providing internet advertising services or product listing who do not collect

payment for the purchaser and transmit payment to the marketplace seller, and • third-party financial institutions appointed by the marketplace seller to handle various

forms of payment transactions.

─ Bill also permits the department to grant a waiver of the marketplace facilitator’s collection and remittance requirements if the marketplace facilitator demonstrates that all its sellers are already registered to collect and remit sales and use taxes.

─ Still in the House, but has passed out of Committee.

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Missouri─ Missouri has multiple Marketplace/Nexus-Related Bills this Session

with similar provisions to HB 1957 including:

• HB 1895 • HB 1957 • HB 2172• HB 2238 • SB 529 • SB 648• SB 659 • SB 805 • SB 872

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Kansas HB 2513

─ Kansas House Taxation Committee introduced HB 2513 on January 28 and several hearings have been held.

─ This bill would require marketplace facilitators to collect and remit sales, compensating use and transient guest taxes if they have more than $100,000 in sales of taxable property or services into the state in the previous calendar year.

─ The Department may grant a waiver if the marketplace facilitator demonstrates, to the satisfaction of the Department, that substantially all of its marketplace sellers already are collecting and remitting taxes to the Department.

─ The bill contains another exception that allows the marketplace facilitator and the marketplace seller to contractually agree to have the marketplace seller collect and remit all applicable taxes and fees if the marketplace seller has annual gross sales in the US over $1 billion (including related entities).

─ See also SB 369, SB 399, HB 2657.

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Louisiana SB 138

─ Louisiana SB 138 was pre-filed on February 25.

─ The bill would require marketplace facilitators to collect and remit sales and use tax if they have either $100,000 of in-state sales or 200 total in-state sales.

─ Louisiana’s remote seller law, which takes effect July 1, 2020, created a central commission for the administration and collection of taxes for remote sellers. • Marketplace facilitators would report and remit taxes to that same

commission, rather than individual localities.

─ The bill very loosely follows the NCSL Marketplace Facilitator Sales Tax Collection Model Legislation, but not all of its provisions.

─ If passed, the law would become effective January 1, 2021.

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Tennessee SB 2182

─ SB 2182 passed out of the Senate Finance, Ways, and Means Committee on March 17.

─ Bill would impose collection and remittance duties on marketplace facilitators.

─ Unlike the NCSL Model Legislation, the bill contains a threshold of $500,000 or less during the previous 12-month period.

─ If passed, the law would take effect on October 1.

─ See also HB 2249.

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Puerto Rico C 2419

─ Puerto Rico introduced a marketplace bill in early March 2020.

─ There is no threshold requirement for collection and remittance.

─ Rather, if you fall within the definition of “marketplace facilitator,” any sales are taxable after December 31, 2019, and you are considered a withholding agent on behalf of the seller.

─ Pending in the Senate Finance Committee

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Alaska – Uniform Ordinance─ On January 6, 2020, the Alaska Remote Seller Sales Tax

Commission approved a uniform ordinance addressing the sales tax obligations of remote sellers and marketplace facilitators.

─ The commission was created to administer and enforce sales tax collections on remote sales made into local jurisdictions that are or that become members of the commission. • To be a member, jurisdictions must enter into an intergovernmental

agreement, and then within 120 days, adopt the uniform sales tax code.

─ Under the agreement, a remote seller or a marketplace facilitator would be required to collect the local sales tax if in the previous calendar year, it has at least $100,000 statewide gross sales from the sale of property, products, or services delivered into Alaska or has made 200 or more separate transactions with Alaska residents.

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Questions?

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eversheds-sutherland.com© 2020 Eversheds Sutherland (US) LLPAll rights reserved.

Contact Us:

Michele BorensPartner Eversheds Sutherland (US) [email protected]

Charlie KearnsPartnerEversheds Sutherland (US) [email protected]

Elizabeth ChaAssociateEversheds Sutherland (US) [email protected]

mailto:[email protected]



behind the eight ball – a look at the past and present ... · 3/18/2020 · ─ these companion...

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