Concerns about New Marketplace Facilitator Laws

As I mentioned in a previous post, I’m participating in the Multistate Tax Commission’s (MTC’s) Wayfair Implementation and Marketplace Facilitator work group. Starting Aug. 6, the work group will hold a series of discussions to address numerous issues arising out of the many new marketplace facilitator/provider sales tax collection laws states have passed, or are finalizing, following the U.S. Supreme Court’s June 2018 Wayfair decision.

Vertex Inc.

The work group, which operates under the MTC’s Uniformity Committee, plans to engage with state departments of revenue, taxpayers, and related professional services providers (e.g., CPA firms) during this process to evaluate potential solutions. This work will result in a whitepaper likely to be published in November so it can be utilized during the 2020 state legislative process.

Late last month, the work group published a long list of issues that need attention. While 21 of these matters relate to new marketplace facilitator collection issues, three of them pertain to economic nexus issues:

  1. Whether the economic nexus thresholds should be restricted to taxable sales;
  2. Whether the number of transactions threshold under the economic nexus test should be eliminated; and
  3. The best way to address Due Process/Commerce clause concerns in “home rule” states that have locally administered local sales/use taxes.

The marketplace facilitator issues are more numerous. These matters relate to concerns about a lack of uniformity in various aspects of new statutes, collection responsibilities (marketplace facilitator vs. marketplace provider) under different circumstances, liability protections, refund processes, class-action lawsuits stemming from over/under-collection of tax, certification processes, and much more. Here are three issues at the top of the working group’s list:

  • Marketplace facilitator/provider collection statutes fall into two roughly equal categories: those using a “narrow” definition of “marketplace facilitator/provider,” and those using a broad definition. Can more uniformity be achieved with these definitions
  • Should the definition of “marketplace facilitator/provider” contain exclusions for: advertising, payment processing, food delivery services, online travel companies, others?
  • Should the marketplace facilitator/provider and the marketplace seller, under certain circumstances (such as when the marketplace seller has already been collecting the tax, etc.), be able to contractually agree to which party has the sales/use tax collection obligation? In addition, some sales, such as telecom, require special calculations. Should the sellers be doing these calculations themselves?

To learn more about the MTC Uniformity Committee’s Wayfair Implementation and Marketplace Facilitators work group’s Aug. 6 meeting, click here. In addition, the National Conference of State Legislatures (NCSL), will also be holding its annual Legislative Summit Aug. 5-8. The “Task Force on State and Local Taxation” will be taking up refinements to the recently passed state marketplace facilitator laws. This work will also likely conclude with a whitepaper in late fall 2019. As I mentioned before, I’ll keep you informed as the work of both these groups progresses through these issues, and potential remedies, during the next six months or so.

Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.


About this Contributor

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Michael Bernard
Chief Tax Officer-Transaction Tax

Mike Bernard is Chief Tax Officer-Transaction Tax, providing insight around tax department operations, indirect tax, tax risk management, emerging tax trends and tax policy. An experienced executive level tax attorney, Mike holds a J.D. and Bachelor of Science from Creighton University. He also served on the board of directors, executive committee and chaired committees for The Tax Executives Institute.

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