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New Marketplace Facilitator Requirements Go Live Oct. 1

Online Sales Tax Collection and Remittance shifts from sellers to Marketplace Facilitators

September 30, 2019
California’s new online sales tax collection law, AB 147 (Burke), was enacted in April 2019 and expands the collection of millions in state sales and use taxes from out-of-state sales via the implementation of the landmark U.S. Supreme Court decision in South Dakota v. Wayfair, 138 S.Ct. 2080 (2018).
 
Beginning Oct. 1, a marketplace facilitator is considered the seller and retailer for each sale facilitated through its physical or online marketplace. Marketplace facilitators are required to register with the California Department of Tax and Fee Administration (CDTFA) for a seller's permit or Certificate of Registration. 

The provisions of AB 147, requiring collection and remittance of sales and use tax by out of state retailers, were effective April 1, 2019. However, the marketplace facilitator requirements become effective Oct. 1.
 
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Marketplace Facilitator Defined

A “Marketplace facilitator” is defined as the retailer responsible for the collection and remittance of sales and use taxes. Marketplace facilitators contract with sellers to sell goods and services on their online platforms. Facilitators generally list products, process payments, collect receipts, and in some cases, take possession of a seller’s inventory, hold it in warehouses, and ship it to customers.

Large marketplace facilitators, such as Amazon and eBay, will now be responsible for calculating, collecting, and remitting state sales tax, including local transactions and use taxes, on sales sold by third party sellers on their online platforms. To ease implementation, AB 147 included substantial hold-harmless provisions for compliance errors until Jan. 1, 2023.

Fiscal Impact

Cities can expect a modest, but positive fiscal impact from the full implementation of AB 147. Of the $1 to $2 billion in annual uncollected sales and use tax revenue, about $125 to $250 million would go to cities and counties for the one percent Bradley-Burns local rate. A similar amount would go to local transactions and use tax rates (local add-on sales taxes). This would be a boost in sales and use tax revenues of about 1.8 to 3.5 percent. Under current CDTFA rules, this out-of-state use tax is distributed through state and countywide “pools” in proportion to the rest of taxable sales within the county.

Further Information


 
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