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Tax Law

Marketplace Monday – California Legislation Pending on Marketplace Sellers

California Assembly Bill (AB) 1790 passed the Legislature on September 26, 2019 and was sent to the Governor.   The Governor has until October 13th to act on the bill.  The Legislative Counsel’s Digest for AB 1790 states the bill would require a marketplace, as defined, to ensure that their terms and conditions regarding commercial relationships with marketplace sellers meet specified requirements, including that the terms and conditions are drafted in plain and intelligible language.  The bill would define “marketplace seller” for these purposes as a person residing in the state who has an agreement with a marketplace and makes retail sales of services or tangible personal property through a marketplace owned, operated or controlled by that marketplace.  If a marketplace decides to suspend or terminate a marketplace seller based upon an alleged violation of law or a term, condition or policy of the marketplace, the bill would require the marketplace to provide the marketplace seller with a written statement of reasons for that decision, as specified.

Buffy Wicks, the author of AB 1790, placed a September 12, 2019 letter of legislative intent in the California Assembly Journal for September 14, 2019.  The letter states that while “marketplace” in AB 1790 is “intentionally broad,” it is not intended to apply to a company that simply advertises third-party sellers’ products and services on their website or platform or refers customers to third-party sellers through their respective company website, so long as any retail sales are completed on the third-party sellers’ own websites or otherwise completed outside of the company’s website or platform.   The letter also states the intent of the bill is for an online marketplace to post only the marketplace’s standard terms and conditions, which pertain to issues raised in AB 1790 rather than posting entire contracts with marketplace sellers.  The letter states that AB 1790 will help level the playing field for small businesses by requiring online e-commerce marketplaces to provide clear and specific information about their terms and policies, make that information available online to the businesses that use their platform to sell goods and set objective grounds for disputes about the disbursement of funds from the third-party sales that are in the platform’s possession.