Tax Law

Marketplace Monday: CDTFA Releases Initial Discussion Paper in Anticipation of Interested Parties Meeting on Marketplace Facilitator Act

On October 4, 2019, the California Department of Tax and Fee Administration (CDTFA) released its Initial Discussion Paper in anticipation of an Interested Parties Meeting (IPM) set for October 15, 2019 in Sacramento. The subject of both the IPM and the Discussion Paper is how to interpret, clarify and make specific the Marketplace Facilitator Act.

Assembly Bill (AB) No. 147 (Stats. 2019, ch. 5) was signed into law in April 2019 and, broadly speaking, has two components. First, as a result of Wayfair, AB 147 added California Revenue and Taxation Code section 6203(c)(4) which provides that a retailer engaged in business in California includes “Any retailer that, in the preceding calendar year or the current calendar year, has total combined sales of tangible personal property for delivery in this state by the retailer and all persons related to the retailer that exceed five hundred thousand dollars ($500,000). That new provision was operative as of April 1, 2019, and was the subject of a CDTFA Initial Discussion Paper released on May 10, 2019, and the subject of a CDTFA IPM held on May 23, 2019, regarding needed amendments to existing CDTFA regulations 1684 and 1827 to conform them to this statutory change.

Second, AB 147 expanded the definition of “retailer” to include marketplace facilitators, as defined, and those new provisions – known as The Marketplace Facilitator Act – were operative as of October 1, 2019. The IPM held on May 23, 2019 did not address the marketplace facilitator provisions of the bill, which CDTFA chose to address at a separate IPM, and which is now set for October 15th. The Initial Discussion Paper just released for that IPM includes a copy of Proposed Regulation 1684.5, “Marketplace Sales” and staff “looks forward to hearing the interested parties’ thoughts regarding the proposed regulation as well as any additional issues that may warrant further consideration.”