Not a Lexis+ subscriber? Try it out for free.

Tax Law

Marketplace Monday: The July Wave of Marketplace Collection Laws

On July 1, 2019, eight (8) more states had marketplace collection laws go into effect. These states include Arkansas, Indiana, Kentucky, New Mexico, Rhode Island, Virginia, West Virginia and Wyoming. With this new wave of states, approximately 22 states now have effective marketplace collection laws with many more expected to become effective this fall.

Why this is important: Businesses operating marketplaces and businesses selling through a marketplace will need to change their sales tax collection practices in each of these states. Marketplaces are now required to collect and remit sales and use tax on their own sales and sales made by sellers through the marketplace (marketplace sellers) in each of these eight states. Marketplace sellers may need to cease sales tax collection in these eight states if all of their sales are through marketplaces that are collecting sales tax on their behalf. Each of these eight states may also have different rules on what types of sales a marketplace is required to collect tax on, documentation requirements, and audit liabilities. Each of these issues will need to be evaluated.

Each of these eight states also has varying rules regarding taxability, so preparation for sales tax collection may require additional considerations. For example, in New Mexico and West Virginia, most receipts from the provision of services are subject to sales tax. Additionally, some states have recently enacted legislation that expands their sales tax. For example, in Rhode Island, the sale of certain digital products is subject to sales tax effective October 1, 2019.

Many of these issues will be addressed in forthcoming Marketplace Monday posts as we shed light on marketplace collection laws across the states.

What to prepare for: The next wave of marketplace collection laws is set to become effective October 1, 2019. As of today, these states include Arizona, California, Colorado, Maine, Maryland, Minnesota, Nevada, North Dakota and Texas.

Next Monday: Who qualifies as a marketplace?