The rise of online marketplaces such as Amazon, eBay, and Shopify has transformed the way businesses sell products. However, tax compliance for eCommerce sellers has become increasingly complex, especially with the introduction of the Marketplace Facilitator Law. This law shifts the responsibility of collecting and remitting sales tax from individual sellers to the marketplace platform. While this simplifies tax collection, eCommerce sellers must still meet specific reporting requirements to remain compliant.

Understanding the Marketplace Facilitator Law

The Marketplace Facilitator Law requires online selling platforms to collect and remit sales tax on behalf of their third-party sellers. This legislation was introduced to ensure that states receive the proper sales tax revenue from online transactions. Previously, individual sellers were responsible for collecting and remitting taxes, leading to inconsistencies and underreporting.

Under this law, platforms like Amazon, Walmart, and Etsy automatically handle sales tax for qualifying transactions. This means that eCommerce sellers no longer need to collect sales tax for sales made through these platforms in states where the law applies. However, sellers must still be aware of their tax obligations and maintain proper records.

Tax Reporting Responsibilities for eCommerce Sellers

Even though marketplace facilitators handle sales tax collection, eCommerce sellers must still comply with tax reporting requirements. Here are the key areas they need to focus on:

Income Tax Reporting

All sales revenue, including those processed through marketplace facilitators, must be reported as taxable income. Sellers should track their gross sales from all platforms and ensure accurate reporting on their tax returns. Platforms often provide 1099-K forms to sellers who meet certain transaction thresholds, but it is the seller's responsibility to verify the accuracy of these reports.

Sales Tax Exemptions and Direct Sales

The Marketplace Facilitator Law does not cover all transactions. If sellers make direct sales through their own website or other platforms that do not collect sales tax on their behalf, they must collect and remit sales tax for those transactions. It is crucial to determine nexus (a tax obligation based on location or sales volume) in different states and register accordingly.

Record-Keeping and Reconciliation

While marketplaces collect and remit sales tax, eCommerce sellers should maintain detailed records of their transactions. This includes invoices, sales reports, and tax filings. Proper record-keeping helps reconcile discrepancies and ensures smooth tax audits. Accountants for eCommerce businesses can assist with reconciling financial data and preparing accurate tax reports.

The Role of Accountants for eCommerce Businesses

Given the complexity of tax reporting under the Marketplace Facilitator Law, hiring accountants for eCommerce is essential. These professionals help sellers:

• Understand tax obligations across multiple states

• Reconcile marketplace sales reports with financial statements

• Identify tax deductions and credits to reduce overall tax liability

• Ensure compliance with federal and state tax regulations

Conclusion

The Marketplace Facilitator Law simplifies sales tax collection for eCommerce sellers, but it does not eliminate their tax reporting responsibilities. Sellers must still track income, report exempt sales, and maintain accurate financial records. Working with accountants for eCommerce ensures compliance and helps businesses navigate the complexities of tax reporting while focusing on growth and profitability.