Budget Amendment ID: FY2020-S3-28
OTH 28
Sales Tax Treatment of Marketplace Facilitators and Sellers
Mr. Crighton moved that the proposed new text be amended in SECTION 30, in line 48, by striking the definition of “Marketplace facilitator” and replacing it with the following:-
"'Marketplace facilitator' means a person that: facilitates a retail sale by a retailer by listing or advertising for sale by the retailer in any forum, tangible personal property, services, or digital goods that are subject to tax under this chapter; and either directly or indirectly through agreements or arrangements with third parties collecting payment from the customer and transmitting that payment to the retailer regardless of whether the marketplace provider receives compensation or other consideration in exchange for its services. This definition does not include a payment processor business appointed by a merchant to handle payment transactions from various channels, such as credit cards and debit cards, and whose sole activity with respect to marketplace sales is to handle transactions between two parties.";
and to further amend SECTION 32 in line 23 by striking subsection (e) and inserting the following new sections:-
"(e) A marketplace facilitator, at its discretion, may request and will be granted a waiver from the requirements of this section if the following requirements are met: (1) The marketplace facilitator submits a waiver application to the Commissioner substantiating that, based on the facts and circumstances of the marketplace transaction, the marketplace facilitator can presume in good faith that the applicable taxes are collected and remitted by a marketplace seller required to be registered to collect tax under this section; (2) the Commissioner approves the marketplace facilitator’s application; (3) the marketplace facilitator collects the applicable tax registration numbers of marketplace seller(s) transacting on the marketplace platform. These registration numbers will be kept in the books and records of the marketplace facilitator and may be examined by the Commissioner upon audit; and (4) the marketplace seller is required to register to collect sales tax.
(f) If such waiver is granted: (1) the tax levied under this section shall be (i) collected directly by the marketplace seller or by the marketplace facilitator on behalf of the marketplace seller and (ii) remitted by the marketplace seller(s); (2) except as otherwise provided in section (f)(1), the marketplace facilitator will not be required to collect and remit any applicable taxes or fees; (3) the marketplace facilitator is relieved of liability for remittance of tax on the applicable sales made through the marketplace platform on behalf of those marketplace sellers; and (4) a marketplace seller shall be subject to audit by the Commissioner with respect to all retail sales for which it is required to remit tax. Where the Commissioner audits the marketplace seller, the Commissioner is prohibited from auditing the marketplace facilitator for the same retail sales except to the extent the marketplace facilitator seeks relief under section (f).
No class action shall be brought against a marketplace facilitator in any court on behalf of customers arising from or in any way related to an overpayment of sales and use tax collected on sales facilitated by the marketplace facilitator, regardless of whether such claim is characterized as a tax refund claim. Nothing in this subsection shall affect a customer's right to seek a refund on an individual basis.
(g) Nothing in this section affects the obligation of any consumer to remit sales or use tax for any taxable transaction for which a marketplace facilitator or seller does not collect and remit sales or use tax.
(h) A marketplace facilitator shall be relieved from liability, including penalties and interest, for the incorrect collection or remittance of sales and use tax on transactions it facilitates or for which it is the seller if the error is due to reasonable reliance on (i) an invalid exemption certificate provided by the marketplace seller or the purchaser; (ii) incorrect information provided by the Commonwealth; or (iii) insufficient or incorrect information provided by the marketplace seller or purchaser regarding the tax classification or proper sourcing of an item or transaction, provided that the marketplace facilitator can demonstrate it made a reasonable effort to obtain accurate information from the marketplace seller or purchaser.
1. A marketplace facilitator is relieved of liability to the extent that the marketplace facilitator demonstrates to the satisfaction of the department that:
(a) The marketplace facilitator is not the seller and that the marketplace facilitator and the marketplace seller are not affiliates; (b) the sale was facilitated for a marketplace seller through a marketplace operated by the marketplace facilitator, and; (c) the failure to collect sales and use tax was due to an error other than an error in sourcing the sale.
2. The liability relief provided in subparagraph (1) shall not exceed the following percentage of the total sales and use tax due on sales facilitated by a marketplace facilitator for marketplace sellers and sourced to this state during a calendar year, which sales shall not include sales by the marketplace facilitator or affiliates of the marketplace facilitator: (a) for sales made of facilitated during the 2019 calendar year seven percent; (b) for sales made or facilitated during calendar years 2020 through 2024, five percent; (c) for sales made or facilitated during the 2025 calendar year, three percent; and (d) for sales made or facilitated beginning January 1, 2026, zero percent.
3. To the extent that a marketplace facilitator is relieved of liability for collection of sales and use tax under subparagraph (1), the marketplace seller for whom the marketplace facilitator has made or facilitated the sale is also relieved of liability.
4. The Commissioner may determine the manner in which a marketplace facilitator or marketplace seller shall claim the liability relief provided in this section. The Commissioner may waive penalties and interest if a marketplace facilitator seeks liability relief and the department rules that a reasonable cause exists.
(i) A marketplace facilitator is the sole entity subject to audit by the Department for sales and use tax collection for all transactions facilitated by the marketplace facilitator unless (i) the marketplace facilitator can demonstrate that its failure to collect the proper tax was due to incorrect information provided by the marketplace seller or (ii) the marketplace seller is subject to a waiver granted pursuant to subsection (e).";
and to further amend by striking out SECTION 76 and replacing with the following:-
"SECTION 76. The effective date of sections 30 to 35 shall be ¬ January 1, 2020. No obligation to collect the sales and use tax under these sections may be applied retroactively.".