REPORT
|
UPDATE
AUGUST | 2023
NCSL TASK FORCE ON STATE AND LOCAL TAXATION POLICY RECOMMENDATION
State and Local Tax Considerations
for Marketplace Facilitator
Tax Collection Requirements
iii NATIONAL CONFERENCE OF STATE LEGISLATURES
NATIONAL CONFERENCE OF STATE LEGISLATURES © 2023
The Naonal Conference of State Legislatures is the biparsan
organizaon dedicated to serving the lawmakers and stas of the
naon’s 50 states, its commonwealths and territories.
NCSL provides research, technical assistance and opportunies for
policymakers to exchange ideas on the most pressing state issues,
and is an eecve and respected advocate for the interests of the
states in the American federal system. Its objecves are:
• Improve the quality and eecveness of state legislatures.
• Promote policy innovaon and communicaon among
state legislatures.
• Ensure state legislatures a strong, cohesive voice in the
federal system.
The conference operates from oces in Denver, Colorado and
Washington, D.C.
State and Local Tax Considerations
for Marketplace Facilitator
Tax Collection Requirements
v NATIONAL CONFERENCE OF STATE LEGISLATURES
Contents
Introducon ...................................................................................................................................1
Summary of Policy Issues .............................................................................................................1
Economic Nexus Thresholds ......................................................................................................... 2
Separate Transacons .............................................................................................................2
Threshold Metrics ................................................................................................................... 2
Treatment of Sale for Resale Transacons ..................................................................................3
Determining Collecon Responsibility ........................................................................................3
Legacy Retailers and Food Delivery/Lodging/Car Rental and Sale Plaorms ......................3
Waivers and Contractual Agreement Provisions ..................................................................4
Collecon Dates and When Tax Must Be Remied ...................................................................5
Marketplace Facilitators and Marketplace Sellers:
Increased State Guidance on Taxability .......................................................................................5
Marketplace Facilitators: Liability Relief —Error Allowance ....................................................6
Marketplace Facilitators and Marketplace Sellers: Double Tax Relief .....................................7
Transacons Involving Mulple Marketplaces, Direct and Indirect Sales ...............................7
Consistency in Audits and Protecons from Class Acon .........................................................8
Requiring Remote Sellers to Collect and Remit Other Local Taxes and Fees ...........................8
1 NATIONAL CONFERENCE OF STATE LEGISLATURES
Introduction
The Supreme Court’s 2018 Wayfair decision remains a victory for tax fairness and the integrity of state rev-
enue systems. More than 35 years aer the rst online marketplace opened for business and long aer in-
ternet shopping had become a ubiquitous acvity, states nally gained the authority to impose tax collec-
on requirements on out-of-state internet retailers.
Prior to 2018, the naonal sales tax landscape was riddled with fairness issues and ineciencies. Many
local retail stores were forced to close their doors because they couldn’t compete with the sales tax ad-
vantage of remote sellers. Meanwhile, states were foregoing billions of dollars annually in uncollected tax
revenue.
Following Wayfair, states acted quickly to provide for the collecon of tax on remote sales. They adopt-
ed “economic nexus” laws to require remote retailers who exceed a certain volume of sales into a state to
collect and remit tax. They also passed laws requiring businesses that facilitate sales for third-party sellers
(also known as marketplace facilitators or marketplace providers) to collect taxes on those sales, shiing
the responsibility away from the smaller sellers that use their plaorm.
All the states that impose sales and use taxes have implemented these laws. These new requirements have
modernized their tax systems, invigorated revenue collecons, and created a more level playing eld for
brick-and-mortar retailers. However, while states have, by and large, implemented similar tax collecon re-
quirements for online retailers, there are key discrepancies and complexies that have created challenges
for taxpayers. In these areas, increased clarity and uniformity could assuage some of the concerns around
the burdens being imposed on the businesses charged with collecng and reming tax.
NCSL’s Task Force on State and Local Taxaon has endeavored to promote state sovereignty while acknowl-
edging the value of simplicity and uniformity across sales and use tax systems for both taxpayers and tax
administrators. In January 2020, the Task Force approved model language for states implemenng or
amending sales tax collecon requirements for marketplace facilitators.
To supplement this eort and address ongoing challenges facing implementaon and administraon of re-
mote sales tax requirements, we oer the following recommendaons to assist policymakers as they es-
tablish and rene laws and regulaons to ensure full collecon of state and local sales taxes in a manner
that avoids placing undue burdens on remote sellers.
Summary of Policy Issues
• Economic Nexus Thresholds
n Separate Transacons
n Threshold Metrics
• Treatment of Sale for Resale Transacons
• Determining Collecon Responsibility
n Legacy Retailers and Food Delivery/Lodging Plaorms
n Waivers and Contracts
• Collecon Dates and When Tax Must Be Remied
• Marketplace Facilitators and Marketplace Sellers: Informaon Sharing and Liability Relief
• Transacons Involving Mulple Marketplaces, Direct and Indirect Sales
• Consistency in Audits and Protecon from Class Acon
• Collecon Requirements for Other Local Taxes and Fees
NATIONAL CONFERENCE OF STATE LEGISLATURES 2
Economic Nexus Thresholds
A key feature of the Wayfair decision was the expansion of state sales tax nexus laws. Prior to the ruling, a
seller doing business in a state needed to also have physical presence to be required to collect and remit
sales tax. States are now able to assert nexus based on economic acvity. South Dakota’s Senate Bill 106
required any person making more than $100,000 of sales into the state or more than 200 separate trans-
acons into a state to collect and remit sales tax. These thresholds were intended to act as safe harbors for
smaller sellers with a limited economic footprint in a state.
All of the states that impose sales taxes have adopted economic nexus thresholds of their own. No state
has adopted a threshold below $100,000 sales and/or 200 separate transacons, although some have set
out higher sales volume thresholds or chosen not to apply a separate transacons threshold. The Task
Force considered several ongoing issues related to the thresholds that have been adopted.
SEPARATE TRANSACTIONS
Compared to the sales volume threshold, the separate transacons threshold has the potenal to extend
nexus to businesses with a very limited economic presence in a state. A seller of cheap widgets could have
200 separate transacons of one dollar into a state and be required to collect and remit sales tax. Due to
the burden this could place on small businesses, many states do not include a separate transacon thresh-
old, while others that inially adopted it have gone back and eliminated it, including California, Louisiana,
Massachuses, North Dakota, South Dakota, Washington, and Wisconsin.
NATIONAL CONFERENCE OF STATE LEGISLATURES iv
Policy Consideration/Best Practice
The Task Force recommends that state policymakers consider the discrepancy between the separate
transacons and sales volume threshold and the burden it places on small sellers as well as tax
departments that must process negligible tax returns. The Task Force recommends that states
eliminate the number of transacons threshold from their economic nexus calculaons to simplify
the sales tax compliance landscape for smaller sellers.
THRESHOLD METRICS
The sales volume thresholds across states are relavely uniform, but the sales that are included in the cal-
culaon can vary from state to state. According to the Mulstate Tax Commission, at least 12 states include
only retail sales and four states include only taxable sales in the sales volume. These discrepancies can cre-
ate confusion and complexity for mulstate taxpayers.
There are benets and drawbacks to the dierent approaches and the Task Force was unable to nd con-
sensus around the best metric for sales volume. The Streamlined Sales Tax Governing Board noted that its
member states seem to be gravitang towards “gross sales” due to ease of administraon. “Gross sales” is
the simplest threshold for sellers to calculate and track and is consistent with the threshold used by South
Dakota in the Wayfair decision. In some instances, however, “retail sales” can be easier threshold to ad-
minister, as it would eliminate registraon requirements for remote wholesalers. Streamlined is also con-
nuing discussions that would recommend the use of “gross” sales for purposes of registraon. However,
sellers (including wholesalers), would not be expected to le returns unl such me as they made a “tax-
able” sale aer meeng or exceeding the threshold.
NATIONAL CONFERENCE OF STATE LEGISLATURES iv
Policy Consideration/Best Practice
Some Task Force business parcipants favored using a sales threshold that consists of only “taxable
sales”. The Federaon of Tax Administrators and Streamlined have pointed out that smaller taxpayers
may nd the “taxable sales” threshold dicult to comply with because they have more diculty
determining what is or is not taxable. The Task Force recommends that state policymakers consider
providing guidance and examples regarding the threshold metric used so that taxpayers have a clear
understanding of nexus thresholds.
3 NATIONAL CONFERENCE OF STATE LEGISLATURES
Treatment of Sale for Resale Transactions
Another area where states diverge is whether sale for resale transacons are included in the sales volume
threshold. Because states generally exempt wholesale sales from sales tax, the Mulstate Tax Commission
has noted that including sale for resale transacons in the sales volume threshold would require whole-
salers to register and le “zero” returns. Processing returns that reect no tax collected is inecient and
frivolous for tax administrators as well. As noted above, Streamlined is connuing discussions that would
recommend the use of “gross” sales for purposes of registraon. However, sellers (including wholesalers),
would not be expected to le returns unl such me as they made a “taxable” sale aer meeng or ex-
ceeding the threshold. This would eliminate the need for wholesalers to have to le and states to have to
process “zero” returns.
NATIONAL CONFERENCE OF STATE LEGISLATURES iv
Policy Consideration/Best Practice
The Task Force recommends that state policymakers consider not requiring sellers that make only
wholesale sales and no retail sales to register for sales/use tax.
Determining Collection Responsibility
LEGACY RETAILERS AND FOOD DELIVERY/LODGING/CAR RENTAL AND SALE
PLATFORMS
In some cases, marketplace facilitator tax collecon requirements have complicated the determinaon of
the party responsible for collecng and reming sales and use tax. and other transaconal taxes. Prior to
Wayfair, brick-and-mortar businesses who collect and remit sales tax, including hotels, car retailers, car
rental companies, restaurants, grocery stores and hotels were responsible for collecng tax on food, lodg-
ing, or car sales and rentals, regardless of the manner in which sales were made (i.e., online or in person).
Under most state marketplace facilitator laws, if a meal is purchased from a restaurant via an online deliv-
ery plaorm or a hotel room or car are secured through an online travel company, the sales tax collecon
responsibility is shied from the restaurant, hotel, or rental car company to the plaorm. This change has
created confusion and complexity for both facilitators and sellers. Task Force business parcipants have
noted cases where in-state businesses that were already collecng and reming sales tax or other trans-
aconal taxes prior to the implementaon of marketplace facilitator laws refused to stop due to POS or
other system limitaons. In other instances, facilitators have been assessed for sales tax that was already
collected and remied by sellers; thus, resulng in double taxaon and unfair tax administraon which is
not the goal of marketplace facilitator laws.
The confusion can be exacerbated by transacons that involve mulple taxes, parcularly local taxes that
are not state administered. In some states, marketplace facilitators may only be responsible for the col-
lecon of sales taxes, while rental car, lodging or meals taxes are the responsibility of the seller. In other
states, marketplace facilitators may be responsible for the collecon of all applicable taxes and fees. On-
line plaorms deemed responsible for the collecon of other local taxes and fees may have more diculty
with compliance than the legacy retailers who have historically been charged with collecon. For example,
car rentals are oen subject to special fees and taxes that online plaorms may not have systems to col-
lect or accurately determine the tax or fee. Or, car sales may involve special licensing or regulatory issues
which can limit the type of enty (i.e. a licensed car dealer) that collects and remits the applicable sales
and use and other taxes. This can also create uncertainty for marketplace sellers about whether the appro-
priate amount of tax has been collected by the plaorm. For this reason, the Task Force’s 2020 model legis-
laon provided a limited exclusion for accommodaon providers from the denion of “marketplace facil-
itator” if: “the rooms, lodgings or accommodaons are provided by a hotel, motel, inn, or other place that
is a [registered seller] under (cite code secon) and the [registered seller] provides the rooms, lodgings or
accommodaons for occupancy under a brand belonging to such person.
NATIONAL CONFERENCE OF STATE LEGISLATURES 4
NATIONAL CONFERENCE OF STATE LEGISLATURES iv
Policy Consideration/Best Practice
The Task Force recommends that state policymakers consider expanding exclusions from
the denion of marketplace facilitator for certain hotel lodging enes, delivery network
companies, and car rentals and/or sale marketplaces where the marketplace seller is a brick and
mortar company who has historically remied the tax unless the excluded company noes all
local merchants that make sales using its website or mobile applicaon that it is subject to the
requirements of a marketplace provider and has agreed to collect the applicable taxes and fees.
The Task Force recommends states provide denions for delivery network companies to promote
uniformity and clear understanding, such as provided in California or Florida.
WAIVERS AND CONTRACTUAL AGREEMENT PROVISIONS
The model marketplace facilitator language adopted by NCSL’s SALT Task Force in 2020 also included a pro-
vision that would allow tax departments to grant waivers to marketplace facilitators from sales tax collec-
on requirements if they can demonstrate that substanally all of their marketplace sellers are registered
with the state and collecng tax. It also included language to allow marketplace facilitators and market-
place sellers to contractually agree to have the seller collect and remit all applicable taxes. The ability to en-
ter into a contractual agreement is subject to certain limitaons, the most notable being that the market-
place seller must have at least $1 billion in U.S. gross sales.
Most of the states that have enacted marketplace facilitator sales tax collecon requirements do not per-
mit the marketplace facilitator and marketplace seller to negoate which party has the collecon and re-
porng responsibility and do not allow the state tax agency to waive that collecon or reporng require-
ment. However, some states have included provisions in their laws allowing the marketplace facilitator and
marketplace seller to contractually negoate which party has the collecon and reporng requirement. A
few states include provisions that allow the state tax agency to waive the marketplace facilitator collecon
and reporng requirement, under certain circumstances.
In examining this issue, the Mulstate Tax Commission noted to the Task Force that: “states considering
such negoaon or waiver provisions should balance the need to address special situaons against the
risk of undermining the eecveness of the marketplace facilitator/provider collecon model, if those pro-
visions are made too widely available.” To ensure waiver provisions are not abused, states should require
that marketplace sellers be registered to collect and remit tax before a waiver can be granted.
NATIONAL CONFERENCE OF STATE LEGISLATURES iv
Policy Consideration/Best Practice
The Task Force recommends that state policymakers consider allowing marketplace sellers
and marketplace facilitators to contractually negoate which party has the collecng and
reporng requirement. This is parcularly important for marketplace facilitators that contract
with marketplace sellers that operate physical stores or locaons in the state and are already
collecng and reming sales tax. More exibility and the ability for the marketplace facilitator and
marketplace seller to agree on who will handle sales tax remiance is encouraged. Addionally,
the Task Force encourages states to grant waivers to marketplace facilitators who can demonstrate
that substanally all of their sellers are registered with the state and the sellers agree to collect the
tax on all their sales facilitated by the marketplace facilitator. State’s should commit to providing a
determinaon on waiver applicaons within a reasonable meframe (e.g., 90, 120 days). While the
taxpayer’s waiver applicaon is in review, the Task Force recommends that the waiver applicaon be
viewed as condionally approved. If applicable, the Task Force recommends that state policymakers
consider reducing or eliminang the $1 billion threshold for when marketplace facilitators can
contractually agree to have the seller collect and remit all applicable taxes and fees.
5 NATIONAL CONFERENCE OF STATE LEGISLATURES
Collection Dates and When Tax Must Be Remitted
Under state economic nexus laws, remote sellers are not required to collect and remit sales tax unl they
have exceeded a minimum threshold of sales into a state. The amount of me sellers have to register to
calculate and collect the tax once they have exceeded the economic nexus threshold varies by state. In
some states, sellers are required to register and begin collecng tax immediately aer the sales volume
threshold is exceeded. Other states provide a cushion period before sellers must commence tax collecon.
For example, in Colorado, a seller must register and commence collecng tax by the rst day of the month
following the 90
th
day aer the sales volume threshold has been exceeded.
While the lack of uniformity in collecon dates presents some complexity for taxpayers, Task Force busi-
ness parcipants noted that requirements to collect tax immediately aer exceeding a state’s sales volume
threshold are parcularly challenging, as businesses tax compliance soware is not able to provide real
me nocaon the moment a threshold has been crossed. The result is that taxpayers selling into states
that require immediate collecon may be unwingly out of compliance.
NATIONAL CONFERENCE OF STATE LEGISLATURES iv
Policy Consideration/Best Practice
To provide more exibility to remote sellers and ensure compliance with sales tax collecon
requirements, the Task Force recommends that state policymakers consider extending the me for
remote sellers to register and collect to the rst day of the rst calendar month, that is at least 60
days aer the economic nexus threshold is met or exceeded.
Marketplace Facilitators and Marketplace Sellers:
Increased State Guidance on Taxability
A state needs to provide adequate informaon on which products (especially digital products and services)
are subject to its sales and use tax, including any local sales and use taxes. Business models are connually
changing and it oen takes years to get leer rulings from states on the taxability of various products and
services. For transacons where the proper amount of sales tax has not been collected, most state mar-
ketplace facilitator requirements provide that the facilitator rather than the seller is subject to audit and li-
ability, unless the facilitator can show that the failure to collect was due to the seller providing erroneous
informaon to the facilitator. However, there is oen not enough guidance on how the states impose their
tax and more guidance is needed, especially from non-SSUTA states.
NATIONAL CONFERENCE OF STATE LEGISLATURES iv
Policy Consideration/Best Practice
The Task Force recommends that state policymakers consider providing clear guidance on the
taxability of products like digital goods and services to avoid uncertainty. It is recommended that
states require their tax agencies, that are not Streamlined Sales and Use Tax Agreement (SSUTA)
members, to complete the SSUTA taxability matrix (or a similar form or matrix), including disclosed
pracces, and note how that state follows or does not follow certain provisions in the SSUTA.
Addionally, states need to increase resources to provide both mely informal and formal guidance
to taxpayers so that taxpayers are not waing for lengthy periods of me to receive guidance on
taxability. (Note: Streamlined has indicated a willingness to allow non-member states to get set-up
and use its online taxability matrix and tax administraon pracces templates so sellers can nd the
informaon for mulple states all in one place.)
NATIONAL CONFERENCE OF STATE LEGISLATURES 6
Marketplace Facilitators:
Liability Relief —Error Allowance
The relaonship between marketplace facilitators and marketplace sellers requires a certain amount of in-
formaon sharing. In order for marketplace facilitators to collect tax on sales made by marketplace sellers,
they need to be able to properly categorize the product and determine its taxability. In instances where a
marketplace seller retains the obligaon to collect sales and use tax, they may need informaon from the
marketplace facilitator in order to properly complete the tax return.
As result of the enactment of marketplace facilitator laws, almost 60% of sales occur through marketplaces
and therefore most state sales and use tax is now being collected and remied by marketplace facilitators.
Most marketplace facilitators had no prior experience with collecng and reming sales and uses taxes
prior to the enactment of the marketplace laws because they were not selling goods or services, but only
facilitang the sales of such goods and services on behalf of sellers. Marketplace laws thrust facilitators
into the role of collecng and reming sales tax which require marketplace facilitators to be very reliant
on geng certain key informaon from marketplace sellers to determine a product or service categoriza-
on, taxability, sourcing and other details required to collect the correct amount of tax.
For transacons where the proper amount of sales tax has not been collected, most state marketplace fa-
cilitator requirements provide that the facilitator rather than the seller is subject to audit and liability, un-
less the facilitator can show that the failure to collect was due to the seller providing incorrect or insu-
cient informaon to the facilitator. The 2020 NCSL model relieves sellers from liability if it can prove that a
tax on a sale it facilitated was paid by a seller. These situaons can pit marketplace facilitators against sell-
ers and places state tax administrators in the posion of being an arbitrator., which can lead to both pares
being assessed for the tax unl the dispute is resolved.
NATIONAL CONFERENCE OF STATE LEGISLATURES iv
Policy Considerations/Best Practices
To avoid conicts between sellers and facilitators over minor errors or inaccuracies, and remove
a tax agency from arbitrang such disputes, the Task Force business parcipants propose that
an error percentage of the sales tax collected on behalf of a marketplace seller be provided to
marketplace facilitators. However, if an error percentage is allowed and liability relief is provided to
the marketplace facilitator because the marketplace seller failed to provide complete and accurate
informaon to the marketplace facilitator, state policymakers may also want to consider pushing
those liabilies back to the marketplace seller to encourage the marketplace seller to provide
complete and accurate informaon to the facilitator to ensure accuracy and collecon.
The Task Force recommends that state policymakers consider the error percentage be calculated as
follows:
A marketplace facilitator is not liable for [X%] of the amount of sales or use tax that the
marketplace facilitator fails to collect or inaccurately collects on sales in the state that are
facilitated on behalf of marketplace sellers, however, in no event shall the error percentage
allow the marketplace facilitator a refund of sales tax.
This provision is similar to Washington and Utah marketplace collecon transion allowances. See
RCW § 82.08.0531(6); Utah Code § 59-12-107.6(7) (2019-2022 calendar years).
Addionally, for those states that do not use an error allowance, it is also recommended that states
provide clear guidance on what constutes the provision of incorrect or insucient informaon
by the marketplace seller to the marketplace facilitator. In most states that contain this type of
provision, it is unclear how this would be proved in an audit sample where millions of transacons
are being sampled and audited.
7 NATIONAL CONFERENCE OF STATE LEGISLATURES
Marketplace Facilitators and Marketplace Sellers:
Double Tax Relief
For marketplace facilitators that oer goods for sale on behalf of marketplace sellers that operate physical
retail stores (e.g., grocery stores), the enactment of the marketplace laws created an addional challenge.
The goods sold by the marketplace seller on the marketplace facilitator’s plaorm must be obtained from
the marketplace sellers retail store in the state and delivered to the purchaser. In order for this to occur
the goods must be processed through the marketplace seller’s retail store point-of-sale system. This may
mean that the marketplace seller is charging sales tax in its point of sales system and is unable to sup-
press tax when the marketplace facilitator begins collecng and reming sales tax to the state. This re-
sults in sales tax being charged to the marketplace facilitator on the in-store transacon and sales tax being
charged to the purchaser by the marketplace facilitator on the same goods.
NATIONAL CONFERENCE OF STATE LEGISLATURES iv
Policy Consideration/Best Practice
The Task Force recommends that state policymakers consider providing clear guidance on the
taxability of products like digital goods to avoid taxpayer uncertainty. Informaon requirements
between the marketplace facilitators and marketplace sellers and rules on when liability can
be gained should be clear and standardized. States should consider allowing the marketplace
facilitator a ”tax paid on purchases resold” deducon on its sales tax return for sales tax paid to the
marketplace seller due to the marketplace seller’s point of sale system not being able to suppress
sales tax on facilitated transacons. The state should also provide guidance in how a marketplace
facilitator should present such deducon on its sales and use tax returns. Absent such a provision,
double taxaon would result: a marketplace facilitator would charge sales tax on transacons
occurring on the plaorm and tax would also be charged at the marketplace seller’s point of sale
system to the marketplace facilitator. Addionally, a “paid at source” deducon would eliminate
administrave ineciencies in having marketplace facilitators seek connuous refunds from the
state or marketplace sellers. In some states (e.g., Arizona), marketplace facilitators would not even
be able to seek refunds directly from the state, but would be forced to seek a refund from the
marketplace seller that would then have to seek a refund from the state.
Transactions Involving Multiple Marketplaces,
Direct and Indirect Sales
State denions of “marketplace facilitator” are not uniform. Some states have a relavely narrow deni-
on that applies to enes that are either directly or indirectly involved in payment processing or collec-
on from a purchaser. The 2020 NCSL model marketplace facilitator language adopted a narrow denion,
but the fact that both the party directly taking payment and the party indirectly taking payment both meet
the denion. Automacally defaulng tax responsibility to the party directly taking payment will oen
lead to the less sophiscated party becoming tax responsible even when they are incapable of properly
complying.
Other states have adopted broader denions, which potenally apply to plaorms that may have not
been intended targets, such as fundraising plaorms, aggregators, or technology facilitators.
Broader denions have resulted in some enes being held responsible for sales and use tax collecon
when they are not involved in the nancial transacon. Without a connecon to the payment, tax collec-
on and remiance is not possible. Addionally, there may be mulple pares involved in facilitang cer-
tain transacons that could qualify as a “marketplace facilitator.” In these instances, there is oen a lack of
clarity around the party responsible for collecng and reming tax.
NATIONAL CONFERENCE OF STATE LEGISLATURES 8
For transacons involving mulple marketplace facilitators or sellers, Task Force business parcipants ex-
pressed a preference to allow the pares involved in the transacon to contractually agree which party will
be responsible for tax calculaon, collecon and remiance, as prescribing a specic approach could cre-
ate addional complexies. However, some states may want documentaon to prove that tax was remit-
ted beyond a contractual agreement.
NATIONAL CONFERENCE OF STATE LEGISLATURES iv
Policy Consideration/Best Practice
For transacons involving mulple marketplace facilitators, The Task Force encourages states to
consider allowing marketplaces to contractually agree to which party will calculate, collect and remit
sales tax and other applicable transaconal taxes. If the state wants the marketplace facilitator
agreeing to remit the tax to nofy it of the arrangement or otherwise enter into agreement with the
state, the process should be clear and mely. The Task Force recommends that state policymakers
consider 1) providing instrucons for when two pares are required to remit tax, and 2) either
prohibit or provide guardrails to avoid necessitang condenal taxpayer records of one party be
provided to support the other’s audit. This guidance will also prevent fricon in audits and serve as
guidance to state auditors.
Consistency in Audits and Protections
from Class Action
The NCSL model marketplace facilitator language included class acon lawsuit protecon for marketplace
facilitators. Several states have included similar protecons in their marketplace facilitator tax collecon
laws as well. This ensures that if there is doubt about whether the correct amount of tax has been collect-
ed, marketplace facilitators are not incenvized to opt against collecon. However, these provisions are
specic to marketplace facilitators and not all sales tax collecon. The Task Force deems it benecial to
broaden class acon provisions to all sales tax collecon. Streamlined States provide this type of protec-
on to all sellers in Secon 325 of the SSUTA.
NATIONAL CONFERENCE OF STATE LEGISLATURES iv
Policy Consideration/Best Practice
In instances involving the overcollecon of sales tax, the Task Force recommends that state
policymakers consider the American Bar Associaon’s Model Transaconal Tax Overpayment Act
and/or broadening their class acon prohibion to more broadly apply to all sellers and not just
sales by a marketplace facilitator. This language protects retailers from class acon suits in the event
of overcollecon and provides relief for customers through a state refund process.
Requiring Remote Sellers to Collect and Remit
Other Local Taxes and Fees
While most state marketplace facilitator laws are specic to the collecon of sales and use taxes, some
states and localies have started to require marketplace facilitators and remote sellers to collect other
types of taxes and fees, such as lodging, meals, rental car, or specialized fees or taxes (e.g., ulity taxes, al-
cohol/tobacco taxes, re fees). Unlike sales taxes, which are now centrally administered in nearly all of the
states, many of these taxes and fees are administered at the local level.
Task Force business parcipants noted several challenges with these new local requirements. Including:
• Lack of understanding of the burdens being placed on businesses; many of the new local tax collec-
on requirements adopted by localies have not gone through tax commiees.
• Soware systems that assist businesses with sales tax compliance do not exist for other taxes and fees
that are being imposed.
• Lack of a single source of truth that lists applicable local taxes that the plaorm is required to remit.
• Lack of coordinaon with state or local tax ocials, who may not be noed of state or local tax law
changes and therefore are unprepared to operaonalize.
• Without a state role, plaorms are le to navigate quesons from localies on how to register a
non-physically present business.
• Locally administered taxes are oen paid monthly regardless of the volume meaning the plaorms
are oen spending signicantly more to le the return than tax is remied to the jurisdicon.
• Local requests for data under guise of tax have been used for regulatory purposes in violaon of con-
denality laws.
• Confusion between what is a local “tax” versus what is a local “fee” and whether the plaorm also has
the authority or obligaon to remit “fees”. This issue is parcularly prevalent with local Tourism Im-
provement Districts funded by lodging taxes.
NATIONAL CONFERENCE OF STATE LEGISLATURES iv
Policy Consideration/Best Practice
In states where localies have or would like to expand marketplace facilitator and remote seller
collecon requirements to include other local taxes and fees, the Task Force encourages state policy
makers to consider expanding marketplace facilitator collecon of non-sales taxes and fees to pursue
simplicaon soluons that align with their administraon of local sales and use taxes, including
centralized collecon and clear, state-level guidance for taxpayers. These consideraons are best
veed before such requirements are imposed on facilitators and remote sellers to avoid undue
burdens of collecon that may be put onto businesses. In addion, new tax collecon requirements
should be the product of legislaon rather than changes in regulatory interpretaon. Finally, in
addion to government operaons legislave commiees, tax commiees should also review/hold
hearings when the responsibility for a local tax will shi to a plaorm in the state’s enabling act to
ensure the state’s tax advisors are able to fully vet the tax implicaons/risks of such proposals.
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NCSL’s State and Local Taxaon Task Force
This updated white paper was developed by NCSL’s State and Local
Taxaon (SALT) Task Force. The Task Force was created to analyze
emerging tax issues and provide guidance to state legislators confronng
the complexies of the 21st century economy and consists of legislators,
legislave sta, and NCSL Foundaon members. Acng in a biparsan
manner, the task force idenes crical issues legislatures need to address
and provides praccal guidance to states by developing principles and
best pracces for tax reform and modernizaon.
