CT Marketplace Facilitator Act States

Connecticut’s Marketplace Facilitator Sales Tax Law, Explained

by Sarah Craig

Connecticut sales tax online marketplaces

Good news for marketplace sellers! The state of Connecticut now requires marketplaces to collect sales tax on behalf of sellers on online marketplaces like Amazon and eBay.

This means that if you sell on a platform like Amazon, then Amazon will collect sales tax from your Connecticut buyers on your behalf, and remit it to the state. 

But as usual, there are always a few wrinkles here when it comes to eCommerce sales tax. 

This post will explain what online sellers need to know about the Connecticut marketplace facilitator law, and answer your frequently asked questions. 

Overview of the Connecticut Marketplace Facilitator Law

Connecticut’s marketplace facilitator law states that marketplace facilitators in Connecticut must collect and remit sales tax on behalf of their marketplace sellers.

Quick Facts about the Connecticut Marketplace Facilitator Law

    • Effective date: December 1, 2018
    • Threshold: This law requires that marketplace facilitators in Connecticut must collect and remit sales tax on behalf of their marketplace sellers.
    • If you’re already registered as a retailer with the Department of Revenue Services, but you only make sales through marketplace facilitators who collect and remit sales tax on your behalf, then you can request to change your filing status to annual. Send a secure email via the online Taxpayer Service Center (TSC).  But, before you change your filing frequency, you’ll need to wait until you receive written confirmation from the DRS of your change in filing status.
    • State law information: Read the full text of the Connecticut Market Facilitator Law
  • Marketplaces that have adopted this law: 

Frequently asked Questions about Marketplace Facilitator Laws

What exactly is a marketplace facilitator in Connecticut?

Under Connecticut law, A “marketplace facilitator” is any person who:

  1. Facilitated retail sales of at least $250,000 during the prior twelve-month period by marketplace sellers by providing a forum that lists or advertises tangible personal property subject to sales and use taxes or taxable services, including digital goods, for sale by such marketplace sellers;
  2. Directly or indirectly through agreements or arrangements with third parties, collects receipts from the customer and remits payments to the marketplace sellers; and
  3. Receives compensation or other consideration for its services.

A marketplace facilitator can be located within or outside of Connecticut.

Does this mean I can stop collecting Connecticut sales tax?

It depends. Every business’s sales tax situation is unique to that business. 

Let’s look at a couple of common scenarios for businesses who have sales tax nexus in Connecticut. 

Example #1: You only make sales on online marketplaces. 

In this example, you only sell on Amazon and eBay. Because Amazon and eBay are both now collecting sales tax from buyers on your behalf, you are not required to collect sales tax from your buyers. (However, you may still be required to file periodic sales tax returns. See “Does this mean I can cancel my Connecticut sales tax permit?” below.)

Example #2: You sell on online marketplaces and your own online store and/or brick and mortar store.

In this case, you’d still be required to collect sales tax from buyers who purchase from you through your own online store (for example, via your BigCommerce or Shopify store). And you would still be required to collect sales tax from your brick and mortar customers. 

Marketplace facilitator laws only cover marketplaces. The state still requires that merchants collect sales tax from buyers via sales channels where the marketplace facilitator laws do not apply.

Does this mean I can cancel my Connecticut sales tax permit?

It depends. 

Typically, no, but it depends on the location and business activity of the seller. Check out this chart to see which situation applies to you. 

Do I still need to file a Connecticut sales tax return?

Marketplace sellers that are registered with DRS must still report sales made through marketplace facilitators. All sales should be reported as gross receipts, and sales made through marketplace facilitators should be deducted on the same line as a sale for resale.

What do I do with any Connecticut sales tax I have already collected?

If you have already collected Connecticut sales tax from buyers, it is vital that you remit that amount to the state. The only way to get in serious criminal trouble in sales tax is to collect sales tax from buyers on the state’s behalf but keep it in your own pocket. 

Example:

Let’s say you sell on Amazon and Connecticut requires you to file and remit sales tax quarterly. Though Amazon began collecting sales tax on your behalf on December 1, 2018, if you had any sales tax in your bank account that you collected from November 2018, you would still need to remit that to Connecticut Department of Revenue or face a penalty. 

Does TaxJar handle this for me? 

Yes. 

TaxJar AutoFile handles Connecticut sales tax automatically

TaxJar AutoFile automatically compiles your sales tax data the way the state of Connecticut wants it filed. For example, many states, Connecticut included, want sellers to break down their sales tax collected interstate (sales originating in Connecticut  sent to another state) and intrastate (sales made from Connecticut to Connecticut.) 

If a marketplace has collected sales tax on your behalf, TaxJar reports that directly to the state so that the state is aware you have met your sales tax obligations. 

If you currently AutoFile your Connecticut sales tax returns, you don’t need to do a thing. It’s handled!

TaxJar Reports give you all the info you need to file manually

If you prefer to file manually, your TaxJar Reports also reflect what the Connecticut Department of Revenue wants to see on your tax return. 

Also don’t worry that you will double pay. TaxJar accounts for sales tax collected on your behalf, and only shows you the amount you owe to the state out of your pocket.

Further reading on Connecticut sales tax and marketplace facilitator laws:

Do you have questions or something to say about the Connecticut marketplace facilitator law? Start the conversation in the comments!

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