This means that if you sell on a platform like Amazon, then Amazon will collect sales tax from your Massachusetts buyers on your behalf, and remit it to the state.
But as usual, things aren’t always simple when it comes to eCommerce sales tax.
This post will explain what online sellers need to know about the Massachusetts marketplace facilitator law, and answer your frequently asked questions.
Overview of the Massachusetts Marketplace Facilitator Law
Massachusetts’ marketplace facilitator law states that remote marketplace facilitators who make more than $100,000 in sales in Massachusetts in the previous or current calendar year on all sales made through the marketplace are required to collect sales tax on behalf of third party sellers.
Quick Facts about the Massachusetts Marketplace Facilitator Law
- Effective date: October 1, 2019
- Threshold: Remote marketplace facilitators who make more than $100,000 in sales in Massachusetts collect sales tax on behalf of third-party sellers in the previous or current calendar year on all sales made through the marketplace.
- State law information: Read the full text of the Massachusetts Market Facilitator Law
- Marketplaces that have adopted this law:
Frequently asked Questions about Marketplace Facilitator Laws
What exactly is a marketplace facilitator in Massachusetts?
Massachusetts law defines marketplace facilitators as “a person that contracts with 1 or more marketplace sellers to facilitate for a consideration, regardless of whether deducted as fees from the transaction, the sale of the seller’s tangible personal property or services through a marketplace operated by the person…”
Online sales platforms like Etsy and eBay are considered marketplace facilitators under Massachusetts law.
A software like Shopify or Magento that allows online sellers to build and manage their own stores would not be considered a marketplace facilitator.
Does this mean I can stop collecting Massachusetts 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 Massachusetts.
Example #1: You only make sales on online marketplaces.
In this example, you only sell on Walmart and eBay. Because Walmart 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 Massachusetts 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 Massachusetts sales tax permit?
According to the Massachusetts Department of Revenue if you are a marketplace seller who has already registered due to physical presence (such as inventory stored in your Marketplace’s warehouse) or you have voluntarily registered for a Massachusetts sales tax permit, then you should remain registered
Do I still need to file a Massachusetts sales tax return?
If you are registered to collect sales tax in Massachusetts (i.e. you have an active Massachusetts sales tax permit) then the state still requires that you file sales tax returns.
If you only make sales via marketplaces, and all of your marketplaces collect sales tax from buyers on your behalf, then you will only be required to file an annual “zero return.” Find out more about Massachusetts zero returns for marketplace sellers here.
What do I do with any Massachusetts sales tax I have already collected?
If you have already collected Massachusetts 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.
Let’s say you sell on Walmart.com and Massachusetts requires you to file and remit sales tax quarterly. Though Amazon began collecting sales tax on your behalf on October 1, 2019 if you had any sales tax in your bank account that you collected from Q2 2019, you would still need to remit that to the Massachusetts Department of Revenue or face a penalty.
Does TaxJar handle this for me?
TaxJar AutoFile handles Massachusetts sales tax automatically
TaxJar AutoFile automatically compiles your sales tax data the way the state of Massachusetts wants it filed.
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 Massachusetts 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 Massachusetts 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 shows you how to fill out your sales tax return the way the state wants to see it.
Further reading on Massachusetts sales tax and marketplace facilitator laws:
- TaxJar’s Marketplace Facilitator FAQ
- State by State: Marketplace Facilitator Laws Explained
- Massachusetts Sales Tax Guide for Businesses
Do you have questions or something to say about the Massachusetts marketplace facilitator law? Start the conversation in the comments! Ready to automate sales tax? To learn more about TaxJar and get started, visit TaxJar.com/how-it-works.