Good news for marketplace sellers! The state of Mississippi now requires marketplaces to collect sales tax on behalf of sellers on online marketplaces like Amazon or eBay.
This means that if you sell on a platform like Amazon, then Amazon will collect sales tax from your Mississippi buyers on your behalf, and remit it to the state.
But as usual, things aren’t always that simple when it comes to eCommerce sales tax.
This post will explain what online sellers need to know about the Mississippi marketplace facilitator law, and answer your frequently asked questions.
Overview of the Mississippi Marketplace Facilitator Law
Mississippi’s marketplace facilitator law states that marketplace facilitators who generate $250,000 in any consecutive 12 months are required to collect sales tax on behalf of third party sellers who sell on the marketplace.
Quick Facts about the Mississippi Marketplace Facilitator Law
- Effective date: July 1, 2020
- Threshold: Marketplaces that make more than $250,000 in sales in any consecutive twelve-month period are required to register for a Mississippi use tax account and collect sales tax on behalf of 3rd party sellers who sell on the marketplace.
- State law information: Read the full text of the Mississippi marketplace facilitator law here
- Marketplaces that have adopted this law:
Frequently asked Questions about Marketplace Facilitator Laws
What exactly is a marketplace facilitator in Mississippi?
Mississippi law defines marketplace facilitators as any person who facilitates a retail sale by a seller by:
- (i) 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
- (ii) 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 service.
Online sales platforms like Amazon and Walmart are considered marketplace facilitators under Mississippi law.
A software like BigCommerce or Shopify 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 Mississippi 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 Mississippi.
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, as a seller with nexus in the state, you will most likely still be required to file periodic sales tax returns. See “Does this mean I can cancel my Mississippi 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 Mississippi sales tax permit?
Mississippi has not yet offered guidance for marketplace sellers when it comes to whether or not sales tax permits can be cancelled if a business only has sales tax nexus due to selling on online marketplaces. Stay tuned here for updates as Mississippi releases more information.
Meanwhile, we recommend checking directly with the state or a sales tax expert before cancelling your sales tax registration. This is because your business is now on the state of Mississippi’s books and potentially on their radar should they decide that you still have sales tax obligations in the state of Mississippi.
Final note: It’s important to assess your business before making a decision about cancelling sales tax permits. Are you in a growth stage? Do you plan to expand and think you may have Mississippi sales tax collection requirements in the future? Then you may want to hang on to your Mississippi sales tax permit rather than cancelling it and going through the administrative hassle of registering again in the future. This business decision is up to you.
Do I still need to file a Mississippi sales tax return?
If you are registered to collect sales tax in Mississippi (i.e. you have an active Mississippi 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 may only be required to file a “zero return.” (This is a return showing that you do not have any sales tax to remit to the state.)
If you no longer have any sales tax to remit to the state of Mississippi, we recommend checking directly with the state to determine if you can cancel your sales tax registration.
Be cautious here. If you are registered for a sales tax permit and do not file, the state can assess penalties even though you don’t have any sales tax to remit! We have, unfortunately, talked to too many sellers who have found this out the hard way when a tax penalty bill arrives.
What do I do with any Mississippi sales tax I have already collected?
If you have already collected Mississippi 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 Amazon and Mississippi requires you to file and remit sales tax quarterly. Though Amazon began collecting sales tax on your behalf on July 1, 2020 if you have any sales tax in your bank account that you collected from Q2 2020, you will still need to remit that to the Mississippi Department of Revenue or face a penalty.
Does TaxJar handle this for me?
TaxJar AutoFile handles Mississippi sales tax automatically
TaxJar AutoFile automatically compiles your sales tax data the way the state of Mississippi wants it filed. For example, many states, Mississippi included, want sellers to break down their sales tax collected interstate (sales originating in Mississippi sent to another state) and intrastate (sales made from Mississippi to Mississippi.)
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 Mississippi 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 [State 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 Mississippi sales tax and marketplace facilitator laws:
- TaxJar’s Marketplace Facilitator FAQ
- State by State: Marketplace Facilitator Laws Explained
- Mississippi Sales Tax Guide for Businesses
Do you have questions or something to say about the Mississippi marketplace facilitator law? Start the conversation in the comments!