If you are a freelancer who sells taxable goods online, you are likely aware of the challenges of collecting and remitting sales tax in multiple jurisdictions. A case in point that you should pay attention to if your business includes sales in New York State (NYS): the state recently enacted legislation to force marketplace providers to collect sales tax on behalf of their sellers. This requirement went into effect on June 1, 2019. The following is what you need to know:
The definition of a marketplace provider
In the new NYS regulation a marketplace provider is someone who has an agreement to facilitate the sales of tangible personal property for a marketplace seller. To facilitate a sale of tangible personal property the following must hold true:
The definition of a marketplace seller
In the new NYS regulation a marketplace seller is defined as any person who has an agreement with a marketplace provider to facilitate sales of tangible personal property on their behalf.
A marketplace provider cannot refuse to collect tax on a marketplace seller’s sales, even if the seller is registered for sales tax purposes.
Responsibilities of a marketplace provider
As part of the new NYS requirements, a marketplace provider must:
Specific sales tax obligations for marketplace providers
Just like any other vendor, a marketplace provider has the following sales tax obligations and rights:
In addition, marketplace providers must keep records and cooperate with the Department of Taxation and Finance to ensure the proper collection and remittance of tax imposed, collected or required to be collected.
Liability relief for marketplace providers and marketplace sellers. Even the NYS Department of Taxation and Finance understands that occasionally errors happen. As such, a marketplace provider is not held responsible for failure to collect the right amount of sales tax if they can prove that they had incorrect or not enough information from the marketplace seller.
Any marketplace seller registered to collect sales tax does will receive sales tax liability relief on a sale of tangible personal property if:
There is no liability relief in either case if there is an affiliation between the marketplace seller and marketplace provider.
As you can see, if you sell goods on behalf of a marketplace provider into NYS, you need to ensure that you are meeting these new requirements. Likewise, if you are depending on a marketplace provider to sell goods for you in the state, now is the time to make sure they are aware of—and following—these new rules. Failure to do so could mean facing substantial fines and penalties.
Jonathan Medows is a certified public accountant licensed in New York, New Jersey, Maryland, and Pennsylvania. He is also a recognized expert in taxation for freelancers and the self-employed—often tapped for his expert knowledge and perspective on self-employment taxation by national and regional publications such as The New York Post, BusinessWeek, Forbes taxation blog, WebCPA, CPA Practice Advisor, and others. You can read some of Jonathan’s press coverage here.
©2021 MEDOWS CPA, PLLC