Marketplace Facilitator Laws: Who Collects Sales Tax

Marketplace facilitator laws make online platforms such as Amazon, Etsy, eBay and Walmart Marketplace responsible for collecting and remitting sales tax on the sales they process for third-party sellers. Every state with a statewide sales tax, plus Washington, D.C., now has one. If you sell only through a qualifying marketplace, the platform handles tax at checkout; if you also sell directly, through your own website, social media or by invoice, the tax on those sales is still your job.

That split is where small sellers get caught. This guide explains how marketplace facilitator rules work, what they cover and what they do not, how they interact with economic nexus, and how to invoice cleanly when you sell both on and off platform. It is general information, not tax advice, and state rules change often, so confirm with each state's revenue department or a sales tax professional.

Why marketplace facilitator laws exist

Before 2018, states could generally only require sellers with a physical presence to collect sales tax. The Supreme Court's 2018 decision in South Dakota v. Wayfair allowed states to impose economic nexus on remote sellers based on sales volume. Rather than chase millions of small sellers, states passed laws making marketplaces collect on behalf of everyone who sells through them. Our explainer on sales tax nexus covers the Wayfair background in depth.

Missouri was the final state, with economic nexus and marketplace facilitator rules effective January 1, 2023. The Missouri Department of Revenue marketplace facilitator rule requires a facilitator to collect once its sales into the state exceed $100,000 in the previous or current calendar year.

Who counts as a marketplace facilitator?

Definitions vary, but a platform usually qualifies if it:

• Lists or advertises products for third-party sellers, and
• Directly or indirectly processes the customer's payment, and
• Meets the state's sales or transaction threshold, counting its own and facilitated sales.

Platform type	Usually a facilitator?	Who collects tax
Amazon, Walmart Marketplace, eBay, Etsy	Yes	Platform, on orders placed through it
App stores and some digital marketplaces	Often yes	Platform, where it meets the state definition
Your own Shopify, WooCommerce or Squarespace store	No (software, not a marketplace)	You
Payment-only services (Stripe, PayPal invoices)	No	You
Social media shops	Depends on whether the platform processes payment and the state definition	Check the platform's tax help page

What sellers still have to do

1. Collect tax on direct sales. Orders through your website, craft fairs, wholesale or direct invoices are not covered by the marketplace. If you have nexus, you collect.
2. Track nexus in each state. Physical presence, such as inventory in a fulfillment center, creates nexus even with no direct sales. Review the sales tax by state guide for rates.
3. Register where required. Some states require a seller's permit and even zero returns for marketplace-only sellers; others exempt them.
4. Report correctly. Several states ask you to report marketplace sales as a deduction or exempt line on your return so they are not taxed twice.
5. Keep marketplace tax reports. Download the platform's tax-collected reports each period for your records.

Marketplace sales and economic nexus

Most states set economic nexus at $100,000 in sales, and some at higher amounts. Many states have dropped the alternative 200-transaction test in recent years, and more are removing it, so check current rules. The key question for a hybrid seller is whether marketplace sales count toward your personal threshold.

State approach	Effect on a seller with $80,000 on Amazon and $30,000 direct in one state
Includes marketplace sales in your threshold	$110,000 total: over $100,000, so collect tax on the $30,000 direct sales
Excludes marketplace sales	$30,000 counted: under threshold, no collection on direct sales (unless physical presence)

This table is illustrative. Look up each state's specific approach on its revenue department site before deciding.

Worked example: a candle maker on Etsy and Shopify

Illustrative figures. A candle maker based in Ohio sells $140,000 a year on Etsy and $45,000 through her own Shopify store. Etsy collects and remits tax on every Etsy order in every sales tax state. Her Shopify sales include $20,000 to Ohio customers and $25,000 spread across other states.

• Ohio: she has physical presence, so she must collect Ohio sales tax on the $20,000 of direct Ohio sales and file Ohio returns, reporting Etsy sales as marketplace sales where the return asks for them.
• Other states: in a state where her combined Etsy plus direct sales exceed the threshold and marketplace sales count, she may need to register and collect on direct sales there too. In states that exclude marketplace sales, her small direct volume likely stays under the threshold.
• Wholesale: her sales to a boutique for resale are exempt if she collects a valid resale certificate.

For invoicing direct and custom orders, see our guide to the Etsy invoice and custom orders.

State differences that matter to sellers

Marketplace facilitator laws share a common goal but differ in details that affect small sellers:

• Registration for marketplace-only sellers. Some states release sellers whose only in-state sales are through a collecting marketplace; others still expect a permit and periodic returns.
• Thresholds for the facilitator. Most mirror the remote seller threshold, often $100,000, but some use higher figures such as California's $500,000.
• What the marketplace must collect. Some states include local taxes and special fees, such as tire, battery or rental surcharges; others leave certain fees with the seller.
• Liability relief. Many states relieve the seller of liability for tax the marketplace should have collected, provided the seller gave accurate product information.
• Services and rentals. Some laws also cover platforms that facilitate lodging, ride or delivery services; others cover only tangible goods and digital products.

Because these rules change, keep a simple table of your active states with the date you last checked each state's guidance.

Marketplace sales and your income taxes

Marketplace facilitator laws only deal with sales tax. The money you earn through the platform is still business income. Marketplaces report seller payouts to the IRS on Form 1099-K once you exceed the federal threshold, which the 2025 tax law restored to more than $20,000 and more than 200 transactions; see our 1099-K threshold guide. Remember that the 1099-K gross amount may include the sales tax the marketplace collected. That tax is not your income, so reconcile the 1099-K with the platform's reports and subtract tax collected, refunds and fees before it reaches Schedule C.

Business buyers on marketplaces

Business customers who are tax-exempt or buying for resale usually register their exemption certificates with the marketplace's business program, so the platform does not charge tax. If a business buyer asks you for an invoice for a marketplace order, issue one that mirrors the platform's order record: same order number, same totals, tax shown as collected by the marketplace. Never re-bill tax that the marketplace already collected.

Marketplace returns, refunds and chargebacks

When a marketplace order is refunded, the platform normally refunds the sales tax it collected and adjusts its own state filings, so you do not need to do anything on your sales tax return for that order. Direct sales are different: if you refund a customer on your own store, you refund the tax too and take a deduction for returned sales on your next return in states that allow it. Keep the original invoice and the refund record together, and mark the invoice as credited rather than deleting it, so your sales records and tax filings still agree if a state asks.

Common mistakes with marketplace facilitator rules

• Assuming the marketplace covers everything. It covers only orders it processes.
• Double taxing. Adding sales tax to an invoice for a marketplace order that already had tax collected.
• Ignoring inventory placement. Amazon FBA can store your goods in states where you never planned to have nexus; see starting an Amazon FBA business.
• Reporting marketplace sales as taxable on your return. Use the marketplace deduction line where the state provides one.
• Forgetting digital and service rules. Taxability of what you sell still matters. See our guide to sales tax on digital products.

Step by step: a quick marketplace compliance check

1. List every channel you sell through: marketplaces, your own store, social media checkout, events and direct invoices.
2. For each marketplace, confirm in its help center which states it collects in and download the tax report.
3. Total your direct sales by state for the current and previous year.
4. Note where you have physical presence, including inventory in third-party warehouses.
5. Compare each state's threshold, and whether it counts marketplace sales, against your totals.
6. Register, collect and file where required, and set a reminder to repeat this review every quarter.

What if you were not collecting on direct sales?

If you discover you crossed a threshold months ago, stop the bleeding first: register and start collecting. For past periods, many states offer voluntary disclosure agreements that limit lookback periods and waive penalties. Our guide on how to file a sales tax return covers the filing mechanics, and our ecommerce invoice guide shows how to display tax on direct orders. If you buy supplies tax-free for resale but use some yourself, you may also owe use tax.

For every direct sale, wholesale order or custom commission, send a clear invoice that shows the item price, any sales tax and the buyer's location. Make one in minutes with our free invoice generator, with no sign-up, and download it as a PDF; the sales tax calculator helps you get the rate right.