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1 Manish Bhatt, Marketplace Facilitator Laws: Past, Present, and a Better Future 1 (2023)

handle is hein.taxfoundation/mrktpcfc0001 and id is 1 raw text is: *0TAX FOUNDATION Marketplace Facilitator Laws: Past, Present, and a Better Future Manish Bhatt Senior Policy Analyst November 2023 Key Findings • For decades, Supreme Court precedent held that marketplace facilitators (remote sellers) were not subject to state and local sales tax collection and remittance obligations without a physical presence in a state. • The Wayfair decision, however, overruled this precedent and established that economic nexus is suf- ficient to obligate a marketplace facilitator to collect and remit sales tax. In the wake of the decision, states acted hastily to enact economic nexus legislation. • As a result, marketplace facilitators are now subject to a patchwork of diverse laws and face in- creased compliance costs and inefficiencies. • There is little uniformity among the states, and the current patchwork imposes meaningful burdens on interstate commerce, which raises Commerce Clause concerns. This could lead to federal preemption or congressional invalidation of the Wayfair holding. • To alleviate the compliance burdens created by post-Wayfair laws, states should pursue legal unifor- mity for marketplace facilitator sales tax collection and remittance obligations. To this end, we recom- mend the following policy reforms: • To ease compliance costs, states should centralize sales tax administration and provide free access to Certified Service Providers (CSPs) that can assist the marketplace facilitator with collection and remittance in each jurisdiction. Moreover, the CSP should be easily integrated into existing compliance software used by marketplace facilitators. • States should limit the thresholds that obligate marketplace facilitators to collect and remit sales taxes to sales revenues on final, retail sales. States should exclude business-to-busi- ness sales involving marketplace facilitators to avoid tax pyramiding. In addition, states should abandon all transaction thresholds in favor of monetary thresholds. • Once thresholds are met, marketplace facilitators should be given at least 30 days to begin compliance with statutory collection and remittance obligations. • States should not subject marketplace facilitators to specialty fees or registration require- ments that are separate from the general state and local sales tax. The Tax Foundation is the world's leading nonpartisan tax policy 501 (c)(3) nonprofit. For over 80 years, our mission has remained the same: to improve lives through tax policies that lead to greater economic growth and opportunity. TAX FOUNDATION 1325 G STREET, NW, SUITE 950, WASHINGTON, DC 20005 202-464-6200 1 laxfoundation.org

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