Collecting Sales Tax
For our sellers on MAC Marketplace, we will take care of collecting, remitting, and filing sales tax returns to each state's treasury department on your behalf. Unfortunately, if you also sell on your own website, and/or via a marketplace that does not collect, remit, and report sales tax on your behalf, you are responsible.
As a seller on the MAC Marketplace, you will not collect sales tax from your customers. We’ll talk about when you should collect and remit sales tax the following sections. We’ll also explain what is a financial nexus, what is a physical nexus, and if and when each applies to you.
COLLECTING SALES TAX AS A SELLER ON THIS MARKETPLACE
As stated in the opening paragraph, you will not be responsible for collecting and remitting sales tax if you are selling through this marketplace. If you sell on other marketplaces, please read their terms and ensure who is responsible for sales tax collection and reporting.
We haven’t qualified nor are we required to collect sales tax at this time. Our marketplace is based in Oregon, which is not a sales tax state. We will eventually collect and remit sales tax for those states and their local jurisdictions if and when we have established financial (sales tax) nexus.
When we do meet the requirements, we will establish our connections with each state’s treasury department. Until then we are not required. It is also against the law to collect sales tax without establishing an account with each jurisdiction in which we have met their requirements.
What is physical nexus?
Physical nexus means there is a physical presence in the state. Physical nexus includes and is not limited to: having at least one employee working in the state, or having real or tangible personal property in the state.
Since the MAC Marketplace is based in Oregon, we won’t establish physical nexus even if your location is physically located in one of the 45 states that collect sales tax. This is because you’re a seller on this marketplace. The only way we, the MAC Marketplace, would meet the physical nexus requirement is if we move our operations to one of those states.
What is financial nexus?
Financial nexus or also known as sales tax nexus is when one of the two thresholds are met. Keep in mind, not all states having a sales tax requirement have two thresholds. Some only have one. The two thresholds are the number of transactions and the other is a sales threshold. Both thresholds have a look back period of 12 months. Most transaction thresholds are 200 transactions. The sales threshold varies and the lowest is $100,000.00. We’ll post the table with financial nexus requirements under a separate article as this article is specifically for collecting sales tax for this marketplace.
COLLECTING SALES TAX AS AN INDEPENDENT SELLER
This is just informational for those who also sell independently on your own website or on a marketplace where they don’t collect sales tax on your behalf.
You've met physical nexus
If you live in a state that collects sales tax, you have physical nexus. This means you will need to obtain an account with your state and/or local jurisdiction before you can officially collect sales tax. We recommend you establish your account with your state’s treasury department prior to making your first sale. If you didn’t establish an account with your state’s treasury department prior to your first sale in that state, DO NOT COLLECT SALES TAX. Collecting sales tax without an account is a criminal offense.
Also note, if you have physical nexus, you are not required to meet the thresholds for financial nexus in that state. For example, your business is in Texas. Texas requires most business to collect sales tax. Because you’re physically located in the state, you have already met the requirement to collect sales tax.
Keep in mind, if you are only selling on the MAC Marketplace, you don’t have to obtain your tax account.
You've met financial nexus and not physical nexus
This scenario is when you are physically located in one state and have reached the financial nexus for an external state. An example of this is your business is in Texas and you’ve just completed your 200th transaction in the state of Oklahoma, which is an external state that collects sales tax.
In this example, you are required to establish an account with the Oklahoma treasury department. After your account is established, the next sale shipped to a customer in Oklahoma will be charged the appropriate sales tax. You’ll also be required to remit the sales tax collected to that state treasury office and file appropriate informational reporting.
As mentioned in the previous section, if you are only selling through the MAC Marketplace, you don’t have to obtain you tax account with any jurisdiction. It is our responsibility to create our account with each jurisdiction, collect and remit the sales tax, and file the associated informational sales reports.
SUMMARY
If you ONLY sell via the MAC Marketplace, you will not be required to establish an account with each state’s treasury department. We will collect, remit, and file the appropriate sales tax forms on your behalf.
If you also sell on your own website and/or marketplaces where they do not collect, remit, and report sales tax on your behalf, you are responsible for establishing your tax account with each state’s treasury department.
If you have any questions, feel free to connect with us at info@macmarketplc.com and we will respond as soon as we can.