Generally, a Marketplace Facilitator is a business or organization with a physical or electronic marketplace that facilitates third party sales. Other well-known entities that act as Marketplace Facilitators include Amazon, eBay, Etsy and Wayfair.
Changing state laws require Marketplace Facilitators to collect and remit sales tax on the seller’s behalf in states in which the facilitator exceeds certain thresholds. iPROMOTEu has been advised by its tax advisors that it will be classified as a Marketplace Facilitator by states given the evolving state laws regarding sales tax.
Nexus is the connection a business has with a state or taxing jurisdiction that requires registration and compliance with a state’s sales tax rules/laws. If there is no connection between the jurisdiction and the company, the business is not required to adhere to the jurisdiction’s sales tax rules. Generally, if you have employees or property in a state, or your sales in a state is greater than $100K or exceeds 200 transactions per year, you will have nexus with that state.
iPROMOTEu, through its consolidated Affiliate sales, will exceed the filing threshold in all states that charge sales tax. Therefore, all non-exempt transactions will be charged sales tax in those states
We will provide a letter explaining the Marketplace Facilitator concept and the need to charge sales tax in most states.
Yes, in addition to an explanatory letter, a note can be added to invoices.
There are no changes regarding the setup of a new client.
We are relying on our Affiliates to set up customers in the correct location for billing purposes. It is important to always enter the zip code in the zip+4 format. The full 9-digit code can be found on sites such as usps.com if it is not known.
Non-exempt out of state sales will now be taxable for most states. Alaska, Delaware, Montana, New Hampshire and Oregon do not have any state level sales tax requirements, so no state taxes will be charged in those states. Note, Alaska does have some areas that charge local taxes.
Upon invoicing, TaxJar will automatically calculate the correct sales tax based on the ship-to zip code (zip+4 format). There is no need to know these rates in advance.
Please work with our Affiliate Services Team and they will work with our TaxJar experts to investigate your concern.
You can set up your customer in our order management system as tax-exempt using a series of exemption reason codes that are available by category of exemption. Generally, customers who are reselling goods are exempt from sales tax if they provide a resale certificate. Each state’s rules are different, and customers can be exempt in one state and taxable in another.
iPROMOTEu will be filing one return for all Affiliates using iPROMOTEu’s state registration number without any reference to Affiliates. States will only contactiPROMOTEu regarding any questions or concerns they may have.
The cost to the Affiliate is a flat $14 per month, per required state filing (states in which the Affiliate has nexus in the prior calendar year). This is a monthly fee, regardless of an Affiliate’s current filing frequency. Given the filing transition period (see below), this monthly fee is expected to commence on October 1st. The number of states for which an Affiliate will be charged will be determined on an annual basis based on the Affiliate’s nexus with each state.
Ever-changing state legislation and new nexus requirements because of the “Wayfair Decision” (on 6/1/2018, the US Supreme Court decided that states can mandate those businesses without a physical presence in a state with more than 200 transactions or $100,000 in-state sales collect and remit sales taxes) have caused iPROMOTEu to be designated as a Marketplace Facilitator which requires us to administer tax compliance in all states. iPROMOTEu has added technology and staffing to make sure that all Affiliates are in compliance with state laws. These nominal fees are intended to cover the costs we are incurring to implement this significant new process.
Opt-out requests are approved on a state-by-state basis. We can only opt-out an Affiliate from TaxJar Phase II (i.e., the Marketplace Facilitator tax laws) if allowed by the Affiliate’s state(s) since we are required to follow state tax guidelines. If your state allows opt-outs, which may require approval from your state, iPROMOTEu will allow you to withdraw from this program. In addition, if you opt-out of the program, iPROMOTEu will require you to execute an agreement with us to document that you are fully responsible for your sales taxes moving forward and that iPROMOTEu will have no liability for your sales taxes.
TAX FILING INFORMATION
No, iPROMOTEu is not filing affiliate sales tax returns. iPROMOTEu will be reporting all affiliate sales on a return under the iPROMOTEu name and ID number, as the marketplace facilitator. Affiliate company names and ID numbers will not appear on the iPROMOTEu returns. Affiliates should check with their home state for guidance on future filings, if any, as a marketplace seller.
For your iPROMOTEu sales, we will collect and file in all states on your behalf. You are only responsible for sales processed outside of iPROMOTEu. If you are already registered in your home state and have no sales outside iPROMOTEu, check with your state to see if your registration can be altered or closed. Some states do not require sellers to register if they sell only using a marketplace. Other states require the seller to register, report all sales, and take a deduction for the marketplace sales. Note, we have included links below for all state tax guidelines.
On July 1, 2021, iPROMOTEu will begin charging and collecting sales tax on behalf of Affiliates.
Invoice dates through and including 6.30.2021 –
No change: Affiliate files sales tax returns with tax amounts sent to you by iPROMOTEu. This will continue until all open AR balances with sales tax as of 6.30.2021 are collected and sent to you. We expect this transition to last less than 90 days from June 30th. Once all amounts are collected, you may want to file a “final return” so that the state is no longer looking for returns from you.
Invoice dates 7.01.2021 and after
iPROMOTEu collects, files and pays sales taxes on Affiliate’s behalf.
The Affiliate will continue to file returns, with the money received from iPROMOTEu, until all Accounts Receivable balances as of June 30, 2021 are paid (on average 45 days). iPROMOTEu will begin filing for the month of July based on “invoiced sales.” The returns filed by iPROMOTEu will not list the Affiliate company or Tax ID. The Affiliate should continue to file using its name and tax number for any sales processed outside iPROMOTEu. As mentioned above, if your only sales are processed with iPROMOTEu, you can file a final return once your AR balance from 6/30/21 is fully collected.
Some states in which you are already registered may require continued filing by the Affiliate, with a reduction for gross sales for the amounts reported by the Marketplace Facilitator. Other states will allow you to cancel your registration. We will provide a sample letter to be sent to the state if needed, including the iPROMOTEu state registration number.
Yes, a report will be available with this information monthly.
TaxJar 101 – An Affiliate’s Guide to Sales Tax Compliance with iPROMOTEu
Customize these sample letters (with your logo and signature) and use them to communicate with your customers and your state taxing authorities to advise them of these new tax requirements in the event you are questioned as to why the current process has changed.
STATE BY STATE GENERAL INFORMATION
CLICK HERE for links to additional state-specific information regarding Marketplace Facilitator laws/rules.