Collecting and Remitting Sales Tax is Growing State by Stateby
Sales tax is top of mind for the Georgia General Assembly as lawmakers in the state passed a measure requiring marketplace facilitators to collect and remit sales tax on behalf of third-party sellers.
Trying to keep up with the many state-by-state changes in sales tax laws since the Supreme Court ruled states can collect them, regardless of whether a business resides there, has been a daunting task. Moreover, it’s one that contributor and sales tax expert Gail Cole has taken on with aplomb.
The biggest impact for tax professionals is that regardless of what state your clients are in (with a few exceptions), if they’re in retail they need to keep tabs on what all states are doing if they sell enough into those states.
The latest move is in the realm of marketplace facilitator legislation in the state of Georgia. Below, Gail details what Georgia is proposing when it comes to collecting and remitting sales tax.
Georgia Governor Brian Kemp signed House Bill 276 into law on January 30, which makes the marketplace facilitator the dealer responsible for the tax due on all sales sourced to Georgia and made through the marketplace, including those by small marketplace sellers based in other states who wouldn’t otherwise be required to collect and remit Georgia sales or use tax. As written, the measure will take effect April 1, 2020 effectively joining Georgia with 38 other states that make marketplace facilitators responsible for the tax due on third-party sales.
To be considered a “marketplace facilitator,” a person must contract with a seller, in exchange for a consideration, to make available or facilitate a taxable retail sale on the seller's behalf by directly or indirectly:
- Facilitating the retail sale in any manner, including advertising, marketing, promoting, taking orders, or providing the physical or electronic infrastructure that brings purchasers and marketplace sellers together
- Collecting, charging, processing, or otherwise facilitating payments for such retail sales on behalf of the marketplace seller.
Businesses that help connect customers with sellers but don’t facilitate payments for the seller aren’t considered marketplace facilitators. But the collection requirement would likely apply to lodging and transportation marketplaces such as Airbnb and Uber.
A retail sale is sourced to a location in Georgia if it’s “held for pickup, used, consumed, distributed, stored for use or consumption, or rendered as a service” within the state.
The measure prohibits bringing a class action that’s in any way related to an overpayment of sales or use tax collected by the facilitator, “regardless of whether that claim is characterized as a tax refund claim.” However, customers may seek a refund of taxes erroneously paid.
Marketplace sellers won’t be audited by the Georgia Department of Revenue for sales made through the marketplace unless the facilitator can satisfactorily demonstrate that any errors made were “due to insufficient or incorrect information given to the marketplace facilitator by the marketplace seller.” Even then, the facilitator must have “made a reasonable effort to obtain correct and sufficient information” from the seller.
Relief from liability doesn’t apply if the facilitator and seller are related (see Code Section 48-7-28.3). In the event a marketplace facilitator isn’t liable for the sales or use tax due, the marketplace seller is to be solely liable.
Effect on Franchises
HB 276 specifies that a franchisor is not a marketplace facilitator with respect to any franchisee, provided:
- The franchisor and all its franchisees had less than $500 million in aggregate annual gross sales in the United States in the prior calendar year;
- The franchisee maintains a valid certificate of registration (Code 100 Section 48-8-59); and
- The franchisee and franchisor maintain a valid contract providing that the franchisee will collect and remit all applicable taxes and fees that the franchisor would otherwise be required to collect and remit as a marketplace facilitator for the franchisee.
Effect on Large Marketplace Sellers
Marketplace facilitators aren’t responsible for the tax due on sales made through the platform on behalf of a seller if:
- The seller had at least $500 million in annual gross sales in Georgia in the prior calendar year;
- The seller maintains a valid certificate of registration in Georgia (Code 100 Section 48-8-59); and
- The seller maintains a valid contract with the facilitator providing that the seller will collect and remit all applicable taxes and fees that the facilitator would, as a marketplace facilitator, otherwise be required to collect and remit on behalf of the seller.
Marketplace facilitators may report third-party sales separately from their direct sales or together. Additional details are available in the text of the bill.
Gail Cole is a Senior Writer at Avalara. She’s on a mission to uncover unusual tax facts and make complex laws and legislation more digestible for accounting and business professionals — or anyone interested in learning about tax compliance.