Marketplace Sales Tax Setup
As a Marketplace enabler, ShopRunner and our platform partners adhere to Marketplace Facilitator Laws. We know tax can be complicated, so we’ve outlined some options to help.
WHAT DO I NEED TO KNOW
ShopRunner shares your Tax Nexus with the marketplace platform so that they can properly calculate and charge customers tax when an order is placed for your product.
Scenario 1
In the 43 states with Marketplace Facilitator Laws, the platform partner (i.e Instagram, eBay, etc.) will collect and remit tax to the owed collection authority.
Scenario 2
In the 7 states that charge sales tax but do not have Marketplace Facilitator Laws, you - the supplier, is responsible for remitting sales tax to the owed authority.
Click here for an up-to-date list of Marketplace Facilitator states.
EXAMPLE MARKETPLACE RULES
In conjunction with your tax solution, you can set up location and marketplace rules that will allow you to view and sort transactions made for each marketplace which allows you to exclude those transactions from tax remittance when a marketplace collects and pays for you.
There may be some variation based on the specific nuances of your tax solution, however this is meant to provide an example of how marketplace logic functions.
WHAT'S THE OUTCOME?
When ShopRunner places the order on your website you’ll still charge tax on the transaction. If an order is to a state without marketplace facilitator laws, you’ll collect and remit as normal.
If the order is shipping to a state with marketplace facilitator laws, the tax amount will be omitted from your reports and the amount will not be remitted if you have auto-remit set up. ShopRunner will collect back the charged tax value for these orders as a part of the invoice process.
SETUP
Create location codes to indicate that the orders placed by ShopRunner are marketplace transactions.
LOCATION CODE 1
For orders that Instagram is collecting and remitting sales tax for, an advanced rule must be created to flag these orders so that no action is needed from the supplier.
Your rule should follow the basic logic:
Location = ShopRunner 1
Type = Marketplace
Category = Marketplace Remits Tax
Category = Marketplace Remits Tax indicates to the calculator that this is a marketplace transaction and tax is handled by Instagram. Thus, no tax liability.
LOCATION CODE 2
For the 7 non-marketplace facilitator states, tax would be collected and remitted as usual, based on the supplier nexus:
Your rule should follow the basic logic:
Location = ShopRunner 2
Type = Marketplace
Category = Seller Remits Tax
Category = Seller Remits Tax indicates normal tax calculation process based on nexus.
CREATE AN ADVANCED RULE TO EXCLUDE MARKETPLACE SALES TAX REMITTED BY THE MARKETPLACE
Some tax systems have the ability to create advanced rules or logic to exclude all the flagged orders that will be remitted by the Marketplace Sales tax is still calculated on these transactions. This rule will simply help bypass any manual work to remove these transactions on the liability report when it comes time for the supplier to remit sales tax to their appropriate entity.
Each tax system may vary in how the rules are set up. Below is general guidance of how the logic should be built:
If ShipToState= any of the states that “Marketplace is collecting and remitting sales tax to”, and contains any “codes or flags that identify transactions as a marketplace order”, then override or exclude those transactions with the location code that was created to flag “marketplace remits tax” order.
TAX PROVIDERS
TAX PROVIDERS
Discover specific details on configuration for your tax provider.
