Most states have recently passed laws requiring marketplace facilitator to collect tax on e-commerce sales by remote sellers made through the marketplace’s platform. Ohio, for example, broadly defines a marketplace facilitator as any entity that operates a marketplace and facilitates payment processes for goods or services. R.C. 5741.01(W). This definitions covers the usual suspects, such as Amazon, eBay, and Etsy, but also could capture many others that provide an online platform where third-party sellers make products or services available for purchase.

These marketplace facilitators are typically required to collect tax when they exceed the state’s economic nexus threshold. In most states, if exceeding $100,000 of annual gross sales or 200 separate transactions delivered into the state – including its own sales and those facilitated on behalf of other sellers – the marketplace facilitator will be treated as the seller of each facilitated sale and required to collect sales tax. Further, in Ohio, marketplace sellers (i.e., sellers who sell their goods and services through marketplace facilitators) may unintentionally create substantial nexus since its marketplace sales count towards Ohio’s economic nexus requirement, even if it is not required to collect tax on sales made through the marketplace. In other words, the remote seller must include its sales made through the marketplace in determining whether the nexus thresholds have been exceeded, but would only be required to collect on its direct sales to Ohio consumers.

Given modest nexus thresholds and broad, inconsistent definitions of marketplace facilitators, e-commerce platforms and businesses selling through them must take extra care to ensure it is complying with their sales tax collection obligations.