Marketplace Facilitator Laws Explained
What Is a Marketplace Facilitator
A marketplace facilitator is a business that provides a platform for third-party sellers to make sales to customers, and that directly or indirectly does at least one of the following: processes the payment, lists or advertises the products, or facilitates the delivery. Under this broad definition, virtually every major online marketplace qualifies as a facilitator, including Amazon, Etsy, eBay, Walmart Marketplace, Shopify's Shop app (for orders placed through the Shop app), Mercari, Poshmark, Depop, and many others.
The marketplace facilitator is treated as the seller for sales tax purposes on transactions it facilitates. This means the marketplace, not the individual third-party seller, is legally responsible for calculating the correct tax rate, collecting the tax from the buyer, remitting the tax to the state, and maintaining records and filing returns for the marketplace transactions. The third-party seller's obligation on marketplace-facilitated transactions is relieved in most states, meaning you cannot be held liable for tax that the marketplace was required to collect, even if the marketplace makes an error.
A critical distinction: marketplace facilitator laws only apply to orders placed through the marketplace platform. If a customer finds your product on Amazon but then places the order through your own website, that transaction is not marketplace-facilitated and you are responsible for tax collection on your direct sale. The law applies to the channel through which the order is processed, not to the seller's relationship with the marketplace.
Which Marketplaces Collect Tax
Amazon collects and remits sales tax as a marketplace facilitator in all applicable states for all third-party seller orders, including both FBA and FBM orders. Amazon's marketplace tax collection has been active since 2019. See our Amazon sales tax guide for details specific to Amazon sellers.
Etsy collects and remits sales tax on all orders in every applicable state. This covers all seller types: handmade, vintage, and supply sellers. See our Etsy sales tax guide for specifics.
eBay collects and remits sales tax on all third-party transactions in applicable states. eBay's marketplace tax collection applies to both fixed-price and auction listings.
Walmart Marketplace collects and remits sales tax on all third-party seller orders in applicable states, similar to Amazon's approach.
Other marketplaces that collect tax as marketplace facilitators include Mercari, Poshmark, Depop, Bonanza, Reverb, StockX, Wish, Facebook Marketplace (for checkout-enabled listings), and Google Shopping (for Buy on Google orders). Essentially, any marketplace with built-in checkout that processes payment on behalf of sellers is a marketplace facilitator and handles tax collection.
What Sellers Still Need to Do
Report marketplace sales on your returns
Many states require sellers who are registered for sales tax to report their marketplace sales on their returns, even though the marketplace collected and remitted the tax. The return typically has a line for "marketplace facilitator sales" or "sales where tax was collected by a marketplace," where you enter your gross marketplace sales. This amount is then deducted from your total, resulting in tax due only on your direct (non-marketplace) sales. The purpose is to give the state visibility into your total sales activity, not to double-collect tax.
Track marketplace sales for nexus purposes
In most states, your marketplace sales count toward your economic nexus threshold for direct sales. If your combined marketplace and direct sales in a state exceed the threshold, you have nexus and must collect tax on your direct sales. This is a separate obligation from the marketplace's collection, and it means that high-volume marketplace sellers often have nexus in more states than they realize, creating obligations for any direct sales they make.
Collect tax on your direct sales channels
Marketplace facilitator laws do not eliminate your tax obligations on orders placed through your own website or other non-marketplace channels. If a customer orders from your Shopify store, you are responsible for collecting sales tax on that order in every state where you have nexus. The marketplace only handles orders placed through its platform.
Manage product tax codes on marketplaces
The marketplace calculates tax based on the product category you assign to your listings. If you sell products with special taxability (clothing, food, digital goods), verify that your listings use the correct product category so the marketplace applies the right tax treatment. An incorrectly categorized product could result in the marketplace overcollecting or undercollecting tax, which, while technically the marketplace's liability, can affect customer experience and your order-level economics.
Marketplace Facilitator Law Exceptions
Not every transaction on a marketplace platform is necessarily covered by facilitator laws. Some exceptions and edge cases include transactions where the marketplace does not process the payment (some marketplaces connect buyers and sellers but let them transact independently), transactions below certain thresholds in a few states (though this is rare), and B2B transactions where the buyer provides an exemption certificate (handling of exempt sales on marketplaces varies by platform and state).
For the vast majority of standard consumer ecommerce transactions on major platforms, marketplace facilitator laws apply without exception. The edge cases primarily affect niche platforms, service marketplaces, and B2B scenarios that most ecommerce sellers do not encounter.
The Liability Shield
Most marketplace facilitator laws include a liability relief provision for sellers. If the marketplace is required to collect tax on a transaction but fails to do so (calculates the wrong rate, misses a jurisdiction, or has a system error), the seller is generally not liable for the uncollected tax. The state must pursue the marketplace for the shortfall, not the individual seller. This liability shield is one of the most valuable aspects of marketplace facilitator laws for sellers, because it means you do not need to independently verify that the marketplace is collecting the correct tax on every order.
The liability shield typically requires that the seller acted in good faith and did not intentionally provide incorrect information to the marketplace (like misclassifying a taxable product as exempt). As long as your product listings accurately describe what you are selling and you assign correct product categories, you are protected from liability for marketplace tax calculation errors.
Impact on Small Sellers
Marketplace facilitator laws have been overwhelmingly positive for small ecommerce sellers. Before these laws, every marketplace seller was individually responsible for understanding nexus rules, registering in applicable states, configuring tax collection on the marketplace, and filing returns for marketplace sales. For a small Etsy seller doing $30,000 per year, the compliance burden was disproportionate to the revenue.
Now, marketplace facilitator laws handle the tax obligation automatically for all marketplace sales, letting small sellers focus on making and selling products instead of navigating tax compliance. A seller who only sells on Etsy, eBay, or Amazon and has no direct sales channel may have no sales tax compliance obligations at all (depending on state-specific registration requirements), because the marketplace handles everything.
The compliance burden only returns when you add a direct sales channel like your own Shopify store. At that point, you need to understand nexus, register, collect, and file for your direct sales, and your marketplace sales affect your nexus calculations. For sellers considering adding a direct channel, understanding these tax implications is part of the business case. Our guide to when to start collecting helps you determine if your direct sales volume warrants the compliance investment.