Indiana Enacts Marketplace Nexus Legislation

Indiana has enacted legislation with marketplace nexus provisions, effective July 1, 2019. Per the legislation, a marketplace facilitator is required to collect Indiana sales tax if the facilitator meets Indiana’s economic nexus threshold of $100,000 or 200 transactions even if the retailer does not have nexus with Indiana.

A marketplace facilitator is considered the retail merchant of each retail transaction that is facilitated for sellers on its marketplace when it does any of the following on behalf of the seller:

  • Collects the sales price or purchase price of the seller’s products;
  • Provides access to payment processing services, either directly or indirectly; or
  • Charges, collects, or otherwise receives fees or other consideration for transactions made on its electronic marketplace

Regardless of whether a transaction was made by the marketplace facilitator on its own behalf or on behalf of a seller, the marketplace facilitator is required to do the following for each retail transaction made on its marketplace:

  • Collect and remit the gross retail tax, even if a seller for whom a transaction was facilitated does not have a registered retail merchant certificate or would not have been required to collect gross retail tax had the transaction not been facilitated by the marketplace facilitator.
  • Comply with all applicable procedures and requirements as the retail merchant.

Per the legislation, a “marketplace facilitator” is a person, or affiliate of the person, who owns, operates, or otherwise controls a marketplace and facilitates retail transactions. It does not include a payment processor business that is appointed by a merchant to handle payment transactions from various channels and whose sole activity with respect to marketplace sales is to handle payment transactions between two parties.

The legislation defines “marketplace” as a forum, whether physical or electronic, that a marketplace facilitator uses to connect sellers to purchasers for the purpose of making retail transactions involving a seller’s products – which includes tangible personal property, specified digital products, rooms, lodgings, or accommodations, and enumerated services – by means of any of the following:

  • Listing, making available, or advertising products
  • Transmitting or otherwise communicating an offer or acceptance of a retail transaction of products between a seller and a purchaser
  • Providing or offering fulfillment or storage services for a seller
  • Setting prices for a seller’s sale of the seller’s products
  • Providing or offering customer service to a seller or a seller’s customers, or accepting or assisting with taking orders, returns, or exchanges of products sold by a seller
  • Branding sales as those of the marketplace facilitator

For calendar years beginning after December 31, 2021, except in cases where the facilitator and the seller are affiliated, a marketplace facilitator is not liable for failure to collect and remit gross retail and use taxes if the facilitator demonstrates to the satisfaction of the department that:

  • It has a system in place to require the seller to provide accurate information and has made a reasonable effort to obtain accurate information from the seller about a retail transaction;
  • The failure to collect and remit the correct tax was due to incorrect or insufficient information provided by the seller; and
  • The facilitator provides information showing who the purchaser was in each transaction for which the tax had not been collected.

If the marketplace facilitator is relieved of liability, the purchaser is liable for any amount of uncollected, unpaid, or unremitted tax.

A retailer’s sales are not counted by the retailer for the determination of their own economic nexus threshold if the marketplace facilitator includes those sales in their threshold calculation and collects the tax on those transactions.  If a marketplace facilitator does not have economic presence, the retailer must include those sales in their threshold determination.

Any purchaser of tangible personal property or services who has overpaid gross retail or use tax to a marketplace facilitator may file a claim for refund with the department. The purchaser will not have a cause of action against the marketplace facilitator for the recovery of the overpayment. In addition, customers cannot bring a class action against a marketplace facilitator related to the overpayment of any tax amount. (H.B. 1001, Laws 2019)


UPDATE: Indiana has updated their sales tax guidance on retail transactions for marketplace facilitators. This updated guidance clarifies that marketplace facilitators are required to collect sales tax as long as the marketplace satisfies one of the following: “(1) Collects the sales price or purchase price of the seller’s products. (2) Provides access to payment processing services, either directly or indirectly. (3) Charges, collects, or otherwise receives fees or other consideration from the purchaser for transactions made on its electronic marketplace.” This update is in response to the recent S.B. 382. (Indiana Department of Revenue, Information Bulletin #89, effective July 1, 2022)

UPDATE – 3/25/2024: Effective January 1, 2024 retroactively, Indiana has removed the 200-transaction count from its economic nexus threshold. As of that date, a retail merchant that does not have a physical presence in Indiana is required to collect and remit Indiana sales tax on retail transactions made in Indiana if the merchant’s gross revenue from any combination of the following three items exceeds $100,000 for the current or preceding calendar year:

  • The sale of tangible personal property that is delivered into Indiana
  • The sale of a product transferred electronically into Indiana
  • The sale of a service delivered in Indiana

A marketplace facilitator must include both transactions made on its own behalf and transactions facilitated for sellers for purposes of determining if they exceed the economic nexus threshold. Except for instances where a marketplace facilitator has not met the economic nexus threshold, the transactions of the seller made through the marketplace are not counted toward the seller for purposes of determining if the seller exceeds the economic nexus threshold. (S.B. 228, Laws 2024)

Posted on March 24, 2024