Texas Comptroller Explains Remote Seller, Marketplace Tax Policies

The Texas Comptroller of Public Accounts has offered new guidance and answers to FAQs for marketplace sellers and marketplace provides.

This guidance highlights that no new taxes were imposed by the 86^th Legislature, the new laws passed only address tax collection responsibilities for all sellers—Texas sellers, remote sellers, marketplace sellers, and marketplace providers.

• • Texas Sellers
    • A Texas seller with a physical presence must have an active sales and use permit even if all sales are made through a marketplace provider who has certified it will collect and remit tax.
    • Resale certificates can be used to purchase inventory that will be resold through marketplaces; if a vendor does not honor the retail certificate, a credit can be taken on the next sales tax return filed, or a refund may be requested through the comptroller.
    • Any sales made in Texas, including those made through a marketplace must be reported on tax returns in Total Texas Sales, the sales made through the marketplace provider are then subtracted from the total when entering Taxable Sales on the return.
    • For tax on sales made outside of Texas, the seller will need to find guidance from the State Tax Agency in question, the Multistate Tax Commission, and/or the Streamlined Sales Tax Governing Board.

• • Remote Sellers

• • • A remote seller is an out of state seller who only remotely solicits sales into Texas.
    • Before Oct 1, 2019, remote sellers were not responsible for collecting tax unless they had physical presence in Texas.
    • The safe harbor provision says a remote seller with less the $500,000 in gross revenue for Texas sales in the previous 12 calendar months does not need to have a tax permit or collect and remit use tax in Texas. The $500,000 amount includes charges for handling, transportation, and similar fees as well as sales made for resale and sales to exempt Texas entities.
    • Remote sellers must include all sales, including those through a marketplace, when determining if they fall under the $500,000 threshold.
    • If a remote seller is below the $500,000 threshold, TPP stored in a marketplace provider’s Texas warehouse does not require the remote seller to get a permit if the marketplace has certified it will act as the seller for tax collection.
    • If a seller is a taxable entity and temporarily stores inventory at a marketplace facilitator’s Texas facility, there is a franchise tax responsibility as well.
    • Remote sellers selling through marketplace providers should collect sales and use tax until certification is received from the marketplace provider that it will collect the tax. This certification is required by Texas; marketplace providers should provide it, and sellers must maintain it for tax and audit records.
    • Remote sellers who only sell through a marketplace provider do not need to register for a tax permit as long as they have received and accepted a certification from the marketplace provider that it will collect tax. However, sales records for all marketplace sales must be kept and maintained for four years.
    • For remote sellers who must remit taxes, sales through a marketplace must be reflected on tax returns under “Total Texas Sales” but they will not be included in the “Taxable Sales” number on the return once the marketplace provides certification it will collect and remit tax on sales made through the marketplace.

• • • • • Unless a remote seller qualifies under the safe harbor provision, the seller is required to collect local use tax unless the seller has elected to collect the single local use rate, which can be done by filling out form 01-799 and submitting it to the Comptroller’s office. The Single Local Use Tax Rate is an alternative local tax rate that can be used only by remote sellers; marketplace providers are excluded from claiming this rate. Remote sellers may elect to use this rate rather than the actual local use tax rate by filling out form 01-799 and submitting the form to the Texas Comptroller. Currently, the rate is 1.75%. To opt out of this decision, the same form must be completed and submitted to the comptroller by October -to be effective by January of the next year.

• • • To terminate use tax collection responsibilities in Texas, a remote seller must have 12 consecutive months where total revenue of all sales is less than $500,000.

• • Marketplace Sellers
    • A marketplace seller is any party who sells through a marketplace.
    • The marketplace provider must keep the record of certification of tax collection and payment provided by the marketplace provider, though no specific form is required, and the certification may be included in terms of use or may be a separate document provided by the marketplace provider.
    • Total Texas Sales must be reported on tax returns and do include sales made through marketplace providers. However, those sales made through the marketplace are deducted from the Taxable Sales amount.
    • Marketplace sellers are subject to audit by the Texas Comptroller.

• • Marketplace Providers
    • A marketplace provider can be a physical or electronic store, website, software application, or catalog used by marketplace sellers to make sales. Examples include Amazon, eBay, Etsy, Walmart Marketplace, and similar sites or stores.
    • The $500,000 safe harbor also applies to marketplace providers.
    • Single Local Use Tax Rate cannot be used by marketplace providers.
    • Marketplace providers are required to provide sellers with certification they are collecting and remitting tax. There is no specific form for this and it can be part of the terms and use or any other agreement between sellers and the marketplace provider. Marketplace providers are also responsible for collecting the prepaid 9-1-1 fee on prepaid wireless telecommunication services and the applicable fees associated with lead-acid battery sales.
    • Both marketplace sellers and marketplace providers are subject to audit.
    • If the marketplace provider sells tickets, the deduction generally allowed for resale of tickets found in Section 151.432 can be taken by the marketplace provider on behalf of the marketplace seller, but the marketplace provider must have the marketplace seller’s certification that taxes were paid on the original purchase of the ticket.

(“Texas Comptroller Explains Remote Seller, Marketplace Tax Policies.” Tax News, Tax Articles and Information – Tax Notes, 5 Jan. 2023.)