Texas Enacts Marketplace Nexus Legislation

Texas has enacted legislation with marketplace nexus provisions. Effective October 1, 2019, marketplace providers are required to:

  • Certify to each marketplace seller that the marketplace provider assumes the rights of a seller with respect to sales made by the marketplace seller through the marketplace, and
  • Collect and remit sales tax on sales made through the marketplace.

The legislation defines “marketplace provider” as a person who owns or operates a marketplace and directly or indirectly processes sales or payments for marketplace sellers.

A marketplace seller who in good faith accepts a marketplace provider’s certification as described above shall exclude sales made through the marketplace when reporting and remitting taxes. Marketplace sellers are required to retain records of all sales made through the marketplace. Marketplace sellers are required to furnish to the marketplace provider any information required to correctly collect and remit tax. This may include a certification of taxability that an item being sold is taxable or exempt.

A marketplace provider is not liable for failure to collect and remit the proper amount of tax if the provider demonstrates that the failure was due to good faith reliance on incorrect or insufficient information provided by a marketplace seller. In this instance, the marketplace seller is liable for the deficiency resulting from providing incorrect or insufficient information. A marketplace provider and marketplace seller that are affiliates or associates are jointly liable for a deficiency resulting from a sale made by the marketplace seller through the marketplace.

The laws prohibit a court from certifying an action against a marketplace provider as a class action.

The legislation also states that a sale of a taxable item made by a marketplace seller through a marketplace is consummated at the location in Texas to which the item is shipped or delivered or at which possession is taken by the purchaser. It appears as though marketplace providers who do not otherwise have physical presence in Texas will also qualify to collect the single rate in lieu of the specific local taxes. (H.B. 1525)

Posted on June 17, 2019