Utah has enacted marketplace nexus legislation, effective October 1, 2019. Under the legislation, marketplace facilitators are required to collect tax if, in the previous or current calendar year, the marketplace facilitator makes sales on its behalf or facilitates sales on behalf of one or more marketplace sellers that:
Once a marketplace facilitator without physical presence in Utah meets or exceeds either threshold, they are required to begin collecting and remitting sales and use taxes no later than the first day of the calendar quarter that is at least 60 days after the day the marketplace facilitator met a threshold.
“Marketplace facilitator” means a person, including an affiliate of the person, that enters into a contract, an agreement, or otherwise with sellers, for consideration, to facilitate the sale of a seller’s product through a marketplace that the person owns, operates, or controls and that directly or indirectly and does any of the following:
(A) lists, makes available, or advertises tangible personal property, a product transferred electronically, or a service for sale by a marketplace seller on a marketplace that the person owns, operates, or controls;
(B) facilitates the sale of a marketplace seller’s tangible personal property, product transferred electronically, or service by transmitting or otherwise communicating an offer or acceptance of a retail sale between the marketplace seller and a purchaser using the marketplace;
(C) owns, rents, licenses, makes available, or operates any electronic or physical infrastructure or any property, process, method, copyright, trademark, or patent that connects a marketplace seller to a purchaser for the purpose of making a retail sale of tangible personal property, a product transferred electronically, or a service;
(D) provides a marketplace for making, or otherwise facilitates, a retail sale of tangible personal property, a product transferred electronically, or a service, regardless of ownership or control of the tangible personal property, the product transferred electronically, or the service that is the subject of the retail sale;
(E) provides software development or research and development activities related to any activity described in this Subsection (68)(a)(i), if the software development or research and development activity is directly related to the person’s marketplace;
(F) provides or offers fulfillment or storage services for a marketplace seller;
(G) sets prices for the sale of tangible personal property, a product transferred electronically, or a service by a marketplace seller;
(H) provides or offers customer service to a marketplace seller or a marketplace seller’s purchaser or accepts or assists with taking orders, returns, or exchanges of tangible personal property, a product transferred electronically, or a service sold by a marketplace seller on the person’s marketplace; or
(I) brands or otherwise identifies sales as those of the person; and
(ii) does any of the following:
(A) collects the sales price or purchase price of a retail sale of tangible personal property, a product transferred electronically, or a service;
(B) provides payment processing services for a retail sale of tangible personal property, a product transferred electronically, or a service;
(C) charges, collects, or otherwise receives a selling fee, listing fee, referral fee, closing fee, a fee for inserting or making available tangible personal property, a product transferred electronically, or a service on the person’s marketplace, or other consideration for the facilitation of a retail sale of tangible personal property, a product transferred electronically, or a service, regardless of ownership or control of the tangible personal property, the product transferred electronically, or the service that is the subject of the retail sale;
(D) through terms and conditions, an agreement, or another arrangement with a third person, collects payment from a purchase for a retail sale of tangible personal property, a product transferred electronically, or a service and transmits that payment to the marketplace seller, regardless of whether the third person receives compensation or other consideration in exchange for the service; or
(E) provides a virtual currency for a purchaser to use to purchase tangible personal property, a product transferred electronically, or service offered for sale.
“Marketplace facilitator” does not include a person that only provides payment processing services.
For sales made or facilitated during the 2019 or 2020 calendar year, the marketplace facilitator is not liable for the amount the marketplace facilitator fails to collect due to error that is equal to rate of 7%. During the 2021, the error rate is not to exceed 5% and in 2022, the error rate is not to exceed 3%.
Marketplace sellers are not to pay, collect, or remit sales and use taxes for any sales facilitated by a marketplace facilitator. In addition, marketplace sellers can exclude sales made through the marketplace facilitatory who is collecting tax on the facilitated sales. Marketplace sellers are not liable for a marketplace facilitator’s failure to pay, collect, or remit or any underpayment of tax. No class action cases can be filed against a marketplace facilitator on behalf of purchasers related to the overpayment of sales and use taxes collected and remitted on sales facilitated by the marketplace facilitator on behalf of the marketplace seller. (S.B. 168, Laws 2019)