Wisconsin Enacts Marketplace Nexus Legislation

Wisconsin Gov. Tony Evers signed legislation on July 3, 2019 that contains marketplace nexus provisions. The legislation amends the definition of “retailer” to include sellers who make any sales on the seller’s own behalf or on behalf of another person. Per the legislation, marketplace providers are required to collect and remit tax on sales facilitated on behalf of a marketplace seller, unless the marketplace provider has been granted a waiver. A marketplace provider whose only activities are facilitating sales of tangible personal property or services on behalf of marketplace sellers operating under a hotel, motel, or restaurant brand name shared with the marketplace provider may submit an application to the Department of Revenue (DOR) to request a waiver from collecting and remitting the tax. The DOR may grant the waiver if it is satisfied that the tax due is collected and remitted by the marketplace seller. The DOR may grant waivers for other types of marketplace providers if there is evidence that the marketplace seller has a history of reliably collecting and remitting tax to the DOR or if there is other evidence that the marketplace seller will reliably collect and remit tax on sales. Marketplace providers are required to notify marketplace sellers that the marketplace provider is collecting and remitting tax.  A marketplace provider uses the same threshold calculations of $100,000 gross sales or 200 transactions to determine if it is required to register.  All sales made by either the marketplace provider as a marketplace provider plus those made on its own behalf are combined to determine the small seller threshold.

A marketplace provider must obtain and maintain exemption certificates from purchasers claiming an exemption on a sales facilitated by the marketplace provider on behalf of a marketplace seller. Only the marketplace provider can be audited and held liable for tax. Marketplace sellers will not be subject to audit or held liable on marketplace provider transactions. A marketplace provider is relieved of liability for failure to collect and remit tax if the marketplace provider can demonstrate to the satisfaction of the DOR that the error is due to insufficient or incorrect information provided by the marketplace seller, unless they are related entities. A marketplace seller that provides insufficient or incorrect information to a marketplace provider may be audited and held liable for the tax if the marketplace provider is relieved of liability. Nothing in the legislation affects the obligation of purchasers to remit use tax on transactions for the marketplace provider or marketplace seller did not collect and remit tax. A marketplace provider who collects and remits tax on behalf of a marketplace seller may claim a bad debt deduction if either the marketplace provider or marketplace seller may claim a deduction under IRC Section 166.  If the marketplace provider claims the deduction, the marketplace seller is prohibited from claiming the deduction on the same transaction.

Remote sellers that only sell on marketplaces where the marketplace collects are not required to be registered even if they exceed the economic nexus threshold.  However, if the marketplace seller makes any sales where the marketplace provider does not collect the tax, it must include all sales including those on a collecting marketplace to determine if it exceeds the small seller threshold and if so, it must register and collect on those sales.  The marketplace nexus provisions take effect on the first day of the calendar quarter that is at least 3 months after publication of the legislation which will be January 1, 2020. (Act 10 (A.B. 251), Laws 2019)

Posted on July 29, 2019