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Sales Tax for Marketplace Providers
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In 2018, the U.S. Supreme Court’s decision in South Dakota v. Wayfair caused out-of-state marketplace providers to collect and remit Minnesota Sales Tax if they meet specific thresholds. This also applies to foreign marketplace providers.
A marketplace provider is any person, other than the seller, who facilitates a retail sale by both:
- Listing or advertising the seller’s products
- Processing the payments from the customer, either directly or indirectly through a third party, regardless of whether the marketplace provider receives compensation or other consideration in exchange for its services
Note: Some states refer to marketplace providers as marketplace facilitators.
Requirements to Collect Sales Tax
You may be required to collect sales tax on behalf of sellers using your marketplace. This includes foreign sellers. Requirements vary on whether you have a taxable presence in Minnesota.
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As of October 1, 2019, an out-of-state marketplace provider must collect and remit Minnesota state and local sales tax if their total sales (including facilitated sales) over the prior 12-month period total either:
- 200 or more retail sales shipped to Minnesota
- More than $100,000 in retail sales shipped to Minnesota
When calculating the threshold, include all marketplace provider sales and facilitated sales. Do not include sales where the purchaser is buying for resale. The purchaser must give you an exemption certificate claiming a resale exemption.
What do I need to do if I meet a threshold?
You must register for a Minnesota Tax ID Number and begin to collect and remit Minnesota sales tax on the first day of a calendar month that occurs no later than 60 days after you meet the threshold. You will also have to file a sales tax return.
You must continue to collect and remit Minnesota sales tax until at least the last day of the 12th calendar month from the calendar month you started collecting and remitting.
You may stop collecting and remitting sales tax after you meet all these requirements:
- Notifying the Minnesota commissioner of Revenue that you stopped soliciting sales from customers in Minnesota
- Verifying you did not meet the thresholds during the 12 calendar months following the calendar month you were required to collect and remit sales tax
You are not required to collect sales tax when both are true:
- The seller provides you a copy of their Minnesota sales tax registration
- There is an agreement that the seller will collect and remit sales tax
Register to Collect Sales Tax
You have a couple options to register depending on where you facilitate sales.
You can register for a Minnesota Tax ID Number online or call 651-282-5225 or 1-800-657-3605 (toll-free).
Registration is free. Your Minnesota Tax ID never expires until you request for it to be cancelled.
Collect and File
It is important to keep good records as you collect and file your state and local sales taxes. You are relieved of not collecting the correct amount of tax if you meet specific requirements.
Under Minnesota law, your filing frequency depends on your average total tax liability for a year. Use our filing frequency table to help you determine how often you must file.
You may file a separate return for any third-party sales you facilitate. You need an additional Minnesota Sales and Use Tax account to report the separate sales.
The entity that collects the tax is responsible for obtaining any exemption certificates.
It is important to keep good records to determine the correct amount of state and local taxes you owe.
Your records should include:
- Gross sales report showing all sales by state to identify the Minnesota gross sales
- Sales reports or journals that provide detail on all sales made into Minnesota
- Invoices, receipts, or other documentation detailing the goods and services sold, the price of each item, the tax collected, and the address shipped to
- Exempt customer information, including purchaser name, tax ID number, address, business type, and reason for exemption
- Information used to determine tax rate
- Worksheets, reports, or journals that support the amount of sales tax filed and paid
You are relieved of liability for not collecting the correct amount of tax if all of the following are met:
- Comply with the reporting requirement
- Show the error was based on incorrect information from the seller
- Are not affiliated with the seller
Otherwise, you are liable for any additional tax due.
Demonstrating Incorrect Information
To qualify for relief, the marketplace provider must demonstrate that the seller provided incorrect or insufficient information that caused their failure to collect and remit sales tax. The marketplace provider must show that they have both:
- A system in place that requires the seller to provide accurate and sufficient information to determine taxability
- Made a reasonable effort to obtain that information
Demonstrating an error based on incorrect or insufficient information provided by the seller depends on the specific facts of your marketplace and may vary from business to business.
Marketplace providers are considered retailers in Minnesota. They are subject to audits like any other business and are required to collect additional taxes and fees.
If you use a Streamlined Sales Tax Certified Service Provider (CSP), we work with the CSP in the event of an audit. We have no direct contact with you.
In addition to general and local sales taxes, you may be required to collect additional taxes and fees including but not limited to:
- Liquor Gross Receipts Tax
- Prepaid Wireless E911 and Telecommunications Access Minnesota (TAM) Fees
