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Guide to Marketplace facilitator taxes

Guide to Marketplace facilitator taxes

What is Marketplace Facilitator Tax?

A Marketplace Facilitator is defined as a marketplace that contracts with third party sellers to promote their sale of physical property, digital goods, and services through the marketplace. This means most of the selling platforms today (Etsy, Amazon Seller, etc.) will collect the appropriate sales tax on your behalf for sales made with the United States.

Marketplace Facilitator legislation is a set of laws that shifts the sales tax collection and remittance obligations from a third party seller to the marketplace facilitator. The marketplace facilitator will now be responsible to calculate, collect, and remit tax on sales sold by third party sellers for transactions destined to states where Marketplace Facilitator and/or Marketplace collection legislation is enacted.

How can Greenback help?

Greenback identifies facilitator taxes as "automatic sales tax"

Greenback will define Facilitator Taxes as "Automatic Sales Tax" within your transactions and will treat them as an expense line item. We do this because the burden of collecting and reporting sales tax now belongs with the marketplace. The Marketplace will simply expense the taxes back to your marketplace account. 

In the example below, the Etsy seller sold a $5.00 postcard. Etsy automatically adds $0.51 of sales tax in which Etsy will collect and report. Greenback will show you both the total of each item within the transaction charged to the customer, as well as the fees charged back to you the Etsy store owner in service of the automatic sales tax. In this example below, Greenback itemizes out both the facilitator tax as well as the processing fees Etsy has charged to the store owner.


How to account for facilitator taxes

Prior to exporting transactions that contain marketplace facilitator taxes, you will want to create a new product or service Item within your accounting file called "Marketplace Facilitator Taxes" and use it for all Auto-Tax line items on sales and purchases.

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