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 including Amazon, eBay, Etsy, Walmart and many more, will collect the appropriate sales tax on your behalf.
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.
What markets are Marketplace Facilitator Taxes applicable?
Marketplace Facilitator taxes are applicable in several markets including the United States, the European Union (for digital products) and the UK. Check with your marketplace for more details on if and when they will implement Facilitator taxes on your behalf.
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 the appropriate accounts within your accounting program to properly track both the income and expense associated with facilitator taxes.
- Create a new Income or Revenue account titled "Facilitator Taxes Collected" within your Chart of Accounts.
- Create a new product or service Item titled "Facilitator Taxes Collected" and assign this Item to the new Income or Revenue account created in step 1.
- Create a new expense account titled "Facilitator Taxes Paid"
When you export facilitator taxes you will want to associate the taxes collected to the new "Facilitator Taxes Collected" product/service Item. When exporting Facilitator taxes fees charged to you by the marketplace, you will want to correlate that expense to the new expense account "Facilitator Taxes Paid".