Texas State Capitol

Texas Sales Tax: Proposed Legislation Imposes Compliance Burdens on Marketplace Providers Who Sell For Third Parties

On February 19, 2019, Legislators in the Texas House and Senate filed identical bills mandating sales tax collection by marketplace providers, such as Amazon, Etsy, and EBay. If enacted, the bills would require “marketplace providers” to report as taxable sales, and collect and remit Texas sales tax on, sales of items by third parties through their marketplaces. “Marketplace providers” means “a person who owns or operates a marketplace and directly or indirectly processes sales or payments for marketplace sellers.” The proposed legislation is intended to shift the compliance responsibilities from smaller retailers who sell taxable items, to the marketplace platforms through which the retailers sell their products. The marketplace providers will likely have the algorithms, software, and know-how, to comply with Texas’s confusing web of sales and use tax laws.

The legislation comes on the heels of the Comptroller’s recent amendments to his administrative rule regarding sellers’ and purchasers’ responsibilities. He amended his rules to implement a safe harbor from the duty to collect and remit Texas sales and use tax for remote sellers whose total Texas revenue in the immediate prior 12 calendar months totaled less than $500,000. The proposed marketplace legislation requires the marketplace providers, and not businesses who sell through them, to report the sale of taxable items through the marketplace platform. Under the proposed laws, the sales made by a retailer through a platform like Amazon or Etsy would not count towards that retailer’s $500,000 Texas revenue threshold.

For more information about this article, please visit texastaxlaw.com/blog or contact Jimmy Martens or Allison Cunningham.

Martens, Todd, Leonard & Ahlrich is a trial and appellate law firm headquartered in Austin, Texas, handling only tax cases. The firm specializes in Texas sales tax and Texas franchise tax controversies. The firm’s attorneys have handled cases all the way through the Texas Supreme Court and U.S. Supreme Court. The firm’s attorneys speak and write frequently on a variety of Texas sales tax and franchise tax topics and have published articles in publications such as the Journal of State Taxation, the Texas Bar Journal, the Texas Lawyer, and the Texas Tech Administrative Law Journal. For more information, please visit texastaxlaw.com.