Texas Marketplace Sellers to Generate $850 million in Tax Revenue

TEXAS – Governor, Greg Abbott, signed House Bill 1525 requiring Marketplace Facilitators to collect and remit tax on behalf of marketplace sellers starting October 1, 2019. The bill expands the state’s authority to collect sales tax and is expected to generate $850 million dollars in online sales 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. Amazon is a marketplace facilitator for third-party sales facilitated through amazon.com. The Facilitator provides the forum in which the sales take place, or the offer of purchase is accepted, including internet web site, catalog, shop, store, booth or similar forum; and the person, or affiliate, collects the receipts paid by a customer to a marketplace seller for a sale of tangible personal property, or contracts with a third party to collect revenues. 

House Bill 1525 differs from the comptroller’s economic nexus rule that gives safe harbor to businesses with less than $500,000 in annual Texas revenue. The Economic Nexus affects remote sellers with Texas revenues above $500,000 are required to register, collect sales tax on sales that ship to Texas, and remit the sales tax to the state. Remote sellers with Texas revenue below this amount would not have to register and collect sales tax. HB 1525 applies to all marketplaces operating in the state.

As of October 1, 2019, the marketplace facilitator must:
1.   Certify to each marketplace seller that the provider will assume the duties and rights of a seller for sales made through the marketplace.
2.   Collect sales tax or use tax on all taxable purchases made through the marketplace.
3.   Report and remit the tax on all sales made through the marketplace.
4.   Retain records for all marketplace sales as required. A marketplace seller is any person who has an agreement with a marketplace provider under which the marketplace provider will facilitate transactions of tangible personal property for the marketplace seller. Marketplace sellers must provide all information needed to collect and remit sales and use tax correctly. The marketplace provider is not liable if the seller cannot provide the correct or insufficient information.

About Davis Davis & Harmon LLC – Sales Tax Experts: Headquartered in Dallas, Texas, Davis Davis & Harmon LLC – Sales Tax Experts specializes in sales/use tax refund recovery and audit defense. Our team of consultants is comprised of former Big 4 sales tax consultants and state sales tax auditors. Each of our consultants has 15 to 20 years of experience, providing our clients with access to a highly specialized team of sales/use tax professionals. At Davis Davis & Harmon, LLC we are committed to maintaining the highest standards in our talent pool. We work hard to meet our clients’ needs by ensuring that you view our firm as an extension of your company and a member of your team.

For sales/use tax compliance questions or audit-related concerns, we are here to help!

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