The shift in tax collection responsibility to marketplace facilitators raises questions on how to address exempt sales and related documentation requirements. States generally require sellers responsible for collecting sales and use tax to maintain that (i) sales or use tax was charged on all taxable sales, and (ii) the tax collected was subsequently reported and remitted to the state. When a seller does not charge sales or use tax on transactions, a valid exemption or resale certificate or other record must be maintained to demonstrate that the transaction was not subject to tax. However, when it comes to marketplace sales, the application of these general principles becomes less clear.
The major issues with exempt marketplace sales is determining who is responsible for collecting the exemption or resale certificates and who the certificate should be issued to – the marketplace seller, the marketplace facilitator, or both. For example, New York grants marketplace facilitators “the right to accept a certificate or other documentation from a customer substantiating an exemption or exclusion from tax.” N.Y. Tax Law § 1132(l)(1). Marketplace facilitators are then required to “keep such records and information and cooperate with the commissioner to ensure the property collection and remittance of tax imposed, collected or required to be collected [under New York law].” Id.
For the Full Story: Lexologylexology
Michele Borens, Todd betor and samantha k. trencs
august 26, 2019