Sales Tax for Small Marketplace Sellers: A Plain-English Overview
Sales tax is one of the parts of running an online business that everyone would rather not think about. Here's a plain-English overview. This isn't tax advice — for that, talk to an accountant.
What is nexus?
Sales tax is a state-level obligation. You have to collect and remit sales tax in a state if you have 'nexus' there — historically that meant a physical presence, but since 2018 most states have added economic-nexus thresholds (usually around $100,000 in annual sales into the state, or 200 transactions).
Marketplace facilitator laws
Many states have laws that require marketplaces themselves to collect and remit sales tax on behalf of sellers. Where those apply, sellers do less of the work but should still track what was collected on their behalf. Suliit provides these reports on the seller dashboard.
1099-K reporting
The IRS has thresholds for 1099-K reporting on gross payments through payment settlement entities. The thresholds have shifted over the last few years; Suliit issues 1099-K forms in January for the prior year to sellers who meet the current federal (and where applicable, state) threshold.
What to keep
Records of every order, every fee, every refund, and every payout. Your platform provides most of this; keep a copy independently in a spreadsheet or accounting tool. Come tax time your accountant will thank you.
This article is part of the Suliit editorial series on online commerce for independent sellers and buyers. Suliit is a U.S.-based marketplace operated from Prince Frederick, Maryland.