The California Department of Tax and Fee Administration (“CDTFA”) issued two new special notices addressing marketplace facilitators and its new registration and filing requirements effective October 1, 2019.
In Special Notice L-694, the CTDFA reiterated that effective October 1, 2019, a marketplace facilitator is generally required to pay sales tax or collect and pay use tax on all retail sales by marketplace sellers to California customers facilitated through its marketplace. It was also noted that the new requirements are in addition to any other sales or use tax liabilities a marketplace facilitator is responsible for reporting and paying on retail sales of its own tangible property through its marketplace.
More importantly, Special Notice L-694 stated that if a marketplace facilitator is responsible for tax on retail sales in California facilitated its marketplace, the marketplace seller is no longer liable for the tax on those transactions. The marketplace facilitator should notify all of the marketplace sellers that it is registered with the CDTFA and will be collecting and paying the tax due on marketplace sellers’ sales to California customers facilitated through the marketplace beginning October 1, 2019.
In Special Notice L-700, the CDTFA also noted that marketplace sellers are not responsible for reporting and paying sales and use tax to the CDTFA on retail sales of tangible merchandise facilitated through a marketplace facilitator that is registered or required to be registered with the CDTFA as a retailer. Therefore, a marketplace seller that sells through a marketplace facilitator that is registered and collecting California sales tax does not have to report these sales to CDTFA.