LR 8151
Seller must Report all Marketplace Facilitator Sales on Vendor Use Tax Return and Remit all Tax
July 15, 2021
Dear Applicant:
This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated May 4, 2021.
The facts as presented in your letter ruling request are summarized as follows:
Applicant is a company that specializes in consumer fashion accessories. It utilizes Marketplace Facilitators to market and sell its products. The Marketplace Facilitators do not purchase product from Applicant for resale but instead facilitate the sale to the end customer. Further, the Marketplace Facilitators do not hold any physical inventory on behalf of Applicant for the purpose of these purchases.
Applicant currently engages a Marketplace Facilitator that collects sales tax on behalf of Applicant and remits the tax to Applicant. Applicant then reports and remits the tax amounts to Missouri - along with reporting and remitting vendors use tax for any direct online sales into Missouri.
Applicant has recently entered into a contract with a new Marketplace Facilitator. This new Marketplace Facilitator sells Applicant's product to the end consumer, then collects and remits the sales tax for products sold on its platform under its own sales tax license in every state. Both Applicant and the new Marketplace Facilitator have substantial physical presence in the state of Missouri.
Applicant requests clarification as to which of the following tax compliance alternatives is correct:
1. Applicant prepares a Missouri Sales Tax Return (Form 53-1) showing sales in its own retail stores, and a Vendor's Use Tax Return (Form 53-V) for its direct and facilitated online sales. These combined sales will be reported under the "gross sales" column. Then sales made through the new Marketplace Facilitator are removed in the "Adjustment column" since the new Marketplace Facilitator has already remitted the tax on its sales in its Missouri return. In essence, these sales will appear to be exempt sales. No tax will be remitted by Applicant on these sales.
2. The State of Missouri will not recognize new Marketplace Facilitator's sales since it never purchased the product from Applicant. Applicant must report all sales done on all Marketplace Facilitator platforms in the Applicant's Vendor's Use Tax Return and remit the taxes collected directly to the State of Missouri as it is currently doing with its other Marketplace Facilitator.
ISSUE:
Which, if either, of the two described tax compliance alternatives should be used by Applicant?
RESPONSE:
Applicant must report all sales conducted on all Marketplace Facilitator platforms on Applicant's Vendor's Use Tax Return and remit the taxes collected directly to the State of Missouri as it is currently doing with its other Marketplace Facilitator.
In relevant part, under section 144.610.1, RSMo, "[a] tax is imposed for the privilege of storing, using or consuming within this state any article of tangible personal property . . . in an amount equivalent to the percentage imposed on the sales price in the sales tax law in section 144.020."
In relevant part, under section 144.610.2, RSMo,
[e]very person storing, using or consuming in this state personal property subject to the tax in subsection 1 of this section is liable for the tax imposed by this law, and the liability shall not be extinguished until the tax is paid to this state, but a receipt from a vendor authorized by the director of revenue under the rules and regulations that he prescribes to collect the tax, given to the purchaser in accordance with the provisions of section 144.650, relieves the purchaser from further liability for the tax to which receipt refers.
In relevant part, under section 144.635, RSMo, "[e]very vendor making a sale of tangible personal property for the purpose of storage, use or consumption in this state shall collect from the purchaser an amount equal to the percentage on the sale price imposed by the sales tax law in section 144.020 and give the purchaser a receipt therefor."
In relevant part, under section 144.655, RSMo:
Every vendor . . . shall file with the director of revenue a return of all taxes collected for the preceding quarter in the form prescribed by the director of revenue, showing the total sales price of the tangible personal property sold by the vendor, the storage, use or consumption of which is subject to the tax levied by this law, and other information the director of revenue deems necessary. The return shall be accompanied by a remittance of the amount of the tax required to be collected by the vendor during the period covered by the return.
Therefore, the answer to Applicant's question turns on which entity is a "vendor" for the purpose of Chapter 144. In relevant part, section 144.605(14), RSMo, defines "vendor" as
every person engaged in making sales of tangible personal property by mail order, by advertising, by agent or peddling tangible personal property, soliciting or taking orders for sales of tangible personal property, for storage, use or consumption in this state, all salesmen, solicitors, hawkers, representatives, consignees, peddlers or canvassers, as agents of the dealers, distributors, consignors, supervisors, principals or employers under whom they operate or from whom they obtain the tangible personal property sold by them, and every person who maintains a place of business in this state, maintains a stock of goods in this state, or engages in business activities within this state and every person who engages in this state in the business of acting as a selling agent for persons not otherwise vendors as defined in this subdivision. Irrespective of whether they are making sales on their own behalf or on behalf of the dealers, distributors, consignors, supervisors, principals or employers, they must be regarded as vendors and the dealers, distributors, consignors, supervisors, principals or employers must be regarded as vendors for the purposes of sections 144.600 to 144.745.
In order to bind Applicant to the sales facilitated by the new Marketplace Facilitator, the new Marketplace Facilitator necessarily must operate as an agent of Applicant. Therefore, Applicant is a person engaged in making sales of tangible personal property by agent (the new Marketplace Facilitator). This, in turn, qualifies Applicant as the vendor in this transaction. As a vendor, Applicant is required under section 144.635, RSMo to collect vendors use tax from its purchasers.
Section 144.655, RSMo requires every vendor to regularly file returns reporting its gross receipts for the purpose of vendors use tax. This section also requires the returns be accompanied by a remittance of the amount of the tax required to be collected by the vendor during the period covered by the return. Therefore, Applicant is required to provide full payment with their return.
Applicant must report all sales conducted on all Marketplace Facilitator platforms on Applicant's Vendor's Use Tax Return and remit the taxes collected directly to the State of Missouri as it is currently doing with its other Marketplace Facilitator.
Please note that it is permissible for Applicant to delegate its responsibility to collect tax from the customer under section 144.635, RSMo to its Marketplace Facilitator. However, under section 144.655, Applicant's returns must be accompanied by a remittance of the full amount of the tax required to be collected by the vendor during the period covered by the return. Applicant may not partially delegate this responsibility because such partial delegation would cause its own returns to be incomplete.
Applicant should also be aware that, subsequent to the Supreme Court Ruling in South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (US 2018), Governor Parsons has signed Senate Bill 153 into law. Beginning January 1, 2023, Senate Bill 153 will change the laws regarding sales tax and Marketplace Facilitators. After that date, pursuant to 12 CSR 10.020(9)(A), this letter ruling will no longer be binding.
This letter ruling is binding upon the Department of Revenue with respect to the Applicant until January 1, 2023 and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals. If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change. For this reason, the interpretation set forth above should be reviewed on a regular basis. Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.
Should additional information be needed, please contact Legal Counsel Stephen S. Krogmeier, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475 (phone 573-751-0961), or me.
Sincerely,
Ken Zellers