Minnesota expanded its definition of a “retailer maintaining a place of business” in Minnesota to include online marketplace providers (e.g., Amazon).
Out of state businesses that use a marketplace providers’ fulfillment center within Minnesota may have established a physical presence in Minnesota. The 2017 Minnesota Legislature passed a law imposing sales and use tax collection obligations on marketplace providers. It requires an out-of-state retailer or their marketplace provider to collect and remit tax when the marketplace provider has a physical presence in Minnesota, unless sellers on the marketplace site are already collecting the tax.
Physical presence includes having place of distribution, sales, storage, or sample room or place, warehouse, or other place of business in Minnesota.
Marketplace sellers facilitate a retail sale by:
- listing or advertising the seller’s products; and
- processing the payments from the customer, either directly or indirectly through a third party, regardless of whether the marketplace provider receives compensation or other consideration in exchange for its services.
The law is effective July 1, 2019.
When a physical presence is established, the business is currently required to be registered to collect and remit sales tax. If the business uses a marketplace provider who has a physical presence in Minnesota and the businesses’ inventory is located in Minnesota, it is currently responsible for collecting and remitting the proper Minnesota sales taxes. Sellers are represented by a marketplace provider in Minnesota if the retailer makes sales in Minnesota facilitated by a marketplace provider that maintains a place of business in Minnesota.
Under the 2017 law change, online marketplace providers will be required to collect and remit Minnesota sales tax on all taxable transactions. Unless:
- The business that uses the marketplace to make taxable sales within Minnesota of less than $10,000 in the 12-month period ending on the most recently completed calendar quarter.
- The business that uses the marketplace elects to register and collect Minnesota sales tax directly. Note: If the Marketplace collects the sales tax, then the $10,000 in 12 month period exclusion does not apply, and sales tax is due on all taxable transactions.
- The Marketplace does not maintain a place of business within Minnesota.
If a business that has established nexus is not registered, they may qualify for the Minnesota Voluntary Disclosure Program.
Contact us if you have questions regarding how this legislation may impact you, or call 513-241-8313.