Important update: Marketplace facilitator tax application in SD, DC
Marketplace facilitator tax is a term for legislation passed in the United States by individual states. The legislation shifts tax collection and remittance responsibilities from a marketplace seller to the marketplace itself. Learn more about marketplace facilitator tax
- As of March 1, 2019, the tax will be newly applicable to marketplaces in South Dakota.
- As of April 1, 2019, the tax will also be applicable to marketplaces in Washington DC.
In accordance with these laws, Google will begin to collect and remit taxes for Shopping Actions products sold in states with marketplace facilitator laws.
Google will change the way taxes are calculated for states that implement marketplace facilitator laws. First, Google will begin to collect and remit tax for these states. This means that your items will be taxed in states that you may not have previously been required to apply tax. Google will determine the tax rate in these states by using the Google Product Categories that you supply in your feed.
Additionally, Google will change the way merchants can adjust tax amounts after an order is placed. For orders in marketplace facilitator states, Google will no longer disburse sales taxes to the merchant, and will instead remit these taxes directly to state tax authorities. Second, merchants will not be able to refund or alter tax on orders in these states. For states that do not have marketplace facilitator laws, Google will continue to pass any taxes collected back to the merchant, and merchants will be responsible for remitting to state tax authorities. Merchants will also continue to have the ability to lower or refund taxes as they do currently.
What this means for you
If you’re currently providing tax rate overrides as part of your product feed, Google will use the Google Product Categories that you provide in your feed to determine tax rates in any other state where you have nexus. We believe this will result in more accurate tax calculations for consumers and less effort for merchants.
The best way to make sure that your items are getting charged an accurate tax amount is to submit accurate Google Product Categories for all of your Shopping Actions offers. Doing so will enable Google to calculate accurate tax, which will be charged to customers when they checkout.
You’ll need to review your processes for reconciling disbursements from the Shopping Actions program. Google will no longer be passing tax to merchants as part of the disbursement process for states with Marketplace Facilitator legislation. That means you’ll want to make sure your systems are not expecting to receive tax for these sales.
You should also review your processes for issuing tax refunds for Shopping Actions orders. Since Google will be collecting and remitting tax in Marketplace Facilitator states, you will no longer need to make tax adjustments to orders from these states. Make sure that your systems will be able to handle this change for Marketplace Facilitator states.
What happens if I don’t do anything?
Any merchants that have not provided Google Product Categories in their product data will have tax rates automatically determined and applied by Google in states with Marketplace Facilitator laws. Because Google cannot guarantee its categorization is correct, in order to provide the best experience to your customers we suggest upgrading your feed to provide Google Product Categories.
Google will make every effort to calculate tax as accurately as possible in these circumstances. However, you have the most familiarity with your assortment, and we strongly encourage you to contribute Google Product Categories that help customers pay the tax amounts that they expect to see.