Many small brands sell in two places at once: through a marketplace such as Amazon, Etsy, eBay or Walmart, and through their own website. The sales tax rules are different for each channel. Understanding marketplace vs direct sales tax liability helps you avoid two expensive mistakes: paying tax twice, or not collecting at all on your own site.
Key takeaways
- Every state with a sales tax now has a marketplace facilitator law; Missouri’s took effect January 1, 2023.
- On marketplace sales, the marketplace generally collects and remits the tax.
- On direct sales through your own website or store, you are responsible once you have nexus.
- Some states count marketplace sales toward your own nexus threshold, and some still expect you to report them.
Who Collects in Each Channel
| Channel | Who collects and remits | Your job |
|---|---|---|
| Marketplace (Amazon, Etsy, eBay, Walmart) | The marketplace facilitator | Keep reports; check whether the state wants marketplace sales reported |
| Your own website | You, once you have nexus | Register, collect the correct rate, file returns |
| In-person events and pop-ups | You | Register in that state, often with a temporary permit |
| Wholesale to retailers | No tax with a valid resale certificate | Collect and keep resale certificates |
How Marketplace Facilitator Laws Work
A marketplace facilitator law makes the platform that processes the sale responsible for collecting and remitting tax on third-party sales. For example, Missouri requires marketplace facilitators whose taxable Missouri sales exceed $100,000 to register and collect beginning January 1, 2023, and says marketplace sellers that sell only through such a marketplace do not need to register. Read the full background in our marketplace facilitator guide.
When You Still Have Obligations
- You also sell direct. Your own website sales are your responsibility in every state where you have nexus.
- The state counts marketplace sales toward your threshold. Iowa, for example, includes sales on which a marketplace collected the tax when it measures a remote seller’s threshold. Arizona and Tennessee exclude them.
- Inventory creates physical nexus. Products stored in a fulfillment warehouse in another state can create nexus there, which matters for your direct sales.
- Reporting. Some states expect marketplace sales to be reported on your return as a deduction, even though the marketplace paid the tax.
Example: one seller, two channels in Iowa
Etsy sales to Iowa: $70,000 (Etsy collects the tax)
Website sales to Iowa: $40,000
Iowa threshold check: $70,000 + $40,000 = $110,000 → over $100,000
Result: register in Iowa and collect tax on the $40,000 of website sales.
Check thresholds for every state in our economic nexus thresholds by state guide, and the correct rate for each order with the Sales Tax Calculator or the Iowa rate page.
Avoid Paying Tax Twice
- Do not add your own tax setting on marketplace listings where the platform already collects.
- Separate marketplace and direct sales in your accounting so returns show the right taxable amounts.
- Download each marketplace’s tax reports every month and keep them for audits.
- If you dropship, check who the retailer of record is in each sale.
Conclusion
Marketplace vs direct sales tax liability comes down to who makes the sale: the marketplace handles tax on its platform, and you handle tax on your own channels. Track both channels together for nexus, register where you must, and report what each state requires. Use the Reverse Sales Tax Calculator and the Add/Remove Sales Tax Calculator to reconcile payouts, and find any rate on our state pages or the Tax Rate Center homepage.
Frequently Asked Questions
Does Amazon collect sales tax for third-party sellers?
Yes. Under marketplace facilitator laws, Amazon and other large marketplaces collect and remit sales tax on third-party sales delivered to states with a sales tax.
Do I need a sales tax permit if I only sell on Etsy?
Often not, because Etsy collects the tax, but some states still require registration or reporting, and in-person sales or inventory in a state can create your own obligations.
Do marketplace sales count toward my economic nexus?
In some states. Iowa counts them; Arizona and Tennessee exclude sales on which a registered marketplace collects the tax. Check each state’s rule.
Who is liable if the marketplace collects the wrong amount?
Generally the marketplace facilitator is responsible for the tax it collects on facilitated sales, unless the error came from incorrect information supplied by the seller.
How do I report marketplace sales on my return?
Many states ask you to include them in gross sales and deduct them as marketplace sales; others ask you to leave them off entirely. Follow the return instructions for each state.