Sales Tax, and Who Is Already Collecting It

The good news first

If your sales go through a big marketplace, that marketplace is probably collecting the sales tax already.

Not as a favour. Because the law in most states now puts that job on the marketplace instead of on the thousands of small sellers using it.

Washington's tax department says that if all your retail sales run through a marketplace that is collecting for you, you do not have to collect and send in the tax yourself, provided you have proof it is being done. That is Washington's wording, and it is on its page for marketplace sellers. Go and read the whole thing.

Two words in it matter. All, because one market stall on a Saturday breaks it. And proof, which means you should be able to show the tax the marketplace collected on your sales.

It also does not automatically end every duty you have to your state. It ends the collecting job.

Why a marketplace collects and a payment app does not

This trips people up, so here is the actual test.

Minnesota's tax department, on its page for marketplace providers, describes the kind of business that has to collect as one that facilitates a retail sale by both: Listing or advertising the seller's products and Processing the payments from the customer.

Both. Two jobs in one place.

A marketplace does both. It shows your thing to strangers, and the buyer's money goes through it. That is why it collects.

A payment app between two people does one of them. It moves money. It never showed anybody your product and it does not know whether this was a lawn or a birthday present.

So if you sell in person or through your own page and take money by app, nobody is collecting anything for you. That is not a loophole. It just means the job did not go anywhere else.

The trap in the small seller exemption

Almost every article on this subject says small sellers do not have to worry. Then it mentions an occasional sale exemption and moves on.

Go and read one.

Texas has one. To qualify you have to only sell one or two taxable items during any 12-month period. There is a separate line for selling off your own personal belongings, capped at 3,000 dollars a year.

One or two items. In a year. That is not a small business, it is a clear out.

And then the part nobody quotes. Texas lists who does not qualify, and inside that list, in brackets, are the words artists or craftsmen who make items for sale.

If you make the thing you sell, that state has named you as the person the exemption is not for.

Which is the exact opposite of what the friendly articles imply. This is Texas. Your state will have its own version, and the only way to know is to open it.

What actually decides your answer

Four things, and none of them is your age.

Your state. A few states have no general sales tax at all. Most do.

What you sell. Goods are usually taxed. Services often are not, and which services get taxed is different everywhere. Mowing a lawn and selling a print can land on different sides of that line in the same state.

Where the buyer is. In some states the rate follows the buyer's address, so two orders in one town can be taxed differently.

How you get paid. Which comes back to whether a marketplace is in the middle.

What to do

Find out what your marketplace already does. It is usually on a tax page in the seller settings. Screenshot it.

Ask your state about the sales that do not go through it. Markets, fairs, orders taken by message, anything cash.

Read the exemption yourself if somebody points you at one. Look for the size of it and look for who is written out of it.

Keep a record. What sold, when, where, for how much. Ten seconds a sale. It is the whole answer to any question anybody asks you later.

Sales tax is boring and it is not dangerous. It only becomes a problem when somebody assumed for a year and then found out.