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Marketplace Facilitators

On May 30, 2018, Iowa Governor Kim Reynolds signed Senate File 2417 (SF 2417), an extensive state tax reform bill to improve the tax structure in Iowa. This law modernizes and expands the types of businesses required to collect Iowa sales tax and local option sales tax. Specifically, marketplace facilitators and remote sellers that exceed a certain amount of revenue or transactions must charge Iowa sales tax and applicable local option sales tax the same as retailers with a physical presence in Iowa.

Effective January 1, 2019

Marketplace facilitators must begin collecting Iowa sales tax and applicable local option sales tax on January 1, 2019 if the marketplace facilitator did either of the following in calendar year 2018:

What is a marketplace facilitator? 

A marketplace facilitator generally includes businesses that facilitate retail sales by: 

  • Providing infrastructure (i.e., listing the product on the marketplace, communicating offer or acceptance of a retail sale, providing the physical or electronic marketplace, etc.) or support (i.e., customer service, fulfillment or storage services, etc.) for retail sales to occur; and
  • Collecting the sales price, processing payments, or receiving compensation from the retail sale. 

For a complete description of marketplace facilitators, see section 203 of SF 2417.

Marketplace facilitators include consignment stores, auctions, and online marketplaces. 

Who Collects and Remits Iowa Sales Tax on Marketplace Sales?

If a marketplace facilitator makes or facilitates $100,000 or more in Iowa sales or makes or facilitates Iowa sales in 200 or more separate transactions, the marketplace facilitator must collect and remit Iowa sales tax and applicable local option sales tax on all taxable sales made through its marketplace. The marketplace facilitator must collect Iowa sales tax on all taxable Iowa sales, regardless of the location or sales volume of the marketplace seller

Example: Marketplace M is a marketplace facilitator that collects Iowa sales tax and applicable local option sales tax on Iowa sales facilitated through M's marketplace.  Seller S lists soccer balls for sale on M's marketplace. A purchaser in Iowa buys a soccer ball listed by S on M's marketplace. The soccer ball is delivered to the purchaser's home address in Iowa. M must collect Iowa sales tax and applicable local option sales tax on the sale of the soccer ball. The outcome is the same regardless of whether S is located in Iowa and regardless of S's Iowa sales volume.

Sellers that only make Iowa sales through a marketplace that collects Iowa sales tax:

If a marketplace seller only makes retail sales in Iowa through a marketplace and the marketplace facilitator collects Iowa sales tax and applicable local option sales tax, the marketplace seller does not need to obtain an Iowa sales tax permit or file Iowa sales tax returns. Iowa sales tax will be reported and paid on a sales tax return filed by the marketplace facilitator. 

Example: Seller A has $200,000 in gross revenue from Iowa sales. Seller A makes all of its Iowa sales through a marketplace facilitator that collects Iowa sales tax and applicable local option sales tax on sales. Seller A does not need to register for an Iowa sales tax permit or file an Iowa sales tax return. The marketplace facilitator will report the sales tax on the marketplace facilitator’s Iowa sales tax return. 

Sellers that make Iowa sales through a marketplace that does NOT collect Iowa sales tax: 

If a marketplace facilitator did not meet the sales thresholds ($100,000 or 200 transactions) in calendar year 2018 (and is therefore not required to collect Iowa sales tax beginning January 1, 2019), and the marketplace seller exceeded the small remote seller exception in calendar year 2018, the marketplace seller must collect Iowa sales tax and applicable local option sales tax on retail sales made on the marketplace. Marketplace sellers should contact the marketplaces on which they make sales to determine when the marketplace will begin collecting Iowa sales tax and applicable local option sales tax. 

Remote sellers that make marketplace and non-marketplace Iowa sales: 

If a remote seller makes marketplace and non-marketplace (e.g. the remote seller’s own website or catalog) sales into Iowa, the remote seller must add the total gross revenue from marketplace and non-marketplace sales and the total number of marketplace and non-marketplace transactions to determine whether the seller must collect Iowa sales tax and applicable local option sales tax on non-marketplace sales. Click here for more information.

Example: Seller B has $400,000 in gross revenue from Iowa sales. Seller B makes $325,000 of these sales through a marketplace facilitator that collects Iowa sales tax and applicable local option sales tax. The remaining $75,000 in gross revenue comes from sales made through Seller B’s website. Seller B must collect and remit Iowa sales tax and applicable local option sales tax on the $75,000 in sales made through Seller B’s website. On its Iowa sales tax return, Seller B should report $400,000 in gross sales, but Seller B may take a deduction of $325,000 for sales on which the marketplace collected Iowa sales tax and applicable local option sales tax.

Marketplace sales by a retailer with a physical presence in Iowa:

A retailer with a physical presence in Iowa that makes marketplace and non-marketplace (e.g. the seller’s own store, website, or catalog) Iowa sales must collect Iowa sales tax and applicable local option sales tax on non-marketplace sales regardless of the seller’s gross revenue or the number of sales transactions made. The small remote seller exception does not apply to sellers with a physical presence in Iowa.

Example: Seller C is an Iowa-based business, with property and personnel located in Iowa. Seller C has $80,000 in gross revenue from Iowa sales. Seller C makes $10,000 of gross revenue from Iowa sales through a marketplace facilitator that collects Iowa sales tax and applicable local option sales tax. The remaining $70,000 in gross revenue comes from Iowa sales made directly through Seller C from its physical location in Iowa. Seller C must collect and remit Iowa sales tax and applicable local option sales tax on the $70,000 in non-marketplace sales. On its Iowa sales tax return, Seller C should report $80,000 in gross sales. Seller C may take a deduction of $10,000 for sales on which the marketplace collected Iowa sales tax and applicable local option sales tax.

Definitions

Marketplace Seller: a seller that makes retail sales through a marketplace facilitator, regardless of whether the seller is a remote seller or a retailer with a physical presence in Iowa

View filing instructions for marketplace and non-marketplace sales here.