Marketplace Facilitators

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 Iowa Code section 423.14A.

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, 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. Some states have enacted laws that allow marketplace facilitators and marketplace sellers to agree which party will collect and remit on sales of the seller’s items. Iowa law does not allow for this arrangement.

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 economic nexus threshold in calendar year 2018 (and is therefore not required to collect Iowa sales tax beginning January 1, 2019), and the marketplace seller exceeded the thresholds 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 (i.e. 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 to determine whether the seller must collect Iowa sales tax and applicable local option sales tax on non-marketplace sales. Find more information on remote selling here.

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 (i.e. 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 economic nexus threshold 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.

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.

As mentioned above, consignment stores, auctions, and other sponsors of special events where retail sales occur may be marketplace facilitators. This may also include trade shows, flea markets, farmers markets, craft fairs, and other similar events. If you are sponsoring an event and want to determine whether you need a sales tax permit, review the following questions:

Are you (or an affiliate) providing infrastructure or support for retail sales? This includes, but is not limited to, any one of the following activities:

• Listing a product or service for sale on a marketplace you own, operate, or control. A marketplace includes physical or electronic stores, booths, catalogs, consignment shops, auctions, internet sites, or other similar forums.
• Communicating offer or acceptance of a retail sale through a marketplace you own, operate, or control.
• Providing a physical or electronic marketplace that sells products or services owned by you or a marketplace seller, regardless of whether you ever control the products or services sold.
• Providing customer service, fulfillment, or storage services.
• Setting prices for products or services available on your marketplace.
• Branding sales as your own.

Are you (or an affiliate) collecting the sales price or other compensation for retail sales made through your marketplace? This includes, but is not limited to, any one of the following activities:

• Directly collecting the sales price.
• Providing payment processing services.
• Receiving consideration from the facilitation of retail sales. This includes selling fees, listing fees, referral fees, closing fees, dispatch fees, and percentages of sales prices, regardless of whether you ever control the products or services. This does not include a fee charged only for rental of space at a marketplace.
• Collecting payment from a purchaser and transmitting it to a marketplace seller through a third party with which you have an agreement for the collection and transfer of the payment, regardless of whether the third party payment processor is compensated for their services.
• Providing virtual currency used to purchase property or services.

If you answered yes to both of these questions, you are likely a marketplace facilitator and are required to obtain a sales tax permit to remit tax collected at your event. For full details about how an entity qualifies as a marketplace facilitator, please review Iowa Code section 423.14A.

If you are not a marketplace facilitator, you need to register your special event in accordance with Iowa Code section 423.33(3). Please complete the following Special Events Sponsor Registration Form. For more information about responsibilities of sponsors and vendors of special events, view Special Events - Sales/Use Tax Permits.

If you have general questions, you may submit a request for tax guidance. If you would like a binding answer for your specific situation, you may be interested in a Declaratory Order request. More information about tax guidance and Declaratory Order requests can be found at the Tax Guidance webpage.

If you are doing business in Iowa, you must file an Iowa income tax return. “Doing business” is used in a comprehensive sense and includes all activities or any transactions for the purpose of financial or pecuniary gain or profit. Physical presence in Iowa is not required to meet the definition of doing business in Iowa. If you are making sales or providing services to Iowa customers, or providing services to facilitate sales to Iowa customers, you may be required to file an Iowa income tax return for any year in which you engage in those activities.

Federal law prohibits states from imposing an income tax on sellers whose only activity in the state is the solicitation of sales of tangible personal property, if the orders are filled from outside the state. If your only activity in Iowa consists of solicitation of sales of tangible personal property to Iowa customers, you may not be subject to Iowa income taxes. This federal protection does not relieve you of the obligation to file an Iowa return. If you are a business entity doing business in Iowa, but qualify for protection under Public Law 86-272, you should still file an Iowa return showing no tax due and asserting the protection of that law.

For more information see Iowa Filing Requirement (Nexus) For Out of State Business.