With the Marketplace Fairness Act of 2013 (MFA) gaining traction in Congress, many online businesses and remote sellers are trying to figure out exactly how the bill would apply to them if it passes. Naturally one of the most popular questions for smaller businesses is “Does this apply to me?” This post explains how the “small seller exemption,” actually called the small seller exception, works.
- Who would qualify for the small seller exception?
- What is a “remote sale?”
- Is the $1,000,000 threshold per state or for all states combined?
- What time period is used to determine your gross remote sales?
- What are the requirements that small sellers will avoid?
- How does affiliate or partner revenue impact the exception?
- Could this exception change before the bill passes?
- Where can I go to get up-to-date info on this bill?
A: Here’s what the bill says:
A State is authorized to require a remote seller to collect sales and use taxes under this Act only if the remote seller has gross annual receipts in total remote sales in the United States in the preceding calendar year exceeding $1,000,000.
Q: What is a “remote sale?”
A: A remote sale is a sale into a state where you are not currently required to collect sales tax. Typically this is a sale into a state where you have no physical presence.
A: The $1,000,000 threshold refers to the total of all remote sales you make, regardless of the number of states. So it is not $1,000,000 for each individual state where you make remote sales.
A: The bill uses your gross remote sales from the previous calendar year to determine if you qualify for the small seller exception.
A: If you qualify for the exception, you won’t have to collect sales tax on remote sales.
A: There are two cases where the revenue from other businesses would be added to your gross revenue to determine if you qualify for the exception:
- If the other business or businesses are related to you in the way defined by section 267 of the IRS Code of 1986.
- If you have ownership relations with other businesses designed to avoid collecting sales tax under the MFA.
A: Yes. Several groups, including eBay, have lobbied to change the threshold for the small seller exemption.