by TaxJar December 19, 2024
The state of Minnesota requires marketplaces to collect sales tax on behalf of sellers on online marketplaces like Amazon, and eBay.
This means that if you sell on a platform like Amazon, then Amazon will collect sales tax from your Minnesota buyers on your behalf, and remit it to the state.
But as usual, there are always a few wrinkles here when it comes to e-commerce sales tax.
This post will explain what online sellers need to know about the Minnesota marketplace facilitator law, and answer your frequently asked questions.
Minnesota’s marketplace facilitator law states that marketplace facilitators in Minnesota collect Minnesota sales tax on behalf of third-party sellers.
Minnesota law defines marketplace facilitators as any person, other than the seller, who facilitates a retail sale by:
Online sales platforms like Amazon and eBay are considered marketplace facilitators under Minnesota law.
Marketplace providers and remote sellers that solicit sales in Minnesota, but do not maintain a physical place of business in Minnesota, must register, collect, and remit Minnesota sales tax no later than 60 days after they either make or facilitate:
Marketplace facilitator laws only cover marketplaces. The state still requires that merchants collect sales tax from buyers via sales channels where the marketplace facilitator laws do not apply.
The marketplace provider must collect sales tax on sales they facilitate unless the marketplace provider and seller agree that the seller will collect the sales tax. The seller is required to give the marketplace provider a copy of its registration to collect sales tax in Minnesota.
But first, a word of caution. We recommend checking directly with the state or a sales tax expert before cancelling your sales tax registration. This is because your business is now on the state of Minnesota’s books and potentially on their radar should they decide that you still have sales tax obligations in the state of Minnesota.
Final note: It’s important to assess your business before making a decision about cancelling sales tax permits. Are you in a growth stage? Do you plan to expand and think you may have Minnesota sales tax collection requirements in the future? Then you may want to hang on to your Minnesota sales tax permit rather than cancelling it and going through the administrative hassle of registering again in the future. This business decision is up to you.
According to the state , if you have nexus in Minnesota (due to an actual physical presence in this state or you’ve crossed an economic nexus threshold etc.) you would still be expected to have a license in this state and file returns as sellers with nexus are expected to do.
You will need to register to collect and remit sales tax on your non-Marketplace sales made through your website and other sources that are not collecting and remitting Minnesota taxes for you. When you file, you’ll include the marketplace sales totals in your Gross Sales Total, but you’ll exclude the Marketplace sales total from the Taxable Sales total that you report to the state.
If you have already collected Minnesota sales tax from buyers, it is vital that you remit that amount to the state. The only way to get in serious criminal trouble in sales tax is to collect sales tax from buyers on the state’s behalf but keep it in your own pocket.
TaxJar AutoFile automatically compiles your sales tax data the way the state of Minnesota wants it filed. For example, many states, Minnesota included, want sellers to break down their sales tax collected interstate (sales originating in Minnesota sent to another state) and intrastate (sales made from Minnesota to Minnesota).
If a marketplace has collected sales tax on your behalf, TaxJar reports that directly to the state so that the state is aware you have met your sales tax obligations.
If you currently AutoFile your Minnesota sales tax returns, you don’t need to do a thing. It’s handled!
If you prefer to file manually, your TaxJar Reports also reflect what the Minnesota’s Department of Revenue wants to see on your tax return.
Also don’t worry that you will double pay. TaxJar accounts for sales tax collected on your behalf, and only shows you the amount you owe to the state out of your pocket.
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