Marketplace Facilitator Laws: When Amazon and Shopify Collect Tax for You
Rohan Miller
Head of Tax Strategy
Marketplace facilitator laws require platforms like Amazon and Walmart to collect sales tax on your behalf. But the rules vary by state, and sellers are not completely off the hook.
What Is a Marketplace Facilitator
A marketplace facilitator is a platform that facilitates retail sales on behalf of third-party sellers by providing the forum (website, app, or physical location), collecting payment from the buyer, and transmitting payment to the seller. Under marketplace facilitator laws, the platform, not the individual seller, is responsible for collecting and remitting sales tax on transactions facilitated through the marketplace.
As of 2026, all 45 states with a general sales tax plus the District of Columbia and Puerto Rico have enacted marketplace facilitator laws. The major platforms affected include Amazon (including FBA and third-party seller programs), Walmart Marketplace, eBay, Etsy, Shopify (when using Shopify Payments with its marketplace features), Target Plus, and numerous smaller platforms.
The threshold for triggering marketplace facilitator obligations mirrors the state's economic nexus threshold in most cases. Once the marketplace exceeds $100,000 in sales (or $500,000 in California) in a state, the marketplace is responsible for collecting tax on all sales facilitated through its platform in that state, regardless of whether individual sellers have separately crossed the threshold.
This shift has significantly simplified compliance for small and mid-sized sellers. A seller with $50,000 in annual sales across 30 states through Amazon no longer needs to register in each state, because Amazon collects and remits the tax. However, the simplification is not absolute.
Where Sellers Still Have Obligations
Marketplace facilitator laws only cover sales made through the marketplace. If you sell through your own website, a physical store, wholesale channels, or non-marketplace platforms, you are still responsible for collecting and remitting sales tax on those transactions in states where you have nexus.
This creates a common scenario: a DTC brand sells on Amazon and through its own Shopify store. Amazon collects tax on Amazon orders in all applicable states. But the brand must independently track nexus, register, and collect tax on Shopify orders in states where it has economic nexus from its direct sales. Some states include marketplace-facilitated sales in the seller's nexus threshold calculation, while others exclude them. This distinction determines whether your direct sales alone trigger nexus.
For example, in California, marketplace sales are excluded from the seller's $500,000 nexus threshold. If you sell $400,000 through Amazon and $200,000 through your own site in California, only the $200,000 counts toward your threshold, and you have not triggered California nexus for your direct sales. In contrast, some states include marketplace sales in the threshold, which could trigger nexus for your direct sales channel even if those sales alone are below the threshold.
Sellers also remain responsible for use tax on purchases they make for their own business, such as equipment or supplies purchased from out-of-state vendors that did not collect tax.
Amazon FBA and Inventory Nexus Complications
Amazon Fulfillment by Amazon (FBA) creates an additional nexus complication that marketplace facilitator laws do not fully resolve. When you use FBA, Amazon stores your inventory in warehouses across the country. The physical presence of your inventory in a state creates "physical nexus" in that state, separate from economic nexus.
Physical nexus from FBA inventory applies to your direct sales, not just your Amazon sales. So if Amazon stores your inventory in Texas, you have physical nexus in Texas for sales through your own website. Amazon's marketplace facilitator status covers your Amazon sales in Texas, but you are responsible for collecting tax on your direct Shopify sales in Texas because of the FBA-created physical nexus.
Amazon provides an Inventory Event Detail report that shows which states hold your inventory. We recommend pulling this report quarterly and cross-referencing it against your sales tax registrations. If you have FBA inventory in a state where you are not registered for direct sales tax collection, you may have an unaddressed compliance gap.
Some sellers have shifted to Seller Fulfilled Prime or third-party logistics (3PL) providers in a single state to avoid multi-state inventory nexus. This concentrates physical nexus in one state while still meeting delivery speed requirements. The tradeoff is potentially higher shipping costs.
Shopify and Non-Marketplace Direct Sales
Shopify occupies an unusual position in the marketplace facilitator landscape. When sellers use Shopify as a standalone ecommerce platform to operate their own online store, Shopify is generally not considered a marketplace facilitator because it does not own the transaction or take a commission on the sale. The seller is responsible for their own sales tax compliance.
However, Shopify's Shop app and certain Shopify-facilitated channels may qualify as marketplace facilitation in some states. The determination depends on the specific features used and the state's definition of "marketplace facilitator." This is an area where the law is still developing, and sellers should not assume that Shopify handles their tax obligations simply because they use the Shopify platform.
Shopify does offer built-in sales tax calculation that applies the correct rate based on the buyer's address. This is a calculation tool, not a collection and remittance service. Sellers using Shopify must still register in nexus states, file returns, and remit the collected tax themselves, or use a third-party service to handle filing.
For direct-to-consumer brands that sell primarily through their own Shopify store, marketplace facilitator laws provide no relief. These sellers need a complete sales tax compliance program covering nexus monitoring, registration, rate calculation, and filing. This is where tools like TaxJar, Avalara, or professional services like SpryTax's ecommerce tax package come in.
Reconciliation and Audit Considerations
Even when a marketplace handles tax collection, sellers should reconcile the marketplace's tax reports against their own records. We have seen instances where Amazon collected sales tax at an incorrect rate, failed to collect tax in a state where it should have, or classified a product incorrectly for exemption purposes.
When a state audits a marketplace seller, the state may still contact the individual seller for information, even if the marketplace was responsible for collection. Sellers should maintain records of all transactions, including marketplace-facilitated sales, for at least the statute of limitations period in each state (typically three to four years, but up to eight years in some states).
Record-keeping best practices include downloading monthly or quarterly transaction reports from each marketplace, maintaining a summary of marketplace-facilitated sales by state, keeping documentation of any direct sales tax collected outside the marketplace, and retaining all sales tax returns filed (both marketplace and direct).
At SpryTax, we provide comprehensive reconciliation services for multi-channel sellers. We match marketplace tax reports against state filing records, identify discrepancies, and resolve them before they become audit issues. For brands selling on Amazon, their own website, and wholesale channels, this reconciliation is essential for maintaining clean compliance records.
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