Marketplace Facilitators and West Virginia Sales and Use Tax

2019-21 Administrative Notice 2019-21 Consumers Sales and Service Tax: Marketplace Facilitators Having Economic Nexus With West Virginia Required to Collect West Virginia Sales and Use Taxes on Sales Made On and After July 1, 2019.

TSD-442 Marketplace Facilitators

Source: House Bill 2813 passed March 8, 2019, effective June 6, 2019.

In general, marketplace facilitators will be one of two types:

Type 1 – Some marketplace facilitators are also remote sellers who are selling their own products and services. Any remote seller presently required to collect and remit West Virginia sales and use taxes will be required to collect and remit West Virginia sales and use taxes when they facilitate a sale made on and after July 1, 2019.

Type 2 – Some marketplace facilitators only facilitate sales made for third parties. In these transactions, the marketplace facilitator is the merchant of record. Type 2 marketplace facilitators are required to collect West Virginia sales and use taxes on sales to West Virginia consumers facilitated on and after July 1, 2019.

The following frequently asked questions and answers pertain to Type 2 marketplace facilitators. Type 1 marketplace facilitators should see the frequently asked questions and answers for Remote Sellers.

1. What is a marketplace facilitator?

The term marketplace facilitator is defined in West Virginia Code § 11-15A-1(b)(8) and means a person that contracts with one or more sellers to facilitate for consideration, regardless of whether deducted as fees from the transaction, the sale of the seller's products through a physical or electronic marketplace operated by the person, and engages:

Directly, or indirectly, through one or more affiliated persons, in any of the following:
1. Transmitting or otherwise communicating the offer or acceptance between the buyer and seller;
2. Owning or operating the infrastructure, electronic or physical, or technology that brings buyers and sellers together;
3. Providing a virtual currency that buyers are allowed or required to use to purchase products from the seller; or
4. Software development or research and development activities related to any of the activities described in § 11-15A-1(b)(7)(B) of this code, if such activities are directly related to a physical or electronic marketplace operated by the person or an affiliated person; and
In any of the following activities with respect to the seller's products:
1. (i) Payment processing services;
2. (ii) Fulfillment or storage services;
3. (iii) Listing products for sale;
4. (iv) Setting prices;
5. (v) Branding sales as those of the marketplace facilitator;
6. (vi) Order taking;
7. (vii) Advertising or promotion; or
8. (viii) Providing customer service or accepting or assisting with returns or exchanges.

The term marketplace facilitator does not include a payment processor business appointed by a merchant to handle payment transactions from various channels, such as credit cards and debit cards, and whose sole activity with respect to marketplace sales is to handle payment transactions between two parties.

The term affiliated person is defined in West Virginia Code § 11-15A-1(b)(1) and means a person that, with respect to another person:

Has an ownership interest of more than 5%, whether direct or indirect, in the other person; or
Is related to the other person because a third person, or group of third persons who are affiliated persons with respect to each other, holds an ownership interest of more than 5%, whether direct or indirect, in the related persons.

The term marketplace seller is defined in West Virginia Code § 11-15A-1(b)(9) and means a seller that makes retail sales through any physical or electronic marketplaces operated by a marketplace facilitator or directly resulting from a referral by a referrer, regardless of whether the seller is required to be registered with the Tax Commissioner as provided in § 11-12 et seq. of this code.

The term platform is defined in West Virginia Code § 11-15A-1(b)(12) and means an electronic or physical medium, including, but not limited to, a website or catalog, operated by a referrer.

The term referral is defined in West Virginia Code § 11-15A-1(b)(17) and means the transfer by a referrer of a potential customer to a marketplace seller who advertises or lists products for sale on the referrer's platform.

The term referrer is defined in West Virginia Code § 11-15A-1(b)(18)(A) and means a person, other than a person engaging in the business of printing a newspaper or publishing a newspaper as defined in § 11-15A-1(b)(10) of this code, who contracts or otherwise agrees with a seller to list or advertise for sale one or more items in any medium, including a website or catalog; receives a commission, fee, or other consideration from the seller for the listing or advertisement; transfers, via telephone, internet link, or other means, a purchaser to a seller or an affiliated person to complete the sale; and does not collect receipts from the purchasers for the transaction.

The term referrer does not include a person that:

Provides internet advertising services; and
Does not ever provide either the marketplace seller's shipping terms or advertise whether a marketplace seller charges sales and use taxes. West Virginia Code § 11-15A-1(b)(18)(B).

The term retailer is defined in West Virginia Code § 11-15A-1(b)(23) and means and includes every person engaging in the business of selling, leasing or renting tangible personal property or custom software or furnishing a taxable service for use within the meaning of this article, or in the business of selling, at auction, tangible personal property or custom software owned by the person or others for use in this state: Provided, That when in the opinion of the Tax Commissioner it is necessary for the efficient administration of this article to regard any salespersons, representatives, truckers, peddlers or canvassers as the agents of the dealers, distributors, supervisors, employees or persons under whom they operate or from whom they obtain the tangible personal property sold by them, irrespective of whether they are making sales on their own behalf or on behalf of the dealers, distributors, supervisors, employers or persons, the Tax Commissioner may so regard them and may regard the dealers, distributors, supervisors, employers, or persons as retailers for purposes of this article;

The term seller is defined in West Virginia Code § 11-15A-1(b)(26) and means a retailer, and includes every person selling or leasing tangible personal property or custom software or furnishing a taxable service in a transaction that is subject to the tax imposed by this article;

The term solicitor is defined in West Virginia Code § 11-15A-1(b)(27) and means a person that directly or indirectly solicits business for a retailer.

2. Are all marketplace facilitators required to register in West Virginia?

If the marketplace facilitator is a remote seller who is already registered with the West Virginia State Tax Department, the remote seller is not required to register a second time as a marketplace facilitator.

3. What is the date a marketplace facilitator is required to be registered in West Virginia?

Marketplaces facilitators must register with the State Tax Department prior to July 1, 2019.

4. How do marketplace facilitators register in West Virginia?

A marketplace facilitator can register to begin collecting and remitting West Virginia State and municipal sales and use taxes through either of the following methods:

Register directly with West Virginia – To register only for West Virginia, use West Virginia's online registration system at https://business4.wv.gov/pages/default.aspx, or go to https://dev-tax.wv.gov/Business/BusinessRegistration/Pages/BusinessRegistration.aspx for a business application form.

Register through Streamlined Sales Tax -- To register for multiple states, including West Virginia, submit a single application through the Streamlined Sales Tax Registration System (SSTRS). There is no fee to complete and submit this online registration.

Upon completion of the registration, the remote seller will be registered to collect and remit sales and use tax in all 24 Streamlined member states.

Additional information is provided on the Streamlined Sales Tax Registration System (SSTRS) web page, and in the Streamlined Sales Tax Registration System FAQs.

A remote seller may use a Certified Service Provider (CSP) to perform its sales or use tax responsibilities when registering through the Streamlined Sales Tax Registration System (SSTRS). CSPs are certified under the Streamlined Sales and Use Tax Agreement to perform all the remote seller's sales and use tax functions, other than the remote seller's obligation to remit tax on its own purchases. A CSP is designed to allow a business to outsource most of its sales tax administration responsibilities. If a remote seller registers through the Streamlined Sales Tax Registration System (SSTRS) and contracts with a CSP to perform its sales and use tax functions (i.e., CSP Services), the CSP will file monthly sales and use tax returns on behalf of the remote seller.

See the CSP FAQs for more information.

5. Is a marketplace facilitator required to register if it does not facilitate the making of taxable sales in West Virginia?

A marketplace facilitator that does not qualify for the small-seller exception but only makes nontaxable sales in West Virginia is not required to register to collect West Virginia sales or use tax.

For example, a marketplace facilitator that only facilitates the making of sales for resale, is not required to register for sales or use tax. However, if that marketplace facilitator also facilitates taxable sales to end-users (i.e., not for resale), then the marketplace facilitator is required to register and collect sales or use tax on those sales, unless a West Virginia exemption applies.

Marketplace facilitators are required to collect and remit sales or use tax on all sales of taxable products and services into West Virginia, unless an exemption applies (e.g., resale). See the department's Booklet online under the Business Registration forms page. The Booklet provides Information and Instructions for Business Registration.

Note: New standards for administering sales tax laws for remote sellers have been developed by Administrative Notice 2018-18 consistent with South Dakota v. Wayfair, Inc., which approved a small-seller exception for remote sellers who (1) do not have annual sales of products and services into the state of more than $100,000 and (2) have less than 200 separate transactions for delivery in West Virginia.

See the answer to Question #7 for more information about the small-seller exception.

6. Are marketplace facilitators required to collect tax on sales made via the Internet?

Marketplace facilitators are required to collect and remit tax on all taxable sales into West Virginia, including sales made online when they have economic nexus with West Virginia. The Internet Tax Freedom Act prohibits West Virginia from imposing a sales tax on Internet access services but does not prohibit West Virginia from taxing sales made via the Internet.

7. How often are marketplace facilitators required to file sales and use tax returns?

A marketplace facilitator’s filing frequency (e.g., monthly, quarterly, annually) is based on the information provided with registration. Marketplace facilitators will be notified by the department of their filing frequency based on the annual dollar amount of their taxable sales sourced to West Virginia. The department may review a remote seller's filing frequency on an annual basis and change the filing frequency based on the remote seller's filing history. If the department changes the filing frequency, the remote seller will be notified of the change.

Returns and tax payments are due on the 20th day of the calendar month following the close of the reporting period, except that the annual return is due on the 30th day following the close of the calendar or fiscal year, as the case may be.

Note: If a marketplace facilitator registers through the Streamlined Sales Tax Registration System (SSTRS) and contracts with a Certified Service Provider (CSP) to perform its sales and use tax functions (i.e., CSP Services), the CSP will file monthly sales and use tax returns on behalf of the remote seller.

8. How do marketplace facilitators file sales and use tax returns?

Marketplace facilitators may electronically file West Virginia sales and use tax returns using MyTaxes, the department's online filing and payment system.

Marketplace facilitators must register for a username and password prior to filing returns. Instructions for creating a username and password for MyTaxes may be found in Help. Answers to frequently asked questions for registration and filing returns may be found in FAQ.

9. Are marketplace facilitators required to collect and remit municipal sales and use taxes?

Marketplace facilitators registered to collect and remit West Virginia sales and use taxes must collect the applicable municipal sales and use taxes when the shipped-to physical address of the customer is located within the geographic boundaries of a municipality that imposes a sales and use tax, or the service is provided within the municipality.

Currently, 43 West Virginia municipalities impose a municipal sales and use tax. In most instances the rate of tax is 1% of the sales price, including shipping and handling charges. A few municipalities impose tax at the 0.5% rate of tax. A list of municipalities that impose sales and uses tax and the applicable rate of tax is posted on the Municipal Sales and Use Tax page on our website.

10. Are there sales and use tax resources available for new registrants?

The following resources are available on the department's website.

Streamlined Sales Tax Governing Board, Inc.
http://www.streamlinedsalestax.org/

The Combined Sales and Use Tax Return and Instructions are available on the Sales and Use Tax page on our website.

TSD-100 provides information regarding West Virginia Business Taxes.

TSD-300 provides information for Sales and Use Tax Exemptions.

TSD-345 provides information for Sales Tax and Vendor Responsibilities.

TSD-442 provides information for Marketplace Facilitators.

The TSDs are accessed by going to the Business page and selecting Sales and Use Tax from the sidebar. The Sales and Use Tax page has a link to Publications and the return instructions.

11. Where can remote sellers find information for other states?

The Streamlined Sales Tax Governing Board has developed a State Website page and a Contact Information page that provide sales tax information for both Streamlined Sales Tax member states and non-member states. Information includes links to state websites, customer service contact information, registration pages, sales and use tax rates, and taxable/exempt information for each state.

12. What sales sourcing rules does West Virginia follow?

West Virginia has adopted destination sourcing and the sourcing rules in the Streamlined Sales and Use Tax Agreement. See West Virginia Code § 11-15B-14, 14a and 15

The general rule is that the transaction is sourced to the location where the purchaser receives the tangible personal property purchased or makes first use of the service purchased. The hierarchy of sourcing rules is found in West Virginia Code § 11-15B-15(a).

Source: House Bill 2813 passed March 8, 2019, effective June 6, 2019.

For additional information, please contact:

West Virginia State Tax Department
Taxpayer Services Division
P.O. Box 3784
Charleston, West Virginia 25337-3784

Phone: (304) 558-3333
Fax: (304) 558-3269
Email additional questions to TaxHelp@WV.Gov