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Revenue Administrative Bulletin 2021-22
SALES AND USE TAX – MARKETPLACE FACILITATORS AND SELLERS
Approved: December 21, 2021
Pursuant to MCL 205.6a, a taxpayer may rely on a Revenue Administrative Bulletin issued by the Department of Treasury after September 30, 2006 and shall not be penalized for that reliance until the bulletin is revoked in writing. However, reliance by the taxpayer is limited to issues addressed in the bulletin for tax periods up to the effective date of an amendment to the law upon which the bulletin is based or for tax periods up to the date of a final order of a court of competent jurisdiction for which all rights of appeal have been exhausted or have expired that overrules or modifies the law upon which the bulletin is based.
In 2018, the United States Supreme Court issued its decision in South Dakota v Wayfair, overturning its prior decision in Quill Corp v North Dakota and holding that South Dakota's sales and use tax economic nexus law was constitutional. Michigan and many other states adopted their own economic nexus policies shortly after the Wayfair decision was issued. Additionally, many states adopted marketplace facilitator statutes in conjunction with economic nexus policies. Michigan adopted marketplace facilitator legislation with the enactment of 2019 PAs 143 and 144, which were effective January 1, 2020 ("Marketplace Acts"). The purpose behind this legislation is to require entities that operate a sales platform that links third-party sellers to purchasers to collect and remit tax on sales they facilitate. The Marketplace Acts require a person that meets the definition of "marketplace facilitator" to remit and report tax for sales they facilitate on behalf of third-party marketplace sellers. For purposes of the General Sales Tax Act (GSTA) and Use Tax Act (UTA) (collectively "Acts"), marketplace facilitators are generally considered the taxpayer for all purposes for both their direct sales and sales they facilitate for third-party marketplace sellers. As such, the marketplace facilitator is responsible for remitting and reporting the tax and for receiving any benefits, such as vendor discounts. Conversely, marketplace sellers are generally not liable for sales made through a marketplace facilitator unless the marketplace seller provides incorrect or insufficient information to a marketplace facilitator.
- What is a "marketplace facilitator" and a "marketplace seller"?
- Is a person that operates a marketplace for leased or rented property a "marketplace facilitator"?
- Which party is liable for tax on transactions made through a marketplace facilitator and which party may the Department audit?
- What is the tax base for sales made by a marketplace facilitator?
- What are the sales and use tax registration and return requirements for marketplace facilitators and marketplace sellers?
- How should claims of exemption be maintained?
- How do marketplace facilitators and marketplace sellers calculate their economic nexus thresholds?
1. What is a "marketplace facilitator" and a "marketplace seller"?
The Marketplace Acts define "marketplace facilitator" as a person that meets both of the following requirements:
a. Facilitates retail sales on behalf of marketplace sellers by listing or advertising tangible personal property or taxable services; and
b. Directly or indirectly, through agreements or arrangements with third parties or its affiliates, collects payment from the customer and transmits that payment to the marketplace seller for consideration.
While marketplace facilitators often operate online and involve tangible personal property delivered from out of state, marketplace facilitators may also include print or physical marketplaces and marketplaces that deliver food or other items from local sellers.
A "marketplace seller" is defined as "a person that makes retail sales through a physical or electronic marketplace operated by a marketplace facilitator."
The Marketplace Acts do not define "marketplace," therefore, the Department will apply the commonly understood meaning of the word as it relates to marketplace facilitators: any physical or electronic place, including but not limited to a store, booth, internet website, catalog, television or radio broadcast, dedicated sales software application, or similar platform where a marketplace seller sells or offers for sale tangible personal property or taxable services.
A person is not a marketplace facilitator if it only operates a platform or forum that provides internet, print, electronic, or any other form of advertising services but does not engage, directly or indirectly, in the above requirements.
Example 1: Acme List operates an online classifieds page that allows third parties to advertise sales of tangible personal property for a fee. When a third party makes a retail sale, it receives payment directly from the customer. Acme List is not a marketplace facilitator because it does not, directly or indirectly, transmit payment from the customer to the third party.
Example 2: ABC operates a website that allows sellers to list tangible personal property for sale for no charge. When a customer makes a purchase, ABC collects the payment and sends it to the seller, less ABC's commission. ABC is a marketplace facilitator and sellers listing items for sale on ABC's website are marketplace sellers.
Example 3: Food2Go operates a software application that lists take-out food for sale. Some of the restaurants that list food for sale on the application have an agreement with Food2Go to pay it a commission for facilitating the sale of the food. Other restaurants do not have an agreement with Food2Go and therefore do not pay a commission (or any other form of compensation) to Food2Go for sales made through the application. Food2Go is a marketplace facilitator for sales made on behalf of restaurants with which it has agreements, but not for the restaurants with which it does not have agreements.
For purposes of use tax, a person is not a marketplace facilitator with respect to sales of taxable telecommunications services or sales of taxable accommodations if the accommodations provider itself is registered for sales or use tax.
Example 4: Hotelier is a marketplace facilitator that operates a website for marketplace sellers to advertise and sell hotel rooms. XYZ is a hotel chain that is registered for Michigan use tax. When a customer rents a room from XYZ through Hotelier's website, Hotelier is not acting as a marketplace facilitator and should not collect tax from the customer. Rather, XYZ is required to collect, remit, and report the tax on the sale.
Example 5: Assume the same facts about Hotelier in Example 4. Ms. Smith owns two cabins that she rents periodically throughout the year on Hotelier's marketplace, and she is not registered for sales or use tax. Hotelier is required to collect and remit use tax as a marketplace facilitator when a customer rents a room from Ms. Smith through Hotelier's website.
The Marketplace Acts do not provide a waiver option; therefore, a marketplace facilitator must remit and report tax for sales made by its marketplace sellers. The parties may not enter an agreement that allows for the marketplace seller to remit and report its own tax for facilitated sales.
2. Is a person that operates a marketplace for leased or rented property a "marketplace facilitator"?
Yes, a person that operates a marketplace for marketplace sellers that lease or rent tangible personal property is considered a marketplace facilitator if that person otherwise meets the requirements described in Conclusion 1, above. Lessors of tangible personal property may choose to pay sales or use tax based on the sales or purchase price of the property, respectively, at the time of acquisition or, alternatively, lessors may elect to pay use tax on the rental receipts of the property in lieu of paying sales or use tax at the time of acquisition. A marketplace facilitator that facilitates the lease or rental of tangible personal property must remit use tax on leases or rentals it facilitates unless the lessor provides a valid claim of exemption or the marketplace seller provides proof that it paid sales or use tax upon acquisition of the property.
For vehicles upon which sales tax was paid at the time of acquisition, the marketplace facilitator should maintain a copy of the validated RD-108; for purposes of use tax, it should maintain a copy of the TR-11L. If the marketplace seller does not have such documentation, it may obtain it from the Michigan Secretary of State for a nominal charge. For property other than vehicles, if the marketplace seller paid the applicable tax at the time of acquisition, it must provide the marketplace facilitator a copy of a receipt, invoice, bill of sale, or other similar documentation that indicates that the tax was paid on the property. If a marketplace facilitator does not receive this documentation, or if it receives a copy of a valid lessor election from its marketplace seller, then the marketplace facilitator must collect and remit use tax on all lease or rental transactions that it facilitates.
Example 6: AutoList is a marketplace facilitator that lists vehicles for lease or rent on its marketplace through an arrangement commonly referred to as peer-to-peer car sharing. John Doe rents his personal vehicle through AutoList's marketplace, and he paid sales tax on the vehicle when he purchased it from a dealership. AutoList has a copy of John Doe's validated RD-108. AutoList is not required to remit use tax on the receipts from the rental of John Doe's vehicle.
Example 7: Assume the same facts as Example 6; however, John Doe does not provide a validated copy of the RD-108 for the vehicle. AutoList must remit use tax on the rental receipts for the lease or rental of John's vehicle.
3. Which party is liable for tax on transactions made through a marketplace facilitator, and which party may the Department audit?
The marketplace facilitator is the only party that may be audited or held liable for tax on facilitated transactions unless the marketplace facilitator demonstrates to the satisfaction of the Department that the seller provided incorrect or insufficient information for the facilitator to correctly remit the tax. This relief is not available if the marketplace facilitator and marketplace seller are affiliates. What constitutes incorrect or insufficient information such that a marketplace facilitator is relieved of liability is a fact intensive inquiry. However, some examples include, but are not limited to, the marketplace seller providing an inaccurate description of a product or insufficient address information for a marketplace facilitator to source the transaction.
4. What is the tax base for sales made by a marketplace facilitator?
In general, marketplace facilitators are the taxpayer for all purposes under the Acts; this includes establishing the tax base for facilitated sales. The Acts impose tax at a rate of 6% of the "sales price" (for purposes of the GSTA) or "purchase price" (for purposes of the UTA) of tangible personal property or taxable services sold or otherwise transferred. Therefore, the tax base for sales facilitated by marketplace facilitators is the "sales price" or "purchase price" of the property as charged by the facilitator to the customer, without regard to any fees or commissions paid by the marketplace seller, whether paid directly by the marketplace seller or withheld by the marketplace facilitator. The definitions of "sales price" and "purchase price" are substantively identical and include "the total amount of consideration, including cash, credit, property, and services, for which tangible personal property or services are sold, leased, or rented, valued in money, whether received in money or otherwise, and applies to the measure subject to [sales/use] tax." See MCL 205.51(1)(d) and 205.92(f) for further detail.
Example 8: ABC is a marketplace facilitator. ABC charges marketplace sellers $1 per item to list property for sale on its marketplace. XYZ, a marketplace seller, lists an item on ABC's marketplace with a price of $10.00. When the item sells, ABC must remit tax based on the price paid by the customer, i.e., $10.00.
5. What are the sales and use tax registration and return requirements for marketplace facilitators and marketplace sellers?
Marketplace facilitators are generally considered the taxpayers for all purposes for sales they facilitate. Therefore, a marketplace facilitator is required to obtain a sales tax license and/or register for use tax, remit the appropriate tax, and file all required returns for all facilitated and direct sales on its marketplace platform. Conversely, a marketplace seller should not report any sales made through a marketplace facilitator. If a marketplace seller, either remote or with a physical presence in Michigan, only makes facilitated sales and not direct sales, it should not register for either sales or use tax and has no filing obligation. A sale made by a marketplace seller through a marketplace facilitator is not considered a sale by the marketplace seller to the marketplace facilitator; therefore, a marketplace seller is not required to obtain a resale exemption claim from its facilitator.
Example 9: In one month, XYZ makes $100,000 of retail sales through marketplace facilitators and $10,000 in direct sales through its own website. XYZ must register for sales and/or use tax and remit and report tax on the $10,000 of direct sales. XYZ does not report or remit any tax for the $100,000 of facilitated sales; the tax on those sales will be reported and remitted by the marketplace facilitators. (See Conclusion 7, below, for information regarding economic nexus threshold calculations for marketplace sellers and facilitators.)
Example 10: Assume the same facts as Example 9; however, XYZ makes no direct sales. XYZ does not need to register for sales or use tax or report/remit any tax.
A marketplace facilitator must report both facilitated and direct sales on a single return. Separate reports under separate accounts are not permitted.
6. How should claims of exemption be maintained?
Because the marketplace facilitator is generally the taxpayer for facilitated sales and is the party subject to audit, marketplace facilitators must obtain and maintain a record of all claims of exemption consistent with MCL 205.62 and MCL 205.104b unless the exemption is product-based, such as exempt food. Marketplace sellers must provide all claims of exemption received directly from their customers to their marketplace facilitators.
7. How do marketplace facilitators and marketplace sellers calculate their economic nexus thresholds?
Michigan's economic nexus policy was adopted on August 1, 2018, effective October 1, 2018, and was codified into law with the enactment of 2019 PAs 145 and 146. It specifically provides that a seller has nexus with Michigan if either of the following are met:
a. The seller's gross receipts from sales (taxable and nontaxable) into Michigan exceed $100,000.00 in the previous calendar year; or
b. The seller has 200 or more separate transactions (taxable and nontaxable) into Michigan in the previous calendar year.
Marketplace facilitators must include all direct and facilitated sales into Michigan to determine if they meet Michigan's economic nexus thresholds. Likewise, even though a marketplace seller should not report or remit tax on facilitated sales, it is required to include both facilitated and direct sales in determining if it meets the economic nexus thresholds. Furthermore, a seller that has physical presence nexus (or nexus based on any activity other than its economic presence in Michigan as described in RAB 2021-21) has nexus with Michigan even if its sales fall under the economic nexus thresholds.
Example 11: During the 2018 calendar year, marketplace seller XYZ had $125,000 of gross receipts from sales into Michigan made through a marketplace facilitator and $10,000 of gross receipts from direct sales. XYZ had nexus with Michigan beginning on January 1, 2019, and must remit and report tax for all direct sales for calendar year 2019.
Example 12: XYZ is a marketplace seller that has been physically located in Michigan since 2015. XYZ has $50,000 in sales through a marketplace facilitator and $10,000 in direct sales in 2018. XYZ has physical presence nexus in Michigan; therefore, it must report and remit tax on all $10,000 of taxable direct sales for all periods after it established a physical presence in Michigan in 2015.
 138 S Ct 2080 (2018).
 504 US 298 (1992).
 Michigan adopted its economic nexus policy on August 1, 2018, effective beginning on October 1, 2018. This policy was later codified into the sales and use tax acts through 2019 PAs 145 and 146, respectively. RAB 2021-21, which was issued contemporaneous with this RAB, discusses Michigan's economic nexus policy for sales and use taxes.
 MCL 205.52d(1) and (2) and MCL 205.95c(1) and (2).
 MCL 205.56 and MCL 205.96.
 MCL 205.54 and MCL 205.94f.
 MCL 205.52d(7) and MCL 205.95c(7).
 MCL 205.52d(11)(b)(i) and MCL 205.95c(11)(b)(i).
 MCL 205.52d(11)(c) and MCL 205.95c(11)(c).
 "Person" means "an individual, firm, partnership, joint venture, association, social club, fraternal organization, municipal or private corporation whether organized for profit or not, company, estate, trust, receiver, trustee, syndicate, the United States, this state, county, or any other group or combination acting as a unit, and includes the plural as well as the singular number, unless the intention to give a more limited meaning is disclosed by the context." MCL 205.51(1)(a) and MCL 205.92(a).
 Both services are generally subject to use tax. MCL 205.93a.
 MCL 205.95(4). For more information regarding the sales and use tax treatment of leased or rented property in general, see RAB 2020-16-Sales and Use Tax-Lessors.
 MCL 205.94a(a). This includes sales or use tax remitted to another state or local jurisdiction that imposes a rate of at least 6% and affords a like credit for Michigan sales or use tax. MCL 205.94a(b). This also applies if a person pays the equalization tax imposed by MCL 205.179.
 Until the marketplace facilitator receives this information from the marketplace seller, it must collect and remit use tax on the rental receipts. If such documentation is later produced that indicates that the applicable sales or use tax was paid on the property prior to it being leased or rented, the marketplace facilitator may request a refund of use tax remitted to the extent that it can demonstrate that it has refunded the collected tax to the customer who leased or rented the property through the marketplace.
 MCL 205.52d(7) and MCL 205.95c(7).
 The Marketplace Acts define "affiliate" as either a "person that is a part of the same controlled group of corporations as the seller…or [a]ny other person that, notwithstanding its form of organization, bears the same ownership relationship to the seller as a corporation that is a member of the same controlled group of corporations." MCL 205.52b(7)(a); MCL 205.52d(11)(a) and MCL 205.95a(7)(a); MCL 205.95c(11)(a).
 MCL 205.51(1)(d).
 MCL 205.92(f).
 A seller must report a sale as sales tax if the seller is physically located in Michigan or if it has nexus with Michigan and ownership of the property transfers to the customer in Michigan. A seller must report a sale as use tax if it does not have nexus with Michigan or if it has nexus with Michigan and ownership of the property transfers to the customer outside of Michigan. See RAB 2021-21.
 See RAB 2016-14 for more information.
 See RAB 2021-21.
 MCL 205.52c(1) and MCL 205.95b(1).
 MCL 205.52c(4) and MCL 205.95b(4).
 MCL 205.52c(5) and MCL 205.95b(5).