Update: This article, originally written in 2019, has, as of 2022, been updated with some new information. But it is not intended to be the ultimate resource for tax rules. For the most up-to-date tax information and how it affects Reverb sellers, please visit this Help Center article instead.
The precedent set by the South Dakota v. Wayfair, Inc. Supreme Court decision allows states to tax remote sales—like those made through Reverb and any other e-commerce sites—through a variety of methods.
Previously, states could only tax sales made by businesses with a physical presence in the state. Now, what they call "Economic Nexus" (economic presence in a state) is enough to trigger a sales tax collection obligation.
In broad terms, there are two categories of legislation that states can now adopt and enforce for the purposes of tax collection: Marketplace Facilitators and Economic Nexus.
When you sell to Marketplace Facilitator states, Reverb will be responsible for collecting and remitting sales taxes from buyers on your behalf.
As of January 1, 2022, marketplaces like Reverb are required to report a seller’s sales if they sell $600 or more on the platform in a calendar year. This new reporting requirement means that if you hit the $600 sales threshold, you’ll need to provide tax identification information so that Reverb can issue you a Form 1099-K.
Reverb is currently collecting sales tax from buyers in many Marketplace Facilitator states. Check here for the full list.
If you are a Reverb seller in a Marketplace Facilitator state where Reverb collects and pays sales tax on your orders, you do not need to collect or remit sales taxes for your Reverb sales.
Reverb will automatically collect sales tax for items purchased in Marketplace Facilitator states. It will not be possible for you to opt of this collection practice. The upside is that you will not have to take any additional action. There are no charges or fees for Reverb automatically calculating, collecting, and remitting sales tax.
Reverb is a registered New York State sales tax vendor and will collect sales tax on all taxable sales of tangible personal property that it facilitates for delivery to a New York State address.
You will not have to update your sales tax settings in your shop for orders shipped to Marketplace Facilitator states. Those tax settings are used for states/regions where Reverb does not automatically collect sales tax. (See more on this below.)
Note for PayPal-only Sellers: If a buyer in a Marketplace Facilitator state purchases the order via PayPal, Reverb will supply you with the sales tax as a part of your payout. But you should hold on to that sales tax money, because at the end of the month, Reverb will charge you for the sales tax on your monthly statement so that we can remit the tax to the relevant state.
If you're a tax-exempt entity in a marketplace state and have paid sales tax on a purchase, submit a ticket to our support team. If you are a reseller or a 501(c)(3) organization and are tax exempt, send us an email at [email protected] attaching your reseller certificate or 501(c)(3) paperwork. We will process your information as quickly as possible to prevent future taxable transactions. Note, Reverb will only be able to provide tax exemption in Marketplace States where it directly collects and remits the tax. You will have to discuss your tax exempt status directly with the seller in sales in Economic Nexus States.
Sales tax practices for states that adhere to Economic Nexus policies are more complicated.
The threshold of Economic Nexus is based on a combination of both sales revenue and/or transaction volume. This means that if you sell similar items in different states, you may need to pay sales tax in one but not the others.
You'll need to set up your shop's Tax Policies to collect sales tax for each state you meet the threshold for. Note that these thresholds are not limited to sales made on Reverb—all sales channels should be taken into account when deciding which states will require you to collect sales tax.
Our tax partner Avalara has provided this table with a state-by-state breakdown of Economic Nexus thresholds for your reference.
This information is intended to point you in the right direction. If you'd like more info about setting up your Reverb tax policies, check out this article in our Help Center. For advice about whether or not your business meets these thresholds for Economic Nexus, you should contact a tax professional.
Click here for more information on sales tax in the Reverb marketplace.