What Reverb Sellers Need to Know About New Sales Tax Rules

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.

THE GIST
  • When you sell to Marketplace Facilitator states, Reverb will be responsible for collecting and remitting sales taxes on your behalf.

  • If you sell more than $100,000 per year or engage in 100 or more transactions in a state, through Reverb and/or any other e-commerce site, you may need to collect and remit your own sale taxes for Economic Nexus states.

Marketplace Facilitators

Reverb is currently collecting in Washington and will be collecting in all Marketplace Facilitator states shortly. We will let you know as these states are rolled out.

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 Washington. 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.

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 Washington state, or other future Marketplace Facilitator states mentioned above, 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 TaxExempt@reverb.com 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.

  • Economic Nexus

    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.

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