When must a marketplace facilitator collect tax on third-party sellers' sales, and when is it relieved?

Who is a facilitator

California's Marketplace Facilitator Act (Cal. Rev. & Tax. Code sections 6040 to 6049.5, operative October 1, 2019) defines a marketplace facilitator as a person who contracts with marketplace sellers to facilitate, for consideration, the sale of the seller's products through a marketplace operated by the person or a related person, and who does both of two things. First, directly or indirectly, it engages in at least one platform activity: transmitting or communicating the offer or acceptance between buyer and seller, owning or operating the infrastructure or technology that brings buyers and sellers together, providing a virtual currency buyers use to purchase from the seller, or software development or research and development related to the transaction activities, if directly related to the marketplace. Second, it engages in at least one transaction activity with respect to the seller's products: payment processing, fulfillment or storage, listing products for sale, setting prices, branding sales as its own, order taking, or customer service, returns, or exchanges (RTC section 6041(b)). A marketplace is any physical or electronic place where a seller offers tangible personal property for delivery in California, whether or not anything involved has a physical presence in the state (RTC section 6041(a)); related persons are tested under Internal Revenue Code section 267(b) (RTC section 6041.2(a)). Three carve-outs follow: advertisers that refer purchasers to the seller and do not participate further are not facilitating (RTC section 6041.1); a delivery network company, one that facilitates delivery of local products from unrelated merchants within 75 miles, is not a facilitator unless it meets the general definition and elects in (RTC section 6041.5); and a vehicle rental broker arranging passenger vehicle rentals for an unrelated rental company is not a facilitator (RTC section 6041.6).

New York's definition is shorter and turns on money. A marketplace provider is a person who, pursuant to an agreement with a marketplace seller, facilitates sales of tangible personal property by that seller, and a person facilitates a sale only when it meets both of two conditions: it provides the forum in which, or by means of which, the sale takes place or the offer is accepted, and it, or an affiliate, collects the receipts paid by the customer to the seller, or contracts with a third party to collect them (Tax Law section 1101(e)(1)). A platform that lists and connects but never touches the money is not a provider; a fulfillment operator that holds inventory, ships the order, and collects the payment can be. The Department applied that definition in an advisory opinion, binding only as to its petitioner, TSB-A-24(45)S (October 10, 2024), treating a third-party fulfillment provider that collected customer receipts as a marketplace provider if it met the threshold, while holding that the seller's inventory on the unaffiliated provider's New York premises did not make the seller a vendor. Passenger car rentals are excluded; leases and peer-to-peer car sharing are included (Tax Law section 1101(e)(1)).

The same business can therefore be a facilitator in one state and not the other: a platform that runs the storefront, sets prices, and brands the sale but leaves payment to a processor the seller contracts with directly is a California facilitator and, on those facts, likely not a New York provider.

When the collection duty attaches

Whether the facilitator must register turns on counting facilitated sales as the platform's own. In California, a facilitator is considered the seller, retailer, and dealer for each sale facilitated through its marketplace for purposes of determining whether it must register, in addition to its own sales (RTC section 6042), and for the remote seller threshold it includes all sales of tangible personal property for delivery in California made on its own behalf, by all related persons, and on behalf of marketplace sellers (RTC section 6044(a)). The threshold is total combined sales of tangible personal property for delivery in the state, by the retailer and all related persons, exceeding $500,000 in the preceding or current calendar year (RTC section 6203(c)(4)(A)), with no transaction count. CDTFA Regulation 1684.5(b)(1) adds that the count includes facilitated sales regardless of whether they are taxable; a facilitator with inventory or other physical presence in California is engaged in business on that ground and the threshold is irrelevant (RTC section 6203(c)(1)). Beginning January 1, 2027, California's definition of tangible personal property includes digital products, meaning prewritten software however transferred or accessed (RTC sections 6016 and 6016.1, as amended and added by Stats. 2026, ch. 23), which brings software sales within the measure of that threshold from that date, although how its "for delivery in this state" language applies to remotely accessed software awaits CDTFA guidance. That legislation amends no section of the Marketplace Facilitator Act, but because the act's duties run to facilitated retail sales of tangible personal property, the change may also bear on what a registered facilitator collects from that date.

Once registered or required to register, the facilitator is the retailer selling or making every retail sale of tangible personal property it facilitates for a marketplace seller (RTC section 6043), and the regulation spells out the consequence: the facilitator is responsible for paying sales tax or collecting and remitting use tax on that sale, and the marketplace seller is not, unless the facilitator qualifies for relief under section 6046 (Reg. 1684.5(c)). Under 2021 legislation, with the Department's guide dating the obligation from January 1, 2022, a registered facilitator is also the retailer or dealer for the lumber, tire, electronic waste, and battery fees on facilitated sales (RTC sections 6043.1, 6041.2(b)). District taxes follow the retailer: because section 6043 makes the registered facilitator the retailer and section 6044(a) counts facilitated sales in its measure, a facilitator whose total combined sales exceed the $500,000 district threshold is engaged in business in every district in the state and collects district use tax on every delivery into a district that imposes one (RTC section 7262(a)(1); Reg. 1827(c)(3)).

New York attaches the duty by giving the provider a vendor's obligations. A marketplace provider, with respect to a sale of tangible personal property it facilitates, has all the obligations and rights of a vendor under the state and local sales tax articles, including the duty to obtain a certificate of authority, collect tax, file returns, and remit, and the right to accept exemption documentation from the customer, and it must keep records and cooperate with the Commissioner (Tax Law section 1132(l)(1)). A provider cannot refuse to collect because the seller is registered (TSB-M-19(2.1)S, October 17, 2019). A provider with no physical presence in New York and not otherwise registered is not a marketplace provider if, for the immediately preceding four quarterly periods ending on the last day of February, May, August, and November, its cumulative gross receipts from sales it made or facilitated of property delivered in the state did not exceed $500,000, or it did not make or facilitate more than 100 such sales; such a person may elect to register and is then bound by the article (Tax Law section 1101(e)(1)). The dollar figure was raised from $300,000 retroactive to June 1, 2019, the provision's effective date (TSB-M-19(2.1)S). The exclusion is written as a disjunction, so a platform below either figure is outside and a remote platform is a provider only when both are exceeded, the same pairing as the remote seller test in Tax Law section 1101(b)(8)(iv).

Both regimes stop at tangible personal property. A New York marketplace seller remains responsible for taxable facilitated transactions that are not sales of tangible personal property (TSB-M-19(2.1)S); the Department names hotel occupancy, services, and restaurant food as outside the provider rules, and since March 1, 2025 a booking service collects on the short-term rental occupancies it facilitates under a separate rule (Department of Taxation and Finance, Sales tax requirements for marketplace providers, updated January 15, 2026; Sales tax on short-term rental unit occupancy). A platform facilitating only services is outside California's chapter 1.7.

When the facilitator is relieved

Relief in California has two sources, one live and one historical. The live one is RTC section 6046: if the facilitator demonstrates to the satisfaction of the Department that it made a reasonable effort to obtain accurate and complete information from an unrelated marketplace seller about a retail sale, and that the failure to remit the correct amount of tax or fee was due to incorrect or incomplete information provided by that unrelated seller, the facilitator is relieved of liability for the tax or fee on that sale. The section does not apply where the facilitator is the retailer on its own behalf or where the facilitator and seller are related under section 267(b). And where the facilitator is relieved, the marketplace seller is the retailer for that retail sale. The relief does not erase the tax; it moves it, and the burden of the showing is the facilitator's.

The historical source is RTC section 6047, which relieved a facilitator for good-faith errors other than district-tax sourcing errors on sales facilitated for unrelated sellers before January 1, 2023, capped at a declining percentage of the tax due on facilitated sales (7 percent for the fourth quarter of 2019 and calendar 2020, 5 percent for 2021, 3 percent for 2022), and extended the same relief to the seller unless the seller was the retailer under section 6046. It matters only to 2019 through 2022 audits. Section 6047 does not relieve anyone of liability for tax collected and not remitted (RTC section 6047(d)), and section 6046 by its terms reaches only shortfalls traceable to the seller's information.

Relief also comes from not being the retailer in the first place. Regulation 1684.5's Example 9 describes a platform below the threshold with no physical presence facilitating sales for a seller that is itself required to register; the seller is the retailer on those facilitated sales and the platform is not. A seller whose platform is unregistered is, for California purposes, selling direct (RTC section 6045; Reg. 1684.5(b)(2)).

New York's relief sits in a different section from the one that creates the duty. A marketplace provider is relieved of liability for failure to collect the correct amount of tax to the extent it can show the error was due to incorrect or insufficient information given to it by the marketplace seller, but the relief does not apply if the seller and provider are affiliated within the meaning of section 1101(e)(1) (Tax Law section 1133(f)). Affiliation is an ownership interest of more than five percent, direct or indirect, by one in the other, or more than five percent in each held by another person or by a group of affiliated persons (Tax Law section 1101(e)(1)). The New York standard asks for a showing of causation rather than reasonable effort, and a platform that owns a stake in a seller, or shares a parent with one, collects on that seller's sales with no relief at all.

What the seller still owes

The facilitator statute is not a release for the seller in either state. In California, a marketplace seller must register, as required, for retail sales made on its own behalf and not facilitated through a registered facilitator (RTC section 6045), and its own threshold count includes sales on its own behalf and sales facilitated through any facilitator's marketplace, whether or not taxable (RTC section 6044(b); Reg. 1684.5(b)(2)). Example 6 of the regulation shows the effect: a seller with $200,000 of facilitated sales and $299,500 of direct sales is below the line, and a single $900 direct sale puts it over, so that it must register and collect on its subsequent direct sales while the platform remains responsible for the facilitated ones. A seller whose only California sales are facilitated by a registered facilitator need not hold a seller's permit or a certificate of registration, even where it stores inventory in a California warehouse (Reg. 1684.5(b)(2) and Example 7). A registered seller deducts, as "other," the sales on which the registered facilitator is the retailer, and keeps documentation that the facilitator is responsible for the tax along with the facilitator's permit or account number (CDTFA, Tax Guide for Marketplace Facilitator Act). Because section 6046 relief shifts the tax to the seller, the seller's product taxability feed to the platform is itself a compliance document.

In New York, the seller's safe harbor is a certificate. A marketplace seller who is a vendor is relieved from the duty to collect tax on a particular sale of tangible personal property, and excludes the receipts from its taxable receipts, only if it can show that the sale was facilitated by a provider from whom it received, in good faith, a properly completed certificate of collection in the form the Commissioner prescribes, certifying that the provider is registered and will collect on all taxable sales it facilitates for the seller, and that any failure of the provider to collect the proper amount was not the result of the seller providing incorrect information (Tax Law section 1132(l)(2)). The certificate is Form ST-150, Marketplace Provider Certificate of Collection, administered like a resale or exemption certificate under section 1132(c)(1)(i), including as to completeness and timing of acceptance. The Commissioner may also approve a standard provision in the provider's publicly available agreement that has the same effect as the certificate (Tax Law section 1132(l)(3)), and the Department's guidance treats a certificate delivered within 90 days of the facilitated sales, or a qualifying agreement provision, as satisfying the requirement (Sales tax requirements for marketplace providers).

The affiliate rule bites the seller as well as the provider. For sales facilitated by a provider affiliated with the seller, the seller is deemed liable as a person under a duty to act for the provider for purposes of Tax Law section 1131(1) (Tax Law section 1132(l)(2)). That is the personal liability definition, so an affiliated seller stands behind the provider's collection failures on its own sales as a responsible officer of the platform would.

A New York seller that is a vendor on its own, because it has physical presence or exceeds the remote seller test, keeps its certificate of authority and keeps filing, reporting facilitated sales in gross sales and in nontaxable sales (Sales tax requirements for marketplace providers). A seller whose only New York activity is facilitated sales through a registered provider that collects, and whose inventory sits at the provider's own New York fulfillment facility, is not required to register (TSB-A-24(52)S, November 12, 2024, an advisory opinion binding only as to its petitioner). Outside the booking-service rule for short-term rentals, the seller remains the collector for facilitated transactions that are not sales of tangible personal property.

The open questions

Three questions have no settled answer in either state's statutes or published guidance. First, what is a reasonable effort under RTC section 6046. The statute sets the standard without defining it, the regulation refers to section 6046 relief without defining it, and the Department's guide does not say what information a facilitator must have requested; the showing is made case by case to the Department's satisfaction. A documented onboarding questionnaire and an audit trail of the seller's responses make a stronger record than unvalidated seller tax codes. Second, how far the New York receipts test reaches: the statute does not say whether a payment processor engaged by the seller rather than the platform is the platform's third party, and the advisory opinions discussed above involved providers that collected the receipts themselves. Third, sourcing errors. California's historical section 6047 relief excluded district-tax sourcing errors by name and section 6046 is silent, so a facilitator that applied the wrong district rate because the seller's address data was bad has a section 6046 argument and no certainty about it; New York's section 1133(f) is equally silent about rate-jurisdiction errors.

Practice notes

A marketplace compliance review begins with the definition, not the threshold, because a platform that fails the California two-function test or the New York receipts test owes nothing as a facilitator in that state. The relief provisions reward documentation: in California, the facilitator's record of what it asked each unrelated seller; in New York, the seller's file of Form ST-150 certificates or approved agreement language. Affiliated platforms and sellers have no relief in either state and, in New York, share personal liability. The seller's direct sales, its non-tangible-property sales, and its product data remain its own liabilities after the platform starts collecting. G&G State Tax Group provides marketplace facilitator and marketplace seller collection-responsibility analysis alongside its state and local tax practice.