A marketplace facilitator is a platform that both connects buyers to sellers and handles part of the transaction, and in most US states that combination makes the platform, rather than you, the party legally responsible for collecting and remitting sales tax on sales made through it. If you sell exclusively on Amazon, Walmart, eBay, or Etsy, you may have no sales tax collection obligation at all in states where the platform is registered. If you also sell on your own website, you almost certainly do.
The distinction determines which returns you file, what you report on them, and whether you can close a state registration you are currently maintaining for no reason.
What the definition actually requires
State statutes vary in wording but converge on a two-part test. California’s Marketplace Facilitator Act, which the California Department of Tax and Fee Administration summarizes in its industry guide, is a representative example.
Under California’s rules, a person is a marketplace facilitator if they contract with marketplace sellers to facilitate sales through a marketplace they operate, and they do at least one activity from each of two lists.
From the first list, they must do one of: transmit or communicate the offer or acceptance between buyer and seller, own or operate the infrastructure or technology that brings buyer and seller together, provide a virtual currency buyers use to purchase, or perform software development directly related to the marketplace.
From the second list, they must do one of: payment processing, fulfillment or storage, listing products for sale, setting prices, branding sales as their own, order taking, or providing customer service and handling returns.
Amazon does nearly all of these. So does Walmart, eBay, and Etsy. A site that merely advertises products and refers the buyer elsewhere does not qualify; CDTFA states explicitly that a newspaper or website that advertises merchandise, refers the purchaser to the seller, and does not participate further is not a marketplace facilitator for that sale.
What changed for sellers
California’s rules took effect October 1, 2019, under Assembly Bill 147. From that date, the marketplace facilitator is treated as the retailer for each sale facilitated through its marketplace.
The practical consequence, per CDTFA: a marketplace seller whose retail sales of merchandise are all facilitated through a registered marketplace facilitator is not required to register with CDTFA for a seller’s permit or a Certificate of Registration for use tax.
That is a genuine reduction in compliance burden, and a lot of sellers are still carrying registrations they no longer need because nobody told them the rule changed underneath them.
Where it stops helping you
Three situations put the obligation back on the seller.
Direct sales
Sales through your own Shopify store, wholesale orders, and anything else not facilitated by a registered marketplace are yours. CDTFA is explicit that a marketplace seller making any sales not facilitated by a registered facilitator may have a registration requirement.
Physical presence
Holding inventory in a state generally creates a physical presence there. CDTFA lists maintaining inventory or a place of business in California among the circumstances constituting sufficient physical presence, and notes that a third party’s California fulfillment center may count as your place of business if there is dedicated storage for your merchandise not commingled with other sellers’ goods.
The commingling detail is worth reading carefully rather than assuming an answer, and it is exactly the kind of question to put to a tax professional rather than a forum.
Economic nexus
This is the one that surprises people. California’s economic nexus threshold is $500,000 in total combined sales of tangible personal property for delivery into the state in the preceding or current calendar year.
The critical wording: CDTFA states that to determine whether you exceed the threshold, you must include all sales for delivery into the state, including sales made on your own behalf and sales facilitated through a marketplace facilitator’s marketplace.
So marketplace sales do not create a collection obligation on themselves, but they do count toward the threshold that determines whether your direct sales create one. A seller doing $480,000 on Amazon and $40,000 on their own site into California has crossed $500,000 and has an obligation on the $40,000.
What this does to your books
Three bookkeeping consequences follow, and all three are commonly handled wrong.
Marketplace-collected tax is not revenue. Money the platform collected and remitted passed through you or, more precisely, did not pass through you at all. Running it through your sales account inflates the top line and distorts every ratio computed from it. Book it to a pass-through liability account that nets to zero, or exclude it at the point of import.
You still report the gross sales. If you remain registered because you have direct sales or physical presence, CDTFA requires you to report your total sales on your return, including those facilitated through a marketplace, and then claim a deduction for the facilitated portion. Total sales, then deduct. Not omit.
Channel separation stops being optional. You need marketplace revenue and direct revenue distinguishable in the ledger by state, because they carry different obligations. Tools built for multi-channel selling handle this at import; ConnectBooks, for instance, syncs Amazon, Shopify, Walmart, TikTok Shop, and eBay data separately into QuickBooks Online, QuickBooks Desktop Enterprise, and Xero, which keeps the channel distinction intact rather than collapsing everything into one revenue line. Whatever you use, the requirement is the same: you cannot answer a state’s question with a blended number.
Documentation the states expect you to keep
CDTFA lists what supports your position that a facilitator was responsible for the tax: an agreement with the marketplace facilitator stating it is registered and responsible for collecting, reporting, and paying the tax, or other documentation showing the facilitator is registered. It also advises obtaining the facilitator’s permit or account number and verifying it through the state’s permit verification page.
Most sellers have never done this. It takes an afternoon and it is the difference between a clean answer and a reconstruction project if a state asks.
The part that does not generalize
Everything above uses California as the worked example because California publishes an unusually clear guide. Thresholds, effective dates, and definitions differ by state. Some states use a transaction count alongside a dollar threshold. Some treat inventory in a third-party fulfillment center differently from how California does.
Two starting points. The CDTFA marketplace facilitator guide is worth reading in full even if you never sell into California, because it models the structure most states follow. The IRS small business section covers the federal side, which is entirely separate and gets confused with this constantly.
Then check your own states. This is a description of how the rules generally work, not tax advice, and the cost of one conversation with a state and local tax professional is small next to the cost of finding out you were wrong across four years of filings.