Poshmark Inc., an apparel marketplace with more than 5 million sellers, will begin collecting and remitting state and local sales taxes for transactions made through the platform starting next month. Buyers will be charged the tax rate that applies where they live. Poshmark’s tax program goes beyond what is currently required by law in some states.
There will be no additional charge to sellers for the service, Poshmark says. The program is called Posh Remit and is intended to simplify the sales tax process for sellers.
Sales tax responsibilities have grown increasingly complex following a decision by the U.S. Supreme Court last summer that ruled states and local governments could require online retailers to collect sales tax even if they don’t have a physical presence, or nexus, in the state or local tax jurisdiction. More than 30 states have put online sales tax laws into place, setting different minimum transaction value and volume thresholds for online retailers. For instance, California requires online businesses to collect sales tax if they generate more than $100,000 in gross sales and at least 200 transactions annually in California. Enforcement begins April 1.
Marketplace facilitator laws and sales tax obligations
However, 10 states also have implemented laws that require marketplace operators to manage tax obligations for the sales that happen on their platforms. These laws are commonly referred to as marketplace facilitator laws. The states are Alabama, Connecticut, Iowa, Minnesota, New Jersey, Oklahoma, Pennsylvania, South Carolina, South Dakota and Washington. This means marketplace operators that service sales to consumers in those states have had to implement tax collection and remittance programs.
Poshmark will enroll all sellers in the Posh Remit program automatically. Sellers will be able to see how much tax has been collected and remitted on their sales in their Poshmark account.
“Poshmark’s universal approach to sales tax will allow Seller Stylists to reach shoppers across the U.S., while at the same time supporting their local communities directly,” says Manish Chandra, Poshmark’s founder and CEO.
Poshmark declined to say how many so-called “power sellers” it has whose sales may subject them to tax liabilities in different states. Poshmark sellers range from individuals selling apparel to larger merchants selling through the platform. Poshmark takes a 20% commission on sales of more than $15. For sales of less than $15, it takes a $2.95 fee. Poshmark says it has paid out more than $1 billion to sellers since its start in 2011.
Some other online marketplace platforms have added similar services for marketplace sellers. Etsy Inc., for instance, automatically calculates, collects and remits applicable sales taxes based on orders where online sales tax laws have gone into effect. Amazon.com Inc. takes a different approach. It automatically collects and remits on the part of sellers in the states where marketplace facilitator laws are in effect. (EBay Inc. has done the same.) For orders bought by consumers outside states where marketplace facilitator laws are in effect, Amazon will calculate and charge tax on sellers’ transactions when sellers instruct it to.
Poshmark is No. 33 in Internet Retailer Online Marketplaces Database, which ranks 100 online marketplaces by the gross merchandise value of goods sold through the marketplace. Etsy is No. 16, eBay is No. 5 and Amazon is No. 3.Favorite