Mississippi Enacts Marketplace Facilitator Legislation – Effective July 1, 2020

Summary

On June 30, 2020, Mississippi’s Governor signed House Bill (HB) 379 into law, known as the “Mississippi Marketplace Facilitator Act of 2020,” making Mississippi the most recent state to enact marketplace facilitator rules. Effective July 1, 2020, the bill requires marketplace facilitators with nexus in Mississippi to collect, remit, and report sales tax on taxable sales. Mississippi asserts economic nexus on out-of-state sellers with over $250,000 in sales in any consecutive 12-month period.
 

Details

Changes to Economic Nexus Thresholds

Previously, for periods between September 1, 2018, through June 30, 2020, Mississippi administratively imposed economic nexus on remote sellers that purposefully or systematically exploited the Mississippi market if their sales exceeded $250,000 in the prior twelve months. That administrative guidance applied to remote sellers only. Before July 1, 2020, Mississippi did not have economic nexus rules in place for marketplace facilitators.

Effective July 1, 2020, Mississippi statutorily created an economic nexus threshold that applies to remote sellers, marketplace facilitators, and marketplace sellers doing business in the state. HB 379 does not include “purposefully or systematic exploitation of the Mississippi market” as an element to determine whether an out-of-state seller is doing business in the state. Beginning on July 1, 2020, Mississippi’s economic nexus threshold is sales exceeding $250,000 in any consecutive 12-month period.

When calculating whether it exceeds Mississippi’s economic nexus threshold of $250,000, a sale made through a marketplace is considered the marketplace facilitator’s sales and not the sale of a marketplace seller.
 

Marketplace Facilitators and Their Responsibilities

Effective for sales occurring on or after July 1, 2020, HB 379 requires “marketplace facilitators” who meet the economic nexus thresholds to collect and remit sales tax on all “marketplace-facilitated sales.” Similar to many states with marketplace regimes, Mississippi defines a “marketplace facilitator” as any person who facilitates a retail sale by a seller by:

• Listing or advertising for sale by the retailer in any form, tangible personal property, services, or digital goods that are subject to sales tax; and
• Either directly or indirectly through agreements or arrangements with third parties collecting payment from the customer and transmitting the payment to the retailer regardless of whether the marketplace provider receives compensation or other consideration in exchange for its service.

A marketplace facilitator has the same tax obligations as other sellers doing business in Mississippi.  As such, it is required to comply with the same registration requirements, with the same collection and remittance requirements, and the same reporting requirements as any other retailer in Mississippi. 

Also, similar to other states, Mississippi will only audit the marketplace facilitator for sales made through its marketplace.  Mississippi will not audit marketplace sellers for sales made through the marketplace.
 

Limitations on the Liability of Marketplace Facilitators

Like other states, Mississippi includes a liability relief provision for marketplace facilitators. The marketplace facilitator may be relieved of liability if it can demonstrate that the failure to collect the correct amount of tax was due to incorrect or insufficient information from the marketplace seller, provided that the marketplace facilitator can demonstrate reasonable efforts to collect the necessary information. The liability relief provision does not apply if the marketplace facilitator and marketplace seller are affiliates.

Contractual Agreement Between Marketplace Facilitators and Marketplace Sellers

Mississippi joins the new trend where states include a provision that does not prohibit the marketplace facilitator and the marketplace seller from contractually agreeing to have the marketplace seller collect and remit applicable sales taxes if certain requirements are met.  First, the marketplace seller must have over $1 billion in annual U.S. sales, including gross sales of any related entities. Second, the marketplace seller must provide evidence to the marketplace facilitator that it is registered in Mississippi. And finally, the parties must notify the Department of Revenue that the marketplace seller will collect and remit tax on its sales through the marketplace.
 
 

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