Who pays VAT or sales tax when a platform sells for others?
In the EU, marketplaces are deemed suppliers for imports up to €150 and for sales by non-EU sellers, declared through the OSS or IOSS. In the US, 45 states and DC require marketplace facilitators to collect sales tax for their sellers, generally above a $100,000 economic-nexus threshold.
In detail
In the EU, marketplaces are deemed suppliers for imports up to €150 and for sales by non-EU sellers, declared through the OSS or IOSS. In the US, 45 states and DC require marketplace facilitators to collect sales tax for their sellers, generally above a $100,000 economic-nexus threshold.
What is a merchant of record?
The same acquirer connection can serve a marketplace selling in its own name and a SaaS platform whose users sell in theirs. What differs is who signs the sale, who owes the tax, and who answers the buyer.
How a merchant-of-record sale works
Funds land with the MoR, gross of tax. The MoR keeps the tax, its fee and a reserve, and pays the vendor or seller net, on its own payout schedule.
Why do taxes drive the merchant-of-record model?
In the United States, the 2018 Wayfair ruling let states tax remote sellers, and states pushed the collection duty onto marketplaces. Today 45 states and DC require marketplace facilitators to collect sales tax, with an economic-nexus threshold of $100,000 in most states. A software vendor selling to US buyers from Europe would otherwise have to register in dozens of states.
More detail in our #PayDecoding episode on Merchant of record.