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Business Taxes Law Guide – Revision 2021
 

Sales And Use Tax Law

CHAPTER 1.7. MARKETPLACE FACILITATOR ACT

Article 3. Marketplace Facilitator Relief.

Article 4. Operative Date.


CHAPTER 1.7. MARKETPLACE FACILITATOR ACT


Article 1. General Provisions and Definitions



6040. Title of chapter. This chapter shall be known as and referred to as the Marketplace Facilitator Act.

History—Added by Stats. 2019, Ch. 5 (AB 147), in effect April 25, 2019, operative October 1, 2019.


6041. Definitions. For purposes of this chapter, the following definitions shall apply:

(a) "Marketplace" means a physical or electronic place, including, but not limited to, a store, booth, internet website, catalog, television or radio broadcast, or a dedicated sales software application, where a marketplace seller sells or offers for sale tangible personal property for delivery in this state regardless of whether the tangible personal property, marketplace seller, or marketplace has a physical presence in this state.

(b) "Marketplace facilitator" means a person who contracts with marketplace sellers to facilitate for consideration, regardless of whether deducted as fees from the transaction, the sale of the marketplace seller’s products through a marketplace operated by the person or a related person and who does both of the following:

(1) Directly or indirectly, through one or more related persons, engages in any of the following:

(A) Transmitting or otherwise communicating the offer or acceptance between the buyer and seller.

(B) Owning or operating the infrastructure, electronic or physical, or technology that brings buyers and sellers together.

(C) Providing a virtual currency that buyers are allowed or required to use to purchase products from the seller.

(D) Software development or research and development activities related to any of the activities described in paragraph (2), if such activities are directly related to a marketplace operated by the person or a related person.

(2) Directly or indirectly, through one or more related persons, engages in any of the following activities with respect to the marketplace seller’s products:

(A) Payment processing services.

(B) Fulfillment or storage services.

(C) Listing products for sale.

(D) Setting prices.

(E) Branding sales as those of the marketplace facilitator.

(F) Order taking.

(G) Providing customer service or accepting or assisting with returns or exchanges.

(c) "Marketplace seller" means a person who has an agreement with a marketplace facilitator and makes retail sales of tangible personal property through a marketplace owned, operated, or controlled by a marketplace facilitator, even if that person would not have been required to hold a seller’s permit or permits, or required to collect the tax imposed pursuant to Chapter 3 (commencing with Section 6201), had the sale not been made through that marketplace.

History—Added by Stats. 2019, Ch. 5 (AB 147), in effect April 25, 2019, operative October 1, 2019.


6041.1. Online sales. Newspapers, internet websites, and other entities that advertise tangible personal property for sale, refer purchasers to the seller by telephone, internet link, or other similar means to complete the sale, and do not participate further in the sale are not facilitating a sale under this chapter.

History—Added by Stats. 2019, Ch. 5 (AB 147), in effect April 25, 2019., operative October 1, 2019. Stats. 2019, Ch. 34 (SB 92), in effect June 27, 2019, operative October 1, 2019, deleted "that do not transmit or otherwise communicate the offer and acceptance for the sale of tangible personal property between the seller and purchaser, and do not process payments directly or indirectly through third parties for the tangible personal property sold," and added "refer purchasers to the seller by telephone, internet link, or other similar means to complete the sale, and do not participate further in the sale" before "are not facilitating…" at the end of the sentence.


6041.2. Related persons. For purposes of this chapter, a person is related to another person if both persons are related to each other pursuant to Section 267(b) of the Internal Revenue Code and the regulations thereunder.

History—Added by Stats. 2019, Ch. 5 (AB 147), in effect April 25, 2019, operative October 1, 2019. Stats. 2019, Ch. 34 (SB 92), in effect June 27, 2019, operative October 1, 2019, deleted "Title 26 of" and replaced "United States" for "substituted "Internal Revenue" for "United States."


6041.5. Delivery Network Company; definitions. (a) Notwithstanding Section 6041, a person that is a delivery network company is not a marketplace facilitator for purposes of this chapter.

(b) For purposes of this section, all of the following definitions shall apply:

(1) "Delivery network company" means a business entity that maintains an internet website or mobile application used to facilitate delivery services for the sale of local products.

(2) "Delivery services" means the pickup of one or more local products from a local merchant and delivery of the local products to a customer. "Delivery services" do not include any delivery requiring over 75 miles of travel from the local merchant to the customer.

(3) "Local merchant" means a third-party merchant, including, but not limited to, a kitchen, restaurant, grocery store, retail store, convenience store, or business of another type, that is not under common ownership or control with the delivery network company.

(4) "Local product" means any item, including food, other than freight, mail, or a package to which postage has been affixed.

(c) Notwithstanding subdivision (a), a delivery network company that meets the definition set forth in subdivision (b) of Section 6041 may elect, in a reasonable manner and duration prescribed by the department, to be deemed a marketplace facilitator pursuant to this chapter. Consistent with this section, the department shall adopt regulations that establish the criteria for obtaining and retaining an election to be a marketplace facilitator pursuant to this subdivision.

History—Added by Stats. 2019, Ch. 5 (AB 147), in effect April 25, 2019, operative October 1, 2019. Stats. 2019, Ch. 34 (SB 92) in effect June 27, 2019, operative October 1, 2019, deleted former paragraph (2) and renumbered former paragraphs (3), (4), and (5) as (2), (3), and (4), respectively; and added subdivision (c).


Article 2. Registration and Collection



6042. Seller and retailer. A marketplace facilitator shall be considered the seller and retailer for each sale facilitated through its marketplace for purposes of determining whether the marketplace facilitator is required to register with the department under Chapter 2 (commencing with Section 6051) or Chapter 3 (commencing with Section 6201), in addition to each sale for which the marketplace facilitator is the seller or retailer or both under Chapter 1 (commencing with Section 6001).

History—Added by Stats. 2019, Ch. 5 (AB 147), in effect April 25, 2019, operative October 1, 2019.


6043. Retailer. A marketplace facilitator that is registered with the department or required to register with the department under Chapter 2 (commencing with Section 6051) or Chapter 3 (commencing with Section 6201) and that facilitates a retail sale of tangible personal property by a marketplace seller is the retailer selling or making the sale of the tangible personal property sold through its marketplace for purposes of this part.

History—Added by Stats. 2019, Ch. 5 (AB 147), in effect April 25, 2019, operative October 1, 2019.


6044. Calculating sales. For purposes of determining the total combined sales of tangible personal property for delivery in this state pursuant to Section 6203:

(a) A marketplace facilitator shall include all sales of tangible personal property for delivery in this state, including sales made on its own behalf and by all related persons and sales facilitated on behalf of marketplace sellers.

(b) A marketplace seller shall include all sales of tangible personal property for delivery in this state, including sales made on its own behalf and sales facilitated through any marketplace facilitator’s marketplace.

History—Added by Stats. 2019, Ch. 5 (AB 147) in effect April 25, 2019.


6045. Seller. A marketplace seller shall register with the department under Chapter 2 (commencing with Section 6051) or Chapter 3 (commending with Section 6201), as required, for retail sales made on its own behalf and not facilitated through a registered marketplace facilitator.

History—Added by Stats. 2019, Ch. 5 (AB 147), in effect April 25, 2019, operative October 1, 2019.


Article 3. Marketplace Facilitator Relief



6046. Demonstrate due diligence reasonable effort. If the marketplace facilitator demonstrates to the satisfaction of the department that the marketplace facilitator has 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 imposed under this part was due to incorrect or incomplete information provided to the marketplace facilitator by the unrelated marketplace seller, then the marketplace facilitator shall be relieved of liability for the tax for that retail sale. This section does not apply with regard to a retail sale for which the marketplace facilitator is the retailer selling or making the sale of the tangible personal property on its own behalf or if the marketplace facilitator and marketplace seller are related. Where a marketplace facilitator is relieved of liability for the tax on a retail sale under this section, the marketplace seller is the retailer for that retail sale.

History—Added by Stats. 2019, Ch. 5 (AB 147), in effect April 25, 2019, operative October 1, 2019.


6047. Relief conditions. (a) A marketplace facilitator shall be relieved of the tax on retail sales facilitated through its marketplace as provided in subdivision (c) if the marketplace facilitator demonstrates to the satisfaction of the department all of the following:

(1) The retail sales were facilitated for a marketplace seller prior to January 1, 2023, through a marketplace of the marketplace facilitator.

(2) The marketplace facilitator is not the marketplace seller.

(3) The marketplace facilitator and the marketplace seller are not related.

(4) The failure to collect sales and use tax was due to a good faith error other than an error in sourcing the sale pursuant to the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)).

(b) To the extent that a marketplace facilitator is relieved of liability for collection of sales and use tax under this section, the marketplace seller for whom the marketplace facilitator has facilitated the retail sale is also relieved of liability, unless the marketplace seller is the retailer for those retail sales pursuant to Section 6046. The department may determine the manner in which a marketplace facilitator or marketplace seller shall claim the liability relief provided in this section.

(c) The liability relief provided under this section shall not exceed the following percentage of the total sales and use tax due on sales facilitated by a marketplace facilitator for marketplace sellers, which sales shall not include sales by the marketplace facilitator or persons related to the marketplace facilitators:

(1) For sales facilitated during the fourth quarter of 2019 or during the 2020 calendar year, 7 percent.

(2) For sales facilitated during the 2021 calendar year, 5 percent.

(3) For sales facilitated during the 2022 calendar year, 3 percent.

(d) Nothing in this section shall be construed to relieve any person of liability for collecting but failing to remit to the department sales and use tax.

History—Added by Stats. 2019, Ch. 5 (AB 147), in effect April 25, 2019, operative October 1, 2019.


Article 4. Operative Date



6049.5. Operative date of article. (a) This chapter shall become operative on October 1, 2019.

(b) The provisions of this chapter are severable. If any provision of this chapter or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

History—Added by Stats. 2019, Ch. 5 (AB 147), in effect April 25, 2019, operative October 1, 2019.


Note.—Sec. Section 7, subd. (b) of Stats. 2019, Ch. 5 (AB 147) specifies:

Implementation of Chapter 1.7 (commencing with Section 6040) of Part 1 of Division 2 of the Revenue and Taxation Code and Section 6203.1 of the Revenue and Taxation Code, as both proposed to be added by this act, for the 2019–20 fiscal year, is deemed an emergency and necessary for the immediate preservation of the public peace, health, and safety, or general welfare and, therefore, the California Department of Tax and Fee Administration is hereby authorized to adopt emergency regulations to implement those provisions during the 2019–20 fiscal year, in accordance with the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code). Notwithstanding any other law, the emergency regulations adopted by the California Department of Tax and Fee Administration may remain in effect for two years from the date of adoption.