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Florida enacts remote seller and marketplace provider collection requirements

May 2021

In brief

Florida has enacted legislation that requires remote sellers and marketplace providers to collect and remit sales and use taxes (and applicable local option surtaxes) when they have more than $100,000 in annual sales to Florida buyers. The requirement is effective July 1, 2021. [S.B. 50, signed by Governor, 4/19/2021]

Action item: Businesses should consider their potential liability as either remote sellers or marketplace providers under the new law and whether exclusions from tax collection requirements may apply. Affected businesses must prepare to collect and remit tax with only a little over two months’ notice.

In detail

Remote sales threshold, start date, and liability relief

The legislation provides that every person making a ‘substantial number of remote sales’ and every ‘marketplace provider’ making or facilitating a substantial number of remote sales through a marketplace is a ‘dealer’ required to collect the applicable tax. A substantial number of remote sales is “any number of taxable remote sales in the previous calendar year in which the sum of the sales prices…exceeded $100,000.”

Observation: The remote sales threshold calculation includes only retail sales of tangible personal property taxable under Chapter 212 (“Tax on Sales, Use, and Other Transactions”). The remote sales and marketplace provisions effective July 1, 2021 are limited to taxes under Chapter 212 (and therefore exclude taxes applicable under other Chapters such as the communications services tax). However, effective April 1, 2022, marketplace providers also are responsible for collecting and remitting any applicable prepaid wireless E911 fee, waste tire fee, and lead-acid battery fee.

The remote sales threshold first applies to remote sales made or facilitated on or after July 1, 2021, by a person who made or facilitated a substantial number of remote sales in calendar year 2020. Marketplace sellers should only consider the sales they made outside of the marketplace in determining whether they meet the threshold.

Remote sellers are relieved of liability for tax, penalty, and interest due on remote sales they made or that were facilitated by a marketplace before July 1, 2021, provided they register with the Department of Revenue before October 1, 2021. Marketplace providers with a physical presence and remote sales in Florida before July 1, 2021, will be relieved of liability only for sales facilitated on behalf of a marketplace seller.

Relief does not apply to a remote seller, marketplace seller, or marketplace facilitator that is under audit; has been issued a bill, notice, or demand for payment; or is under an administrative or judicial proceeding as of July 1, 2021.

Observation: The legislation amends the definition of a ‘dealer’ responsible for collecting and remitting tax to add the ‘substantial number of remote sales’ threshold. Remote sellers that fail to register and qualify for liability relief for prior periods under this legislation potentially will have exposure for taxes, interest, and penalties under the preexisting ‘dealer’ definition.

Marketplace facilitator requirements

The collection requirement applies to a ‘marketplace provider’: a person who facilitates a retail sale by a marketplace seller by listing or advertising for sale tangible personal property in a marketplace and who directly, or indirectly through agreements or arrangements with third parties, collects payment from the customer and transmits all or part of the payment to the marketplace seller, regardless of whether the marketplace provider receives compensation or other consideration in exchange for its services.

The legislation excludes from the definition of ‘marketplace provider’:

  • Travel agency service providers solely engaged in arranging, booking, or otherwise facilitating for a commission, fee, or other consideration vacation or travel packages, rental cars, or other travel reservations; tickets for domestic or foreign travel by air, rail, ship, bus, or other mode of transportation; or hotel or other lodging accommodations.
  • Delivery network companies maintaining a website or mobile application used to facilitate delivery services, the sale of local products, or both, unless the delivery network company is a registered dealer that notifies all local merchants that sell through the delivery network company’s website or mobile application that the delivery network company is subject to the requirements of a marketplace provider.
  • Payment processor businesses that process payment transactions from channels such as charge cards, credit cards, or debit cards, and whose sole activity with respect to marketplace sales is to process payment transactions between two or more parties.

The legislation allows a marketplace facilitator the option of reporting all its sales along with its marketplace retailers’ sales on one return. Further, the legislation provides, effective April 1, 2022, that a marketplace provider and marketplace seller may contractually agree to have the marketplace seller collect and remit all applicable taxes and fees if the marketplace seller:

  • Has annual US gross sales of more than $1 billion, including the gross sales of any related entities, and in the case of franchised entities, including the combined sales of all franchisees of a single franchisor;
  • Provides evidence to the marketplace provider that it is registered; and
  • Notifies the Department in a manner prescribed by the Department that the marketplace seller will collect and remit all applicable taxes and fees on its sales through the marketplace and is liable for failure to collect or remit applicable taxes and fees on its sales.

The marketplace provider is relieved of liability if it demonstrates to the Department’s satisfaction that it made a reasonable effort to obtain accurate information from a marketplace seller but failed to collect and remit the correct amount of tax because the information was incorrect or incomplete. In such a case, the marketplace seller or customer will be liable for the tax imposed.

Observation: The term ‘dealer’ now includes (1) every person who sells at retail or who offers for sale at retail, or who has in his or her possession for sale at retail; or for use, consumption, or distribution; or for storage to be used or consumed in this state, tangible personal property, (2) a retailer who transacts a substantial number of remote sales, (3) a marketplace provider that has a physical presence in this state, or (4) a marketplace provider that makes or facilitates through its marketplace a substantial number of remote sales.

The takeaway

Only Missouri still lacks a statutory sales tax collection threshold and marketplace facilitator collection requirements, although proposals to adopt such measures are pending in the legislature. Kansas has previously tried to enforce sales tax economic nexus without a statutory threshold. However, legislation (S.B. 50) to establish such a threshold and adopt marketplace facilitator collection requirements was enacted on May 3 by overriding Governor Laura Kelly’s (D) veto. Businesses should continue to monitor Missouri for potential enactment of legislation adopting sales tax economic nexus standards and marketplace facilitator requirements.

Other provisions in the Florida law impacting businesses include adopting a ‘rounding rule’ for determining sales tax due, providing for payments to the unemployment trust fund, and reducing the state commercial rent tax from 5.5% to 2%. The commercial rent tax reduction’s effective date is dependent on the timing of unemployment trust fund recovery. Affected taxpayers renting real property in Florida should monitor announcements from the Department of Revenue regarding the timing of commercial rent tax relief.

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Peter Michalowski

Partner, State and Local Tax Consulting Leader, PwC US

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