Marketplace Facilitator Tax Updates for U.S. Orders

Sales tax laws can be perplexing. They differ from state to state and they are constantly changing. 🤯 Speaking of changes, many states have enacted new tax laws that affect online marketplaces like Big Cartel and merchants like you. As a result, we’ve changed how we handle sales tax.

We want to explain why Big Cartel handles sales tax collection, and what is expected from you as a merchant on our platform in the hopes this will be less confusing. As always, talk to your own tax specialist if you have questions about your tax obligations.

So what does this all mean?

The effect of these new sales tax laws is to shift the burden of calculating, collecting, and remitting tax on purchases made within a state from individual merchants like you to platforms like us. It’s a way for states to ensure that they can collect sales tax revenue without monitoring millions of individual sellers.💸

This means Big Cartel calculates the sales tax for the shipping address, charge the buyer based on state sales tax rates, and then send the tax owed to the state. This applies to all 45 states that have a sales tax (Montana, Oregon, New Hampshire, Delaware and Alaska don't have sales tax, so customers in those states won't see sales tax added to their orders). That’s a good thing, right?!

To stay in business, it’s important that we stay on top of new state tax rules like these. So take a sec to go through some of the common questions that you’re likely having here.

Marketplace Facilitator Tax FAQs

Why is Big Cartel collecting tax on my behalf?

There was a United States Supreme Court case called South Dakota v. Wayfair Inc., which expanded how states can collect sales taxes. Following this case, most U.S. states passed laws requiring online marketplaces to calculate, collect, and remit taxes on purchases made within the state. Most of these laws are vague and constantly changing, creating a confusing patchwork of requirements for us, you and your customers to sort out. Not only that, many states have different rules and requirements. Facing all of this Big Cartel has to determine how to proceed on a case-by-case basis. We calculate, collect, and remit sales tax on orders shipped to all 45 states that have a sales tax (excluding Montana, Oregon, New Hampshire, Delaware and Alaska which do not).

I don’t personally have sales tax nexus (i.e., a sufficient presence) in other states, so why is Big Cartel collecting and remitting tax on sales I make into those states??

Most states collect sales tax on purchases made within their states. Before the Wayfair case noted above, sellers only had to collect and remit sales tax on purchases where the seller had a physical presence in the state. For example, an online seller who lived in California, or had an office there, would be required to collect and remit sales tax on orders shipped to addresses in California.

Since the Wayfair case, states can now require sellers to collect sales tax on online sales made into the state if the seller reaches a certain revenue and/or transaction threshold. On top of that, most states now treat online marketplaces as the seller when they apply those thresholds. States have different rules for this though, making it particularly tricky to navigate across the U.S. Bottom line: sales made through an online marketplace can now be taxed even if the seller does not have a presence in the state. In response to these new laws, Big Cartel collects and remits sales tax on orders shipped to all 45 states that have a sales tax (excluding Montana, Oregon, New Hampshire, Delaware and Alaska which do not).

Even if other platforms aren’t currently collecting and remitting sales tax, they likely will be soon because these new sales tax laws affect anyone who sells online regardless of the platform they’re using.

It's our recommendation that you take any concerns about the scope of your ability to run your business as an individual to your elected officials both at the state and federal level, as that is the only place that change can happen.

What about sales tax exemptions?

We are integrated with TaxJar so they’ll automatically adjust tax for many of those exemptions, like location, product or service type. Those adjustments will be based on your shop's location, your customer’s location, and the product class you enter for your products.

Is sales tax applied to shipping?

It depends on the state. Unfortunately, the laws are not universal and vary by state. Based on your location, your customer's location, and the type of product you are selling, TaxJar will automatically exclude tax on shipping in states where it is exempt and add tax to shipping for states that require it.

Will I still need to file taxes & report sales made through my Big Cartel shop?

In some cases, depending on your state, you'll still need to report sales and the tax paid on those sales. But you won’t have to remit any sales tax collected on your sales made through Big Cartel where we’ve already done that for you.

If you’re unsure what your responsibilities may be, we encourage you to consult an accountant or other tax specialists.

Will I see the total taxes Big Cartel collects?

Yes, you can see the tax collected per order in the admin's individual order display, and in the orders.csv report.

No thanks, if I can't opt-out of this tax collection then I'll move to a different platform.

There's not a way to opt out-- if you do some research, or talk to a couple of sales tax professionals, you'll learn that you can jump around from platform to platform, but you can't outrun sales tax. Etsy and Amazon are doing this too (although taking slightly different approaches from ours), and other store builders will soon follow in order to keep their businesses above board.

It bears repeating, tax is complicated! While Big Cartel collects and remits state sales tax collected in your shop, there are some states (e.g. - Colorado's home-rule tax or Illinois' ROT) that may have additional local taxes in place that are not administered by the state, and that puts the responsibility of paying that local sales tax on the seller. It's always a good idea, no matter where you're located, to reach out to an accountant to make sure to you are covering any requirements on your end.