What did the Indiana Department of Revenue ruling address?

The ruling examined whether a company providing auction software qualifies as a marketplace facilitator for sales tax purposes. It focused on the company’s role in transactions and whether its activities triggered an obligation to collect and remit Indiana sales tax.

Why was the company not considered a marketplace facilitator?

The company was not considered a marketplace facilitator because it only provided software and infrastructure for auctions. It did not participate in transactions, process payments, list goods, or otherwise control any part of the buying and selling process.

What activities define a marketplace facilitator under Indiana law?

A marketplace facilitator must be actively involved in transactions, such as listing products, processing payments, or otherwise controlling key aspects of the sale between the buyer and seller.

Does providing auction software alone trigger sales tax obligations?

No, simply providing auction software or infrastructure does not trigger marketplace facilitator obligations. The ruling makes clear that involvement in the transaction itself is the key factor.

When is the company required to collect and remit sales tax?

The company must collect and remit Indiana sales tax on its own direct sales, such as downloadable software and SaaS products sold to customers, even though it is not responsible for tax on auction transactions conducted through its platform.

What is the key takeaway from the ruling?

The key takeaway is that sales tax liability depends on the level of involvement in a transaction. Providing tools alone is not enough to create marketplace facilitator obligations, but actively participating in the transaction will trigger them.

Indiana Ruling: Marketplace Facilitator Tax Rules

On March 16, the Indiana Department of Revenue (DOR) published Revenue Ruling concerning a company that developed software used to run auctions and its role as a marketplace facilitator for sales and use tax purposes. Additionally, the ruling underlines the crucial distinction between facilitated sales and direct sales and how they are treated for tax purposes.

Facts of the Case and DOR's Ruling

The company provides auction software for traditional, online, and hybrid auctions and hosts the infrastructure and tools needed to conduct them. However, the company does not engage in actual transactions between sellers and buyers, nor does it handle the payments. Notably, the company does not participate in bidding, does not own or list goods, and is not involved in any way with the auctions.

Based on these facts, the Indiana DOR determined that the company is not liable for sales tax as a marketplace facilitator under Indiana regulation. The DOR pointed out that to be considered a marketplace facilitator, businesses must be actively involved, that is, they must enable and control key parts of a transaction. These key parts of transactions include listing products, processing payments, or otherwise stepping into the flow of commerce between seller and buyer.

Given that the company only provided infrastructure, without taking any part in executing or managing the sales, it is not required to collect and remit sales tax on those auction transactions. However, the DOR stated that the company is responsible for collecting and remitting Indiana sales tax on its own direct sale of downloadable software and SaaS offerings sold to its customers.

Conclusion

The DOR's ruling once again confirmed that sales tax obligations hinge less on the existence of a platform and more on the level of involvement in the underlying transaction. More specifically, providing tools and infrastructure alone is not enough to be considered a marketplace facilitator. In contrast, actively participating in or controlling the transaction does trigger the marketplace facilitator rules.

Source: Indiana Department of Revenue