US: New Sales Tax Rules for Marketplace Facilitators in Tennessee

Tennessee Department of Revenue (TDR) issued updated rules concerning the basis under which marketplace facilitators calculate sales tax. 

Like other US states, Tennessee implemented rules for marketplace facilitators and sellers in 2020 following the Wayfair ruling. However, these rules were unclear and ineffective enough, so the TDR made updates.

Marketplace Facilitators Rules in Tennessee

In 2020, Tennessee implemented the so-called Marketplace Facilitator Law, shifting the responsibility for collecting and remitting sales tax on transactions made through marketplaces onto marketplaces. Unlike some other US States, which used the number of transactions and the amount of sales as relevant for the threshold, Tennessee only used the amount of sales for the threshold; thus, the threshold was set at USD 100,000.

Once the marketplace facilitator makes or facilitates sales of USD 100,000 or more in Tennessee, it becomes liable for sales tax collection and remittance to TDR.

Since 2020, out-of-state marketplace sellers have not been obliged to register for sales tax purposes in Tennessee if they only make sales through the marketplace. However, there are situations when this registration might be required.

If an out-of-state marketplace seller makes other sales except those through the marketplace, it might have to register for sales tax purposes if it has a physical presence in Tennessee or if its sales exceed the USD 100,000 threshold.

Rules from 2020 stated that sales of tangible property are taxed based on the delivery or shipping address, whereas taxable services had different rules in place.

With new rules, as of July 1, 2024, all sales made through the marketplace, including taxable services, are taxed based on the customers' location. Taxable services subject to sales tax in Tennessee include short-term rental of properties, installation of computer software, streaming services, etc.

Conclusion

When discussing the marketplace facilitators' rules in the US, we can refer to the deemed supplier rule established in the EU in 2021. This rule states that a marketplace facilitator is considered the retailer when facilitating the sale between the marketplace seller and the consumer. Simply put, it is as if it made this sale.

Tennessee is just one of the US states adjusting their marketplace facilitators laws by either changing the threshold rules or what transactions fall under the scope of the sales tax.

Source: Tennessee Department of Revenue