New York: Advisory Opinion Concludes that a Marketplace Provider Qualified as a Vendor

In a recent advisory opinion, the Department concluded that, under current New York law, a marketplace provider qualified as a “vendor” required to collect sales tax. Currently, New York does not have any specific provisions mandating that marketplace providers are required to collect and remit sales and use tax on sales made via a marketplace. The posture between the entity requesting guidance (the petitioner) and the Department was a bit different than one might expect:  the requesting entity was already collecting and remitting sales tax and gave no indication that it intended to stop. Rather, it sought confirmation that it could act as a vendor and collect tax, as well as information regarding the consequences of doing so. The petitioner operated an online marketplace via which third-party software vendors offered software, games, and apps for download. The petitioner processed customer payments and remitted sales tax on the purchases to the Department. The purchased software products were delivered to purchasers electronically from one of the petitioner’s data centers.

The Department determined that New York’s current definition of a vendor allowed it to treat the petitioner as a co-vendor for sales occurring through its marketplace because doing so would improve the efficiency of sales tax administration. In terms of consequences, the Department explained that this would relieve the third-party vendors from the need to register with the Department, assuming that they were selling solely via the marketplace. The third-party vendors would not be liable for tax if the petitioner properly collected and remitted the tax due. Finally, as a vendor, the petitioner could accept exemption certificates and seek refunds as could any other vendor. Pending budget legislation in New York includes provisions requiring marketplace facilitators to collect on sales they facilitate beginning September 1, 2019. Please contact Judy Cheng at 212-872-3530 with questions regarding TSB-A-19(1)S.