Cal. Code Regs. tit. 18 § 1684.5
Example 1. Company A owns and operates a website where multiple marketplace sellers offer to sell and sell tangible merchandise for delivery in California. Therefore, Company A's website is a marketplace.
Example 2. Company B owns and operates a website that aggregates the tangible merchandise listed for sale in marketplace sellers' online stores on a single searchable platform where the marketplace sellers offer to sell and sell the tangible merchandise for delivery in California. Therefore, Company B's website is a marketplace.
Example 3. Company C owns and operates its own website where it is the only seller offering to sell and selling tangible merchandise and services. Company C sells web hosting and related services to Sellers D and E, including payment processing services. Sellers D and E use the services to create their own unique e-commerce websites where each of them is the only seller offering to sell and selling tangible merchandise. Therefore, Company C's, Seller D's, and Seller E's websites are not marketplaces.
A person that engages in any of the activities in subdivisions (a)(10)(B)(ii) through (vii) with respect to the marketplace seller's products is not required to provide payment processing services to be a marketplace facilitator.
Example 4: Company A owns and operates a website where multiple sellers sell and offer to sell merchandise for delivery in California. Company A also enters into contracts to facilitate the sale of the sellers' merchandise through its website for a fee and provides payment processing services for sales of these sellers' merchandise sold through its website. Therefore, Company A is a marketplace facilitator.
Example 5: Company A is a marketplace facilitator with no physical presence in California. Company A did not make or facilitate any sales of tangible merchandise for delivery in California during 2018. From January 1, 2019, to September 30, 2019, Company A sold $300,000 of tangible merchandise for delivery in California on its own behalf and facilitated sales of $250,000 of tangible merchandise for delivery in California through its marketplace for Seller A, a marketplace seller. Since the total combined sales of tangible merchandise for delivery in California exceeded the $500,000 threshold in Revenue and Taxation Code section 6203, subdivision (c)(4), during 2019 and prior to October 1, 2019, Company A is a retailer engaged in business in this state on October 1, 2019, and must register with the Department for a Certificate of Registration - Use Tax, and collect and remit use tax beginning October 1, 2019.
Example 6: Seller A is a marketplace seller that has no physical presence in California. Seller A did not make more than $500,000 in sales of tangible merchandise for delivery in California during 2018, and from January 1, 2019, to September 30, 2019, Seller A made $200,000 in sales of tangible merchandise for delivery in California that were facilitated through a marketplace facilitator's marketplace and made $299,500 in sales of tangible merchandise for delivery in California through its own website. Therefore, on October 1, 2019, Seller A is not a retailer engaged in business in this state and is not required to be registered with the Department. However, on October 2, 2019, Seller A made a $900 sale of tangible merchandise for delivery in California through its website that when combined with its other sales exceeded the $500,000 threshold in Revenue and Taxation Code section 6203, subdivision (c)(4). Therefore, Seller A is a retailer engaged in business in this state and required to register with the Department for a Certificate of Registration - Use Tax immediately after the $900 sale on October 2, 2019. Also, Seller A is required to collect and remit use tax on its subsequent retail sales to California customers, except for its retail sales facilitated by marketplace facilitators who are the sellers and retailers for purposes of those sales pursuant to subdivision (c) of this regulation.
Example 7: Seller B is a marketplace seller that leases spaces in a California warehouse where it stores some of its inventory and fulfills some of its orders. However, on and after October 1, 2019, Seller B will only make sales of tangible merchandise in California or for delivery in California that are facilitated by Company C, a marketplace facilitator who will be the seller and retailer for purposes of those sales pursuant to subdivision (c) of this regulation. Therefore, on and after October 1, 2019, Seller B will not be the retailer responsible for paying sales tax or collecting and remitting use tax on its sales in California or for delivery in California and Seller B will not be required to be registered with the Department for a seller's permit or Certificate of Registration - Use Tax on and after October 1, 2019.
A marketplace facilitator that is registered with the Department or required to register with the Department for a seller's permit or Certificate of Registration - Use Tax and facilitates a retail sale of tangible personal property by a marketplace seller on or after October 1, 2019, is the retailer selling or making the sale of the tangible personal property sold through its marketplace. Therefore, the marketplace facilitator is the retailer responsible for paying sales tax or collecting and remitting use tax on that sale and the marketplace seller is not the retailer responsible for paying sales tax or collecting and remitting use tax on that sale, unless the marketplace facilitator qualifies for relief from liability for the tax on that sale pursuant to Revenue and Taxation Code section 6046.
Example 8: Company A is a marketplace facilitator that is currently registered for a seller's permit with the Department. Company A enters into an agreement with Company B, a marketplace seller, to facilitate sales of Company B's tangible merchandise through Company A's marketplace. Company B provides Company A with sufficient information for Company A to determine the correct amount of tax due on the retail sales of Company B's merchandise for delivery in California. Therefore, when Company A facilitates a retail sale of Company B's tangible merchandise for delivery in California through its marketplace on or after October 1, 2019, Company A is the retailer selling or making the sale of the merchandise sold for delivery in California and the retailer responsible for paying sales tax or collecting and remitting use tax on that sale, and Company B is not the retailer responsible for paying sales tax or collecting and remitting use tax on that sale.
Example 9: The facts are the same as in example 8, except that Company A is not registered or required to be registered with the Department for a seller's permit or Certificate of Registration - Use Tax on October 1, 2019, because it does not have a physical presence in California, it did not make any sales for delivery in California during 2018, and it only made or facilitated $250,000 in total combined sales of tangible merchandise for delivery in California from January 1, 2019, through September 30, 2019. Also, Company B is required to be registered with the Department for a Certificate of Registration - Use Tax on October 1, 2019, because it made $550,000 in sales of merchandise for delivery in California from January 1, 2019, through September 30, 2019, and it makes sales for storage, use or other consumption in California that are not facilitated through a registered marketplace facilitator. Therefore, when Company A facilitates a sale of Company B's merchandise through its marketplace on October 1, 2019, Company B is the retailer selling or making the sale of the merchandise and the retailer responsible for collecting and remitting use tax on that sale, and Company A is not the retailer responsible for collecting and remitting use tax on that sale.
A person, including, but not limited to, a person who operates a newspaper or internet website, that advertises tangible personal property for sale, refers purchasers to the seller by telephone, mail, email, website address, internet link, or other similar means to complete the sale, and does not participate further in the sale is not facilitating the sale. Therefore, the person is not considered the seller and retailer for the sale for purposes of determining whether the person is required to register with the Department under subdivision (b)(1) and the person is not the retailer selling or making the sale of the tangible personal property under subdivision (c), regardless of whether the person is a marketplace facilitator, the seller is a marketplace seller, the tangible personal property is advertised in a marketplace, or the advertisement contains an offer to sell tangible personal property.
Example 10: Company A provides internet access and digital television services. Company A sells advertising space on its website and television service and allows sellers to include the picture, description, and sales price of their merchandise and the address of or internet link to their website, so that Company A may refer potential purchasers to the sellers to complete sales of the tangible merchandise advertised for sale on Company A's website or television service. Company A does not otherwise participate further in the sales, such as taking orders or providing payment processing or fulfillment services. Therefore, Company A is not facilitating the sales of tangible merchandise through the advertisements on its website or television service, Company A is not the seller and retailer for those sales for purposes of determining whether Company A is required to register with the Department under subdivision (b)(1), and Company A is not the retailer selling or making the sales of that merchandise under subdivision (c).
Example 11: Company B is a marketplace facilitator that facilitates sales of tangible merchandise by marketplace sellers through its website and is currently registered for a seller's permit with the Department. In addition, Company B sells advertising space on its website and allows sellers advertising on its website to include a picture, description, and sales price of their merchandise and an internet link to their website in their advertisements, so that Company B may refer potential purchasers to the seller's website to complete sales of the tangible merchandise advertised for sale on Company B's website. Company B does not otherwise participate further in the sales of merchandise advertised for sale on its website, such as by taking orders, or providing payment processing or fulfillment services. Therefore, Company B is not facilitating the retail sales of tangible merchandise made through the advertisements on its website, Company B is not the seller and retailer for those sales for purposes of determining whether Company B is required to register with the Department under subdivision (b)(1), and Company B is not the retailer selling or making the sales of that merchandise under subdivision (c).
Example 12: The facts are the same as in example 11, except that Company B offers an email relay service to sellers that advertise on its website whereby Company B will refer potential purchasers to the sellers to complete sales using an email relay service that masks the purchasers' and sellers' personal email addresses. The provision of such an email relay service does not constitute participation in the sales of the tangible merchandise advertised for sale on its website beyond advertising the merchandise for sale and referring the purchaser to the seller to complete the sale. Therefore, Company B is not facilitating the retail sales of tangible merchandise made through the advertisements on its website, Company B is not the seller and retailer for those sales for purposes of determining whether Company B is required to register with the Department under subdivision (b)(1), and Company B is not the retailer selling or making the sales of that merchandise under subdivision (c).
Example 13: The facts are the same as in example 11, except that Company B will take orders for sellers that advertise on its website to make it easier for them to sell their merchandise through Company B's website. Therefore, when Company B takes an order for a sale of tangible merchandise advertised for sale on its website, Company B is facilitating the sale of that merchandise, Company B is the seller and retailer for that sale for purposes of determining whether Company B is required to register with the Department under subdivision (b)(1), Company B is the retailer selling or making the sale of that merchandise under subdivision (c), and Company B is responsible for paying sales tax or collecting and remitting use tax on that sale.
Example 14: The facts are the same as in example 11, except that Company B will provide payment processing services to sellers that advertise on its website to make it easier for them to sell their merchandise through Company B's website. Therefore, when Company B provides payment processing services for a sale of tangible merchandise advertised for sale on its website, Company B is facilitating the sale of that merchandise, Company B is the seller and retailer for that sale for purposes of determining whether Company B is required to register with the Department under subdivision (b)(1), Company B is the retailer selling or making the sale of that merchandise under subdivision (c), and Company B is responsible for paying sales tax or collecting and remitting use tax on that sale.
Cal. Code Regs. Tit. 18, § 1684.5
Note: Authority cited: Section 7051, Revenue and Taxation Code. Reference: Sections 6041, 6041.1, 6041.5, 6042, 6043, 6044, 6045, 6046 and 6203, Revenue and Taxation Code.