Marketplace Sales Tax Exposure What Sellers Still Owe and Why

Marketplace facilitator laws changed how sales tax is collected, but they did not eliminate sales tax exposure for sellers. Many businesses believe selling through marketplaces removes their responsibility entirely. In practice, marketplace activity often creates exposure that is misunderstood, delayed, or discovered only after enforcement begins. Marketplace sales tax exposure exists because collection and liability are not the same thing. Sellers may still have obligations even when a marketplace collects tax on certain transactions.

For a foundational explanation of how exposure works overall, see Sales Tax Exposure

Why Marketplace Sellers Still Have Sales Tax Exposure

Marketplace facilitator laws generally require large platforms to collect and remit sales tax on behalf of sellers for certain transactions. These laws were designed to simplify collection, not to eliminate seller exposure.

Marketplace sellers often remain exposed due to:

Sales made outside the marketplace
Registration requirements that still apply
Inventory creating physical presence
Product taxability differences
Use tax obligations
Historical exposure from periods before collection began

Exposure frequently exists even when current marketplace transactions appear compliant.

What Marketplace Facilitator Laws Actually Cover

Marketplace facilitator laws typically apply only to specific transactions processed through the marketplace.

In most states, the marketplace is responsible for:

Collecting sales tax on eligible marketplace transactions
Remitting tax on those transactions
Handling rate calculation for covered sales

However, marketplace laws often do not cover:

Direct website sales
Wholesale or B2B transactions
Fees, services, or subscriptions sold by the seller
Use tax obligations
Registration requirements in certain states
Historical sales prior to facilitator enforcement

This gap between collection and responsibility is where exposure forms.

Inventory and Fulfillment Create Marketplace Exposure

One of the most common sources of marketplace exposure is inventory placement.

Exposure is often created when:

Inventory is stored in third party warehouses
Fulfillment is handled by the marketplace
Sellers do not know where inventory is physically located
Returns are processed in different states
Inventory moves between facilities without notice

Physical presence created through inventory can trigger nexus even if all sales are processed by a marketplace. To visualize nexus created by inventory and fulfillment, see Sales Tax Nexus Map

Multi Channel Selling Increases Exposure Risk

Marketplace sellers frequently sell through multiple channels.

Exposure risk increases when businesses:

Sell through marketplaces and their own websites
Use multiple marketplaces simultaneously
Transition customers from marketplace to direct billing
Offer subscriptions or add ons outside the marketplace
Run promotions or bundled offerings across channels

Each channel must be evaluated separately for nexus, taxability, and reporting obligations. For business specific exposure scenarios, see Sales tax and use tax exposure for marketplace sellers

Product Taxability Still Matters for Marketplace Sellers

Marketplace collection does not override product taxability rules.

Exposure can arise when:

Products are taxable in some states but not others
Digital products are bundled with taxable items
Services are sold alongside physical goods
Taxability rules change over time
Marketplaces apply default tax categories incorrectly

Incorrect tax classification can create exposure even when tax is collected. For taxability analysis by business type, see

Use Tax Exposure Is Common for Marketplace Sellers

Marketplace sellers often overlook use tax exposure.

Use tax exposure can arise from:

Inventory purchases where tax was not paid
Marketplace fees and services
Equipment or software subscriptions
Out of state purchases shipped into nexus states

Use tax liabilities are frequently discovered during audits and are not covered by marketplace collection. To understand how sales tax and use tax interact, see Sales Tax vs Use Tax Exposure

When Marketplace Exposure Becomes a Real Risk

Marketplace exposure becomes real risk when it leads to assessment or enforcement.

This often occurs when:

A seller registers in a state without reviewing history
A marketplace reports seller activity to a tax authority
Inventory records reveal historical physical presence
An audit is initiated
A filing is submitted without addressing past exposure

Once exposure is identified, states may assess back taxes, penalties, and interest. For escalation guidance, see When Sales Tax Exposure Becomes a Risk . If voluntary disclosure may reduce liability, planning must occur before any registration. Learn more

How to Check Marketplace Sales Tax Exposure Accurately

Marketplace exposure cannot be evaluated by reviewing current collections alone.

A complete analysis requires reviewing:

All sales channels
Inventory and fulfillment locations
Product taxability by state
Registration history
Use tax obligations
Timing of marketplace law changes

Manual reviews often miss exposure created by growth and operational changes. To estimate exposure signals quickly, see Sales Tax Exposure Calculator. For a complete exposure methodology, see How to Check Sales Tax Exposure Accurately

What to Do If You Sell Through Marketplaces

The correct response to marketplace exposure is not always immediate registration or filing.

A structured approach includes:

Identifying all sales channels
Mapping inventory and fulfillment history
Determining when nexus was created
Evaluating historical exposure
Choosing the appropriate resolution path

For guidance before filing, see

Marketplace Sales Tax Exposure