Poshmark is telling sellers not to worry about sale tax compliance as it takes over the burden of collecting tax on all applicable transactions, a radical approach and the first marketplace to do so.
Poshmark, a mobile app that lets people buy and sell fashion goods, announced the launch of Posh Remit on Thursday. According to the announcement:
“Beginning in April, Posh Remit will simplify the process for Poshmark’s community of five million Seller Stylists, alleviating the time-intensive burden of collecting and submitting state and local sales tax. Once implemented across the U.S. in every state where sales tax is imposed, Posh Remit will be one of the first country-wide tax collection and remittance services on a social marketplace.”
Poshmark’s approach is similar to what some ecommerce platforms are doing to comply with so-called Marketplace Facilitator laws, which shifts the burden of collecting and remitting sales tax from the third-party seller to the marketplace instead.
But instead of doing what Etsy and eBay are doing, which is to limit the practice to transactions where the buyer is located in one of the states that have passed such laws, Poshmark is making it universal.
One question that came to our mind was whether all states and tax jurisdictions were okay with Poshmark’s approach, since some states have marketplace facilitator laws, but many do not.
Poshmark Chief Operations Officer John McDonald told EcommerceBytes, “Poshmark will be collecting sales tax in all states and municipalities that have sales tax. In states without existing or proposed marketplace facilitator laws, we have reached agreements to collect and remit on behalf of our Seller Stylists.”
Marketplace Facilitator laws (and Poshmark’s new practice) serve many sellers well, since it lifts a huge burden off their shoulders in the aftermath of the Supreme Court ruling in the Wayfair case.
But what about sellers who sell on multiple channels?
McDonald said, “Our goal is to make commerce on our platform simple and hassle-free for our Seller Stylists so they can focus on growing their business on Poshmark. With Posh Remit, Seller Stylists will not have to worry about collecting and remitting sales tax on our platform. For multi-channel sellers, this should reduce their overall tax collection and remittance burden.”
McDonald confirmed that rather than building a solution in-house, a third-party software vendor is powering the system it’s using to collect and remit sales tax from buyers.
Also worth noting: sellers cannot opt out of Posh Remit.
What about transactions that are tax exempt, whether it’s because a particular state may exempt certain products, or a buyer may be tax-exempt for some or all purchases?
“At launch, we will honor product-level exemptions for each state and municipality,” McDonald told us. “Shortly after launch, we plan to create a system to enable tax-exempt buyers (e.g. reseller, nonprofit, etc.) to submit tax exemption certificates to us and begin making tax exempt purchases.”
FAQs are included in the blog post announcing the new service. Note that Poshmark is updating its Terms of Service as a result of launching Posh Remit. It explains that sellers who want to review how much sales tax has been collected and remitted for their sales can request a “My Sales Report.”
Poshmark also states:
“Sellers don’t need to collect and/or pay sales tax for Poshmark orders sold and delivered within the United States. Currently, Posh Remit will calculate, collect, and remit sales tax on behalf of our sellers to state taxing agencies on a regular basis.”