No added sales tax for marketplace facilitator fees in Tennessee
There’s good news if you work with marketplace facilitators for sales transactions in The Volunteer State. Both seller fees and service provider fees that facilitators may charge when connecting you to customers aren’t subject to sales tax.
Letter Ruling No. 22-02 from the state Dept. of Revenue discusses a marketplace facilitator that charges various fees to service providers and sellers once sales are finalized with buyers.
Sales tax shouldn’t be assessed on these fees, the department said, because they’re being charged in relation to lead generation and payment processing services, which are both tax-exempt under state law.
While there are some taxable components to the transaction, including the web-based software and app used to finalize the sale, the “true object” of the transaction is facilitating the connection between sellers and buyers, as well as making payment processing easier.
Without that goal, the software and app wouldn’t be useful to any of the parties involved. So the nontaxable elements of the transaction are the most significant, making the fees exempt from tax.
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