Marketplace Facilitators Insights

The role of marketplace facilitators has continued to evolve in 2025, reshaping the landscape of retail sales and driving significant revenue growth for platforms like Amazon and other major marketplaces. These platforms have become essential intermediaries in e-commerce, simplifying transactions for both consumers and sellers while managing complex compliance requirements like tax collection and remittance. This article explores the latest trends, regulatory changes, and the broader impact marketplace facilitators have had on the retail ecosystem in 2025, offering valuable insights into their role in shaping the future of commerce.

What Is a Marketplace Facilitator?

A marketplace facilitator is a business or platform that connects buyers and sellers, enabling transactions to occur seamlessly through an online or physical space. These facilitators act as intermediaries, offering tools and services like payment processing, order management, and logistics support, which streamline the buying and selling process. Prominent examples of marketplace facilitators include Amazon, eBay, Etsy, and Walmart, which have transformed the retail landscape by providing comprehensive platforms for both large-scale retailers and small independent sellers.

In addition to facilitating transactions, marketplace facilitators often play a critical role in managing compliance responsibilities, such as collecting and remitting sales tax, making them a cornerstone of modern e-commerce and retail sales.

Key Responsibilities of Marketplace Facilitators

Marketplace facilitators' responsibilities go beyond simply hosting a platform; they manage essential tasks such as payment processing, logistics, and compliance with complex sales tax regulations. By handling these crucial aspects, marketplace facilitators like Amazon, eBay, and others empower businesses to focus on growth while delivering a reliable and efficient shopping experience for consumers.

1. Connecting Buyers and Sellers

Marketplace facilitators provide a platform where sellers can list their products or services, and buyers can easily search, compare, and purchase. This centralized approach eliminates the need for sellers to build and manage their own e-commerce websites while offering buyers a broad range of choices. Platforms like Amazon and Etsy excel at creating a trusted environment where transactions are secure and straightforward.

2. Payment Processing and Logistics

Facilitators handle critical aspects of transactions, such as processing payments, issuing refunds, and coordinating shipping and delivery. By managing these processes, they simplify operations for sellers and ensure a seamless experience for buyers. For example, Amazon provides services like Fulfillment by Amazon (FBA), which manages inventory, shipping, and customer service for sellers.

3. Tax Collection and Compliance

Under marketplace facilitator laws, these platforms are often responsible for collecting and remitting sales tax on behalf of their sellers. This includes ensuring compliance with state-specific tax regulations, including economic nexus thresholds and use tax requirements. This shift has eased the burden on individual sellers but has also made marketplace facilitators a focal point for tax authorities.

The Role of Marketplace Facilitators in Retail Sales

Marketplace facilitators have become indispensable players in the retail landscape, driving significant growth in ecommerce and reshaping how businesses reach consumers. They also provide sellers with unparalleled access to global markets, enabling them to boost revenue and compete on a larger scale.

By simplifying transactions and offering tools to optimize operations, marketplace facilitators not only enhance the shopping experience for consumers but also play a pivotal role in shaping the future of retail sales. Here's a list of what marketplace facilitators do.

1. Drives e-commerce growth

Marketplace facilitators have revolutionized retail sales by creating platforms that reach millions of consumers globally. These platforms have democratized access to markets, allowing small and medium-sized businesses to compete with larger retailers. In 2025, marketplace facilitators are responsible for a significant portion of global e-commerce revenue, with platforms like Amazon leading the charge.

2. Boosts seller revenue

Marketplace facilitators provide sellers with advanced tools to increase visibility, improve customer engagement, and optimize sales performance. Features such as targeted advertising, analytics dashboards, and customer feedback mechanisms help sellers enhance their offerings and maximize revenue.

3. Expands market reach

Marketplace facilitators like Amazon and eBay enable sellers to reach a global audience, breaking down traditional barriers to entry in retail. By providing a platform that aggregates millions of customers, facilitators help sellers connect with buyers they might not otherwise access. This expanded market reach is particularly beneficial for small and medium-sized businesses looking to scale their operations without the infrastructure of large retailers.

4. Streamlines transactions

Marketplace facilitators simplify the buying and selling process by managing critical aspects such as payment processing, shipping, and refunds. Sellers benefit from these streamlined operations as they reduce administrative burdens and improve customer satisfaction. For buyers, the convenience of centralized services enhances the shopping experience, making these platforms a go-to option for retail purchases.

5. Boosting Sales Through Advanced Tools

Facilitators offer sellers a suite of tools to optimize their sales performance, including advertising options, analytics dashboards, and customer feedback systems. These tools empower sellers to make data-driven decisions, improve product visibility, and enhance their offerings. By leveraging these features, sellers can drive higher revenue and build stronger customer relationships.

6. Ensuring Compliance with Sales Tax Regulations

A critical responsibility of marketplace facilitators is managing sales tax collection and remittance on behalf of sellers. These platforms navigate complex regulations, including economic nexus thresholds, ensuring that sales tax is accurately calculated and remitted to the appropriate authorities. This compliance role reduces the burden on individual sellers and helps governments capture tax revenue efficiently.

7. Building Consumer Trust

Facilitators foster trust between buyers and sellers by ensuring secure transactions and implementing clear return and refund policies. Features such as verified reviews and buyer protection programs create a reliable shopping environment, encouraging repeat purchases. For sellers, this trust translates into increased retail sales and stronger brand loyalty.

Compliance Obligations of Marketplace Facilitators

Marketplace facilitators play a vital role in ensuring tax compliance and regulatory adherence for sellers using their platforms. From collecting and remitting sales tax to maintaining accurate transaction records, these platforms must navigate a complex web of rules and obligations to stay compliant across multiple jurisdictions. This section explores the critical compliance responsibilities marketplace facilitators must uphold to meet legal requirements, protect sellers, and maintain trust in the growing e-commerce ecosystem.

1. Sales tax collection and remittance

Marketplace facilitators are responsible for collecting and remitting sales tax on behalf of their sellers in most states. This includes ensuring compliance with state-specific regulations, such as economic nexus thresholds, which dictate tax obligations based on sales volume or transaction count. By automating the tax collection process, facilitators reduce the burden on sellers and help states capture much-needed tax revenue, but they must also maintain robust systems to avoid errors or penalties.

2. Maintaining accurate transaction records

Facilitators are required to keep detailed records of all transactions processed through their platforms, including taxable and non-taxable sales. These records must often be retained for several years to comply with audit requirements set by state and local revenue departments. Accurate recordkeeping is crucial for addressing potential disputes, supporting sellers during audits, and ensuring transparency in tax reporting.

3. Providing Certification and Documentation

Many states mandate that facilitators provide certification documents verifying their compliance with tax collection laws. For example, some jurisdictions require facilitators to issue forms confirming that taxes have been collected and remitted on behalf of sellers. This documentation is essential for regulatory audits and ensures that sellers are not double-taxed or held accountable for obligations already fulfilled by the facilitator.

4. Monitoring and Reporting Nexus Obligations

Marketplace facilitators must continuously monitor nexus thresholds across multiple jurisdictions to determine where tax obligations arise. With varying thresholds for economic nexus and use tax in different states, facilitators need advanced systems to track sales activity and ensure compliance. Failure to meet these obligations can lead to significant penalties, making this an essential area of focus for facilitators operating in the e-commerce space.

5. Adhering to Consumer Protection Laws

In addition to tax compliance, facilitators must comply with consumer protection laws that regulate return policies, refunds, and dispute resolutions. Ensuring fair practices and protecting consumer rights fosters trust in the platform and reduces the risk of legal disputes. Compliance with these laws also enhances the overall shopping experience, benefiting both buyers and sellers.

6. Sharing Information with Tax Authorities

Facilitators are often required to share transaction data with state tax authorities to ensure compliance with sales and use tax regulations. For example, states like Florida and Georgia have agreements to exchange sales data, which can trigger audits if discrepancies are found. Facilitators must maintain secure systems to manage this sensitive information and protect seller and buyer privacy.

7. Recordkeeping and Reporting

Marketplace facilitators are also responsible for maintaining detailed records of transactions, including taxable and non-taxable sales. For instance, states like California require facilitators to retain these records for a minimum of three years to support compliance audits and ensure transparency.

The Impact of Marketplace Facilitators on Taxation

The rise of marketplace facilitators has prompted significant changes in taxation policies worldwide. By centralizing tax collection, these platforms have reduced tax evasion and increased compliance rates, generating billions in additional tax revenue for states and governments. However, this also means facilitators must navigate a patchwork of regulations and ensure they comply with varying laws across jurisdictions.

Marketplace facilitators not only simplify e-commerce for sellers and buyers but also play a pivotal role in shaping the future of retail sales and taxation. As the industry continues to evolve, their responsibilities and influence will likely expand further, driving both innovation and regulatory developments.

The Impact of Sales Tax on Marketplace and E-Commerce

Taxation Across Multiple Jurisdictions

With 47 states enforcing marketplace facilitator laws, each with unique rules and thresholds, e-commerce sellers must navigate a patchwork of taxation systems. States like Missouri and Alaska have added additional layers with local-level marketplace nexus laws. This requires sellers to stay informed about the specific regulations in all states where they operate.

The Role of Competition and Tax Rates

Tax rates vary significantly across jurisdictions, influencing consumer behavior and marketplace competition. High-tax areas, such as Chicago with a 10.25% rate, often see consumers flock to neighboring low-tax regions or online platforms to save money. This trend underscores the importance of compliance while highlighting the competitive advantage of tax-efficient strategies.

Navigating Evolving Sales Tax Regulations for Marketplace Facilitators

The rapid growth of e-commerce has fundamentally transformed how businesses operate, especially for those using marketplace facilitators like Amazon, eBay, and Walmart. While these platforms offer unprecedented reach, they also bring complex challenges related to sales tax compliance.

Changes in marketplace facilitator laws, such as requiring these platforms to handle sales tax collection and remittance on behalf of sellers, have eased some responsibilities but introduced new compliance requirements. Understanding these evolving regulations is critical for marketplace sellers to avoid potential pitfalls like audits or penalties.

This blog explores how shifting sales tax rules impact marketplace sellers, the role of economic and physical nexus, and the importance of staying informed about varying state laws. Whether you're navigating use tax obligations or exploring the best tools for tax compliance, staying ahead of these developments is vital in today's fast-paced e-commerce landscape.

What Are Marketplace Facilitator Laws?

Marketplace facilitator laws shift the responsibility of collecting and remitting sales tax from individual sellers to the platforms they use. By designating marketplace facilitators like Amazon or Walmart as the "retailer" for tax purposes, these laws aim to simplify tax compliance for states while ensuring accurate tax collection. This reduces the risk of underreporting, a common issue before these laws were introduced.

Since their introduction, these laws have evolved rapidly, with 47 states and the District of Columbia now enforcing marketplace facilitator regulations. States like Texas began implementing these laws as early as 2019, followed by others like Florida in 2021. For marketplace sellers, this means reduced administrative burden, but sellers must remain vigilant about their roles, particularly regarding use tax and nexus obligations.

Effects on Marketplace Sellers: Nexus and Audits

While marketplace facilitators handle much of the tax collection, sellers are not entirely off the hook. They may still be liable for use tax or economic nexus obligations in states where their activities, such as direct sales or inventory storage, create a tax nexus. Non-compliance with these obligations could lead to audits or steep penalties, especially in states with aggressive enforcement, such as California or New York.

Economic nexus laws require sellers to collect and remit sales tax if their sales or transactions exceed specific thresholds in a state, even without a physical presence. For instance:

• California: Sellers must collect sales tax if they exceed $500,000 in sales annually.
• Colorado: The threshold is $100,000 in sales or 200 transactions annually.

Marketplace sellers must closely monitor these thresholds for both direct and marketplace sales to ensure compliance. Ignoring nexus obligations can trigger audits and lead to hefty penalties.

What Triggers Audits for Marketplace Sellers?

Marketplace sellers face audits for a variety of reasons, often stemming from non-compliance with sales tax regulations or errors in reporting. Below are the key triggers that can lead to audits, along with detailed explanations to help sellers mitigate these risks.

Exceeding Economic Nexus Thresholds

Marketplace sellers are subject to economic nexus laws, which require them to collect and remit sales tax in states where their sales exceed specific thresholds. These thresholds vary by state, such as $100,000 in sales or 200 transactions annually in states like Colorado and North Dakota. Failing to register or comply with nexus obligations can raise red flags for state tax authorities.

When sellers exceed these thresholds but do not collect or remit sales tax, states may initiate audits to recover lost tax revenue. Marketplace facilitators often handle tax collection for sellers, but sellers must still ensure they remain compliant for any direct sales conducted outside the marketplace. Regularly monitoring sales activity and staying updated on state-specific thresholds can help sellers avoid audits triggered by economic nexus violations.

Inconsistent Sales Reporting

Discrepancies between reported sales and actual transactions can quickly draw the attention of tax authorities. For instance, if a seller reports lower sales revenue than what is recorded by their marketplace facilitator, it signals a potential issue that may warrant an audit. Errors in categorizing taxable and non-taxable items or failing to include use tax on applicable purchases can also lead to discrepancies.

States like California and Texas are known for aggressive sales tax enforcement and actively audit sellers for inconsistencies. To mitigate this risk, sellers should reconcile their records regularly and ensure alignment between their reported figures and the data provided by marketplace facilitators. Leveraging automated tools like Kintsugi can streamline recordkeeping and ensure accurate reporting.

Failure to Register for Sales Tax Collection

Sellers who fail to register for sales tax collection in states where they have a nexus are at high risk of audits. Following the landmark South Dakota v. Wayfair decision, states can now require businesses without a physical presence to collect and remit sales tax based on sales volume. Sellers unaware of these obligations may inadvertently avoid registration, triggering audits when tax authorities identify unregistered activity.

Registration lapses can result in severe penalties, interest on unpaid taxes, and even back-tax assessments for prior years. Marketplace sellers should conduct a thorough nexus analysis to identify states where they are required to register. Partnering with tax compliance solutions can simplify the registration process and help sellers stay compliant with evolving regulations.

Red Flags from Marketplace Facilitator Audits

If a marketplace facilitator is audited, the sellers operating on that platform may also come under scrutiny. Facilitators are required to maintain detailed records of all transactions, and discrepancies in their data could lead to further investigation of individual sellers. For example, if the facilitator’s records indicate a higher volume of taxable sales than what a seller reported, the state may initiate an audit to investigate the discrepancy.

Sellers can reduce this risk by keeping their own detailed transaction records and reconciling them with the reports provided by facilitators. Understanding the facilitator’s compliance process and ensuring alignment can provide an additional layer of protection against audits.

High Sales Volume or Significant Growth

Sellers experiencing rapid growth or consistently high sales volumes are more likely to attract the attention of tax authorities. States often prioritize audits for businesses generating significant revenue to ensure compliance with sales tax and use tax obligations.

While growth is a positive indicator for any business, sellers must proactively address compliance to avoid audits. Regularly reviewing sales activity, conducting internal audits, and using automated tools to manage tax obligations can help sellers scale their operations without facing unnecessary scrutiny.

By understanding these triggers and taking proactive steps, marketplace sellers can reduce their audit risk and focus on growing their businesses while remaining compliant with tax regulations.

States like Texas and California are known for their strict audit practices, and penalties for underreporting or failing to file can be as high as 25% of unpaid taxes. Leveraging sales tax automation tools can help mitigate these risks.

How Can Sales Tax Automation Tool Help With Audits?

A sales tax automation tool can be a game-changer for marketplace sellers looking to avoid audits and ensure compliance with complex tax regulations. By automating the tracking, calculation, and remittance of sales tax, these tools minimize the risk of errors, inconsistencies, and missed obligations that often trigger audits.

They can monitor economic nexus thresholds in real-time, ensuring sellers know exactly when and where they are required to collect and remit taxes. Additionally, automation tools provide detailed reports, reconcile transaction data, and maintain records in line with state requirements, making it easier to respond to tax authorities if questions arise.

Kintsugi offers marketplace sellers a reliable solution to navigate the complexities of tax compliance and avoid audits. Its key features include real-time nexus tracking, seamless integration with major marketplace facilitators like Amazon and eBay, and automated filing capabilities.

Kintsugi’s advanced reporting tools ensure accurate recordkeeping, so sellers can confidently align their data with state tax codes and revenue department requirements. With Kintsugi, sellers gain access to a user-friendly dashboard, predictive insights to stay ahead of compliance risks, and robust support to handle evolving e-commerce tax obligations. By leveraging these features, sellers can focus on growing their businesses without the worry of tax-related audits.

Key Takeaway: Staying Ahead in Marketplace Compliance

Marketplace sellers must navigate a complex web of sales tax, use tax, and nexus regulations to remain compliant. While marketplace facilitators have simplified tax collection, sellers are still responsible for understanding their remaining obligations and avoiding audit risks.

Leveraging tools like Kintsugi can streamline compliance, track nexus thresholds, and ensure accurate tax filings across jurisdictions. By staying informed and proactive, marketplace sellers can focus on scaling their businesses without being bogged down by the complexities of taxation in the ever-evolving e-commerce landscape. So, book a demo or sign up for Kintsugi today.