California Code of Regulations › Title 18 - Public Revenues › Division 2 - California Department of Tax and Fee Administration- Business Taxes (State Board of Equalization- Business Taxes, See Ch. 6 and 9.9) › Chapter 4 - Sales and Use Tax › Article 17 - Payment and Collection of Use Tax › Section 1684.5 - Marketplace Sales. [Repealed]

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) Definitions.
(1) "Branding sales as those of the
				  marketplace facilitator" means using any means, including, but not limited to a
				  name, logo, sign, symbol, or a combination of these, to identify the
				  marketplace facilitator as the person selling a marketplace seller's tangible
				  personal property. If a marketplace seller is expressly identified as the
				  person selling the marketplace seller's tangible personal property, the sale of
				  that property is not branded as a sale of the marketplace
				  facilitator.
(2) "Delivery network
				  company" means a business entity that maintains an internet website or mobile
				  application used to facilitate delivery services for the sale of local
				  products. A person that is a delivery network company is not a marketplace
				  facilitator, unless it makes an election to be deemed a marketplace facilitator
				  pursuant to subdivision (e) of this regulation. Nothing in this regulation
				  shall preclude a delivery network company from being a retailer as defined in
				  Revenue and Taxation Code section
				  6015.
(3) "Delivery services" means the pickup of
				  one or more local products from a local merchant and delivery of the local
				  products to a customer. "Delivery services" do not include any delivery
				  requiring over 75 miles of travel from the local merchant to the
				  customer.
(4) "Facilitate." For
				  purposes of this regulation, a person contracts with a marketplace seller to
				  facilitate the sale of the marketplace seller's products through a marketplace
				  if the person agrees to do anything directly or indirectly, through one or more
				  related persons, that makes it possible or easier for the marketplace seller to
				  sell its products through the marketplace. Also, a marketplace facilitator
				  facilitates a sale by a marketplace seller through its marketplace if it does
				  anything directly or indirectly, through one or more related persons, that
				  makes it possible or easier for the marketplace seller to make the sale through
				  the marketplace. Such activities include, but are not limited to listing
				  products for sale, communicating the offer or acceptance between the buyer and
				  seller, taking orders for merchandise, or providing payment processing or
				  fulfillment services.
(5)
				  "Fulfillment or storage services" means any services related to receiving,
				  storing, or shipping a marketplace seller's tangible personal property,
				  including, but not limited to, picking, packing, shipping, or delivering a
				  marketplace seller's tangible personal property to fulfill an order.
(6) "Listing products for sale" means
				  creating or posting or authorizing or providing the means for another person to
				  create or post a written, verbal, pictorial, graphic, or similar means of
				  announcement of tangible personal property for sale in a marketplace,
				  including, but not limited to, an advertisement that contains an announcement
				  of tangible personal property for sale.
(7) "Local merchant" means a third-party
				  merchant, including, but not limited to, a kitchen, restaurant, grocery store,
				  retail store, convenience store, or business of another type, that is not under
				  common ownership or control with the delivery network company.
(8) "Local product" means any item, including
				  food, other than freight, mail, or a package to which postage has been
				  affixed.
(9) "Marketplace" means a
				  physical or electronic place, including, but not limited to, a store, booth,
				  internet website, catalog, television or radio broadcast, or a dedicated sales
				  software application, where marketplace sellers sell or offer for sale tangible
				  personal property for delivery in this state regardless of whether the tangible
				  personal property, marketplace sellers, or marketplace has a physical presence
				  in this state.
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.
(10) "Marketplace facilitator"
				  means a person who contracts with marketplace sellers to facilitate for
				  consideration, regardless of whether deducted as fees from the transaction, the
				  sale of the marketplace seller's products through a marketplace operated by the
				  person or a related person and who does both of the following:
(A) Directly or indirectly, through one or
				  more related persons, engages in any of the following:
(i) Transmitting or otherwise communicating
				  the offer or acceptance between the buyer and seller.
(ii) Owning or operating the infrastructure,
				  electronic or physical, or technology that brings buyers and sellers together
				  in a marketplace.
(iii) Providing a
				  virtual currency that buyers are allowed or required to use to purchase
				  products from the seller.
(iv)
				  Software development or research and development activities related to any of
				  the activities described in subdivision (a)(10)(B) of this regulation, if such
				  activities are directly related to a marketplace operated by the person or a
				  related person.
(B)
				  Directly or indirectly, through one or more related persons, engages in any of
				  the following activities with respect to the marketplace seller's products:
(i) Payment processing services.
(ii) Fulfillment or storage
				  services.
(iii) Listing products
				  for sale.
(iv) Setting
				  prices.
(v) Branding sales as those
				  of the marketplace facilitator.
(vi) Order taking.
(vii) Providing customer service or accepting
				  or assisting with returns or exchanges.
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.
(11) "Marketplace seller" means a
				  person who has an agreement with a marketplace facilitator and makes retail
				  sales of tangible personal property through a marketplace owned, operated, or
				  controlled by a marketplace facilitator, even if that person would not have
				  been required to hold a seller's permit or permits, or required to collect the
				  use tax imposed pursuant to chapter 3 (commencing with section
				  6201) of part 1 of division 2 of
				  the Revenue and Taxation Code, had the sale not been made through that
				  marketplace.
(12) "Order taking"
				  means the process of getting or obtaining a buyer's order for a marketplace
				  seller's tangible personal property by telephone, fax, email or any other
				  physical or electronic means, including, but not limited to, the customer
				  including the items in a physical or virtual shopping cart at
				  checkout.
(13) "Payment order"
				  means a written instruction or order to pay money signed by the person giving
				  the instruction whether created in electronic or paper format.
(14) "Payment processing services" means any
				  services related to charging a buyer the price to purchase a marketplace
				  seller's tangible personal property, collecting, handling, or processing the
				  payment, and transmitting any portion of the payment to the marketplace seller.
				  Such services include, but are not limited to, providing a physical or virtual
				  credit or debit card terminal, integrating payment processing with an online
				  shopping cart at checkout, or otherwise directly or indirectly authorizing or
				  providing the means for payment processing in any manner. Payment methods may
				  include, but are not limited to, credit cards, debit cards, prepaid cards,
				  stored value cards, Automated Clearing House (ACH) debits, and payment orders,
				  whether accomplished through the use of software or otherwise.
(15) "Providing customer service or accepting
				  or assisting with returns or exchanges" means providing any service related to
				  a marketplace seller's tangible personal property to a potential buyer with or
				  without the marketplace seller's authorization, including, but not limited to,
				  answering a question about the property or the terms of its sale. It also means
				  providing any service to a buyer related to their purchase of a marketplace
				  seller's tangible personal property with or without the marketplace seller's
				  authorization, including, but not limited to, answering a question about the
				  property's use, assisting with fixing or trouble shooting a problem with the
				  property, assisting the buyer with requesting a refund or credit for the
				  property or requesting to exchange the property for other property, or
				  accepting the buyer's return of the property or exchanging the buyer's property
				  for other property.
(16) "Related
				  person." For the purposes of this regulation, a person is related to another
				  person if both persons are related to each other pursuant to section
				  267(b) of the
				  Internal Revenue Code and the regulations thereunder.
(17) "Setting prices" means establishing a
				  price or prices at which an item is offered for sale or sold to customers and
				  includes establishing a price at which an item must be sold or a minimum or
				  maximum price, below or above which an item cannot be sold.
(18) "Virtual currency" is a digital
				  representation of value that functions as a medium of exchange, a unit of
				  account, or a store of value, but which does not have legal tender status in
				  any jurisdiction. Virtual currency does not include retailer coupons or gift
				  cards.