KPMG report: Marketplace facilitator updates (California, Illinois, Texas)

Brief summaries of marketplace-related developments in California, Illinois, and Texas include the following legislative and administrative items.

• California: Legislation is pending signature that would require marketplace facilitators to collect, and remit certain fees imposed on facilitated sales. If signed, Assembly Bill 1402 would require a marketplace facilitator to collect fees administered pursuant to the Fee Collection Procedures Law that are imposed on the retail sale of tangible personal property. The relevant fees include a charge under the Lead-Acid Battery Recycling Act, a lumber products assessment, an electronic waste recycling fee and the California tire fee.
  
  
• Illinois: An emergency regulation dated July 13, 2021, was suspended by the Illinois Joint Committee on Administrative Rules. The emergency regulation had revised certain provisions of a previously issued Compliance Alert addressing the obligations of marketplace facilitators that facilitate sales by food service establishments. Under the emergency regulation, food delivery services that are considered marketplace facilitators were required to collect and remit the “metropolitan pier and exposition authority (MPEA) retailers' occupation tax” and the “Chicago home rule municipal soft drink tax,” as well as sales tax on the sale. In a statement published in the Illinois Register after an August 18, 2021 meeting, the Committee stated that “these changes are occurring in the middle of a tax year, do not specify whether the changes apply to the entire tax year or only prospectively, and did not permit affected entities adequate time to implement required changes to their tax systems.”
  
  
• Texas: The Comptroller has agreed to freeze a revised rule addressing local sales and use tax sourcing pending the outcome of litigation between the City of Round Rock and the Comptroller’s Office. Historically, 34 Tex. Admin. Code § 3.334(h)(3)(C) provided that when an order was placed over the internet and the seller fulfilled that order at a location that is a place of business in Texas, the sale was considered to be consummated at that place of business where the order was fulfilled.  Accordingly, local sales tax was sourced to that fulfillment location. Effective October 1, 2021, 34 Tex. Admin. Code § 3.334(b)(5), provided that “[o]rders not received by sales personnel, including orders received by a shopping website or shopping software application . . . are received at locations that are not places of business of the seller.”  By agreement of the parties, the court has enjoined the Comptroller from implementing or enforcing 34 Tex. Admin. Code § 3.334(b)(5) until a final hearing on the merits or a further order from the court. The trial on the merits is currently set for the week of June 13, 2022. 

Read a September 2021 report prepared by KPMG LLP