An online marketplace seller that sells taxable products owned by a third-party seller on its website may be liable for Wisconsin sales or use tax on its Wisconsin sales.

Retailers engaged in business in Wisconsin are liable for Wisconsin sales or use tax on sales that take place in Wisconsin. This includes sales made by a retailer on behalf of a third-party seller as provided in sec. 77.51(13)(c), Wis. Stats., unless the retailer can show that tax has been remitted on the transaction by the third-party seller.

Exception: Effective July 14, 2015, the definition of "retailer" was amended to allow an online marketplace to make sales of tangible personal property and items under sec. 77.52(1)(b), Wis. Stats., on behalf of third-party sellers, without becoming liable for the tax on such sales if the online marketplace or one of its affiliates operates a distribution facility. However, this exception does not apply to an online marketplace or its affiliates if any sales are made in which a customer takes possession of taxable products at a location (i.e., storefront) operated by the marketplace or one of its affiliates (sec. 71.51(13b)(b)4., Wis. Stats.) See the July 2015 Special Edition of the Wisconsin Sales and Use Tax Report for additional information regarding this new law.

The third-party seller may also be liable for the tax, but this does not relieve the online marketplace seller of its liability to remit the tax. When more than one party is liable for the tax, the liability for the tax is extinguished for both parties when either party remits the tax to the department.

For additional information about the third-party seller's liability, see the article titled "Sellers Using Distribution Facilities in Wisconsin Are Liable for Wisconsin Tax on Their Sales."

May 2, 2016