The responsibilities of marketplace facilitators operating in California are expanding under legislation recently signed by Governor Gavin Newsom. Starting on July 1, 2023, an “online marketplace” will be required to collect and maintain specified contact and financial information related to its “high-volume third-party sellers.” The legislation is intended to “provide greater tools for law enforcement to identify stolen items” being resold through online marketplaces.
Under the legislation, a “high-volume third-party seller” is defined as any seller who, in any continuous 12‑month period during the previous 24 months, has entered into 200 or more transactions through an online marketplace for the sale of consumer products to buyers located in California, resulting in a total of $5,000 or more in gross revenues. While the legislation includes its own definition of an “online marketplace,” the definition will likely reach most (if not all) businesses classified as “marketplace facilitators” for California sales tax purposes.
An online marketplace will be required to collect information about any high-volume third-party seller on its platform, including the seller’s name, tax ID number and bank account number (presuming the seller has a bank account), along with certain government-issued records or tax documents if the seller is not an individual. For those sellers making at least 200 sales totaling at least $20,000 in gross revenues to buyers in California, an online marketplace must collect additional information, disclose certain contact information to consumers and provide a means to allow users “to have direct and unhindered communication with the seller.”
Information collected about sellers must be verified within 10 days and be maintained for at least two years, and the online marketplace must suspend sales activities of a high-volume third-party seller out of compliance with the requirements of the legislation. An online marketplace not in compliance with the legislation will be subject to a penalty of up to $10,000 for each violation.
Businesses impacted by this legislative development or with questions about marketplace facilitators are encouraged to contact the authors of this article.