Internet Sales (Publication 109)
Online Marketplaces and Fulfillment Centers
Some retailers choose online marketplaces to sell their products rather than, or in addition to, selling their tangible personal property (merchandise) through their own websites. Additionally, some retailers choose to use fulfillment centers to fulfill their orders.
What is an online marketplace?
In general, an online marketplace is a website where third-party sellers (marketplace sellers) list products for sale. Online marketplaces can offer products for sale by the owners or operators of the marketplaces as well as third-party sellers. Others exclusively serve as a marketplace for third-party sellers.
What is a fulfillment center?
A fulfillment center is a location, generally a warehouse facility, where orders for tangible merchandise are received, packaged, and picked up by a common carrier for shipment to the customer. Some sellers use their own fulfillment centers to fulfill all their orders, including marketplace orders. Other sellers contract with a third party that operates a fulfillment center (fulfillment center operator) to fulfill their orders. In some instances, the fulfillment center operator is a retailer itself that provides fulfillment services to third-party sellers at the same facilities from which it ships its own products.
Who is the retailer when using an online marketplace or fulfillment center?
When a marketplace seller utilizes an online marketplace and/or a third-party fulfillment center to make a retail sale of tangible personal merchandise to a California customer, either the marketplace seller, marketplace facilitator (as defined in the Marketplace Facilitators Act—see section below), or the marketplace operator (see Consignment Sales section below) may be the retailer for sales and use tax purposes. Beginning January 1, 2022, a marketplace facilitator may also be the retailer for certain fees (see the section Amendments to the Marketplace Facilitator Act effective January 1, 2022 below).
Are retailers with inventory in California required to register with CDTFA?
Retailers that store inventory in California are generally engaged in business in this state and required to register with CDTFA and pay sales tax or collect and pay use tax on their sales of tangible merchandise for delivery in California. This includes retailers that have inventory at a California fulfillment center owned and operated by a third-party.
For more information, please see our online guide, Fulfillment Centers.
Marketplace sellers
Who is responsible for collecting and/or paying the tax on sales?
In general, when tangible merchandise is sold at retail, the owner of the merchandise is the retailer making the sale and responsible for paying sales tax or collecting and paying use tax on that sale, including a marketplace seller selling its inventory through an online marketplace and/or using a fulfillment center.
However, when a marketplace seller is using a fulfillment center to fulfill its retail sales of merchandise made through a marketplace, the marketplace operator may be a consignee making consignment sales and responsible for paying sales tax or collecting and paying use tax as the retailer. Please see the Consignment Sales section below.
Changes beginning October 1, 2019
Beginning October 1, 2019, marketplace facilitators (as defined in the Marketplace Facilitators Act—see section below) may be the seller and retailer required to pay or collect and pay the tax to CDTFA on marketplace sellers' sales of merchandise facilitated through their marketplace. You should contact the person operating the online marketplace where you sell your tangible merchandise to determine if they are a marketplace facilitator and responsible for paying or collecting and paying the tax on your sales made through their marketplace.
If all your retail sales of merchandise are facilitated by a marketplace facilitator registered as a seller or retailer with CDTFA, beginning October 1, 2019, you are not required to register with CDTFA for a seller's permit or a Certificate of Registration—Use Tax. Please see the Marketplace Facilitators Act, beginning October 1, 2019, section below.
Marketplace Facilitators Act, beginning October 1, 2019
The Marketplace Facilitator Act provides that, beginning October 1, 2019, a marketplace facilitator is the seller and retailer, and responsible for paying sales tax or collecting and paying use tax if they:
- Are registered or required to be registered with CDTFA as a seller or retailer, and
- Facilitate retail sales of tangible merchandise for a marketplace seller through its marketplace.
As such, the marketplace facilitator will generally be required to pay sales tax or collect and pay use tax to CDTFA on all retail sales of tangible merchandise for delivery to California purchasers facilitated through its marketplace for marketplace sellers.
The following are the general definitions for terms used in the Marketplace Facilitator Act:
- Marketplace—a physical or electronic place where a marketplace seller sells, or offers for sale, tangible merchandise for delivery in California.
- Marketplace facilitator—in general, a person who contracts with marketplace sellers to facilitate the sale of the marketplace seller's product through a marketplace operated by the person or a related person.
- Marketplace seller—a person who has an agreement with a marketplace facilitator and makes retail sales of tangible merchandise through a marketplace that is owned, operated, or controlled by a marketplace facilitator.
What does this mean for marketplace sellers?
Beginning October 1, 2019, marketplace sellers are no longer considered the retailer of sales of tangible merchandise if their sales are facilitated through a marketplace owned or operated by a marketplace facilitator registered or required to be registered with CDTFA as a seller or retailer.
What documentation should marketplace sellers keep?
As a marketplace seller, you should obtain and keep documentation showing the marketplace facilitator is responsible for collecting and paying the tax to CDTFA when sales of merchandise are facilitated through a marketplace.
This documentation includes, but is not limited to:
- A written agreement with the marketplace facilitator indicating the marketplace facilitator is registered with CDTFA as a seller or retailer and is responsible for collecting and paying the tax on sales made through its marketplace.
- In lieu of a written agreement or other contract, other documentation showing the marketplace facilitator is registered as a seller or retailer with CDTFA.
You should also obtain the marketplaces facilitator's permit or account number. You can verify that it is a valid account number on our Verify a Permit, License, or Account Now page.
In addition, CDTFA will not hold you, as a marketplace seller, liable for tax on a transaction facilitated through a marketplace if we can verify the marketplace facilitator collected the correct amount of tax or tax reimbursement from the purchaser on that transaction and paid it to CDTFA.
For more information, see our online guide, Tax Guide for Marketplace Facilitator Act.
Amendments to the Marketplace Facilitator Act Effective January 1, 2022
Beginning January 1, 2022, marketplace facilitators who are registered with us or required to be registered with us to obtain additional accounts to collect, report, and pay applicable fees on their retail sales of certain items. This fee collection is in addition to collecting, reporting, and paying the sales or use tax due.
Marketplace facilitators will be required to register to collect, report, and pay the following fees when making retail sales of the products noted below:
- Covered Electronic Waste (eWaste) Recycling Fee – New or refurbished covered electronic devices (CEDs) that have a screen size of more than 4 inches measured diagonally and identified by the Department of Toxic Substances Control. Currently, CEDs include "bare" cathode ray tubes (CRTs) or any other product containing a CRT, plasma televisions, computer monitors containing CRTs or that use liquid crystal displays (LCDs), laptop computers, portable DVD players, televisions, etc.
- California Battery Fee (CBF) – New replacement lead-acid batteries primarily composed of both lead and sulfuric acid and weighing over five kilograms with a capacity of six or more volts that are used for specific purposes.
- Lumber Products Assessment (LBA) – Lumber products and engineered wood products.
- California Tire Fee – New tires intended for use with, but sold separately from, on-road or off-road motor vehicles, trailers, motorized equipment, construction equipment or farm equipment. The fee also applies to new tires (including the spare) sold with the retail purchase of new or used motor vehicles, construction equipment or farm equipment.
Registration: If you are a marketplace facilitator making retail sales in California of any of the products listed above, you must register for the appropriate additional account(s). To register for an eWaste, CBF, LBA, and/or Tire Fee account, please visit our online registration services webpage.
Marketplace Sellers: If you are a marketplace seller, beginning January 1, 2022, you are no longer responsible for collecting, reporting, and paying these fees when a registered marketplace facilitator will be collecting them on your retail sales facilitated through their marketplace.
In addition, beginning January 1, 2022, a marketplace seller is not required to keep an eWaste, CBF, LBA, and/or Tire Fee account open with CDTFA to report and pay fees on the merchandise listed above if all retail sales of merchandise will be facilitated by a marketplace facilitator that is registered as a retailer with CDTFA. You must continue to collect, report, and pay these fees on your sales that are not facilitated by a registered marketplace facilitator.
Resources: For more information on these fees, see the following online guides:
Tax Guide for California Lumber Products Assessment
Covered Electronic Waste Recycling Fee Guide
Consignment sales
If the marketplace operator provides fulfillment services for you, the marketplace operator will be considered the retailer of your merchandise if:
- It has possession of the merchandise at the time of sale, and
- It can transfer ownership to the purchaser without further action by you.
For additional information, please see publication 114, Consignment Sales.
Please note: If the marketplace operator has the authority to transfer ownership, but a different person, such as a fulfillment center operator, has possession of the merchandise at the time of sale, then neither person would be a consignee, even if the two are related entities. Under these conditions, you are considered to be the retailer of the merchandise being sold to a consumer and thus are liable for the tax on the sale to the California customer. This applies, unless the sale is facilitated by a marketplace facilitator who is the seller and retailer under the Marketplace Facilitator Act.
Marketplace operators as retailers of merchandise owned by marketplace sellers
Some online marketplace operators display the merchandise of various sellers, manufacturers, and suppliers. When a consumer purchases merchandise through the marketplace, the terms of sale dictate, and receipts and other documents related to the sale reflect, that the consumer purchases the tangible merchandise directly from the marketplace operator. In these instances, the marketplace operators are generally purchasing the merchandise from the sellers, manufacturers, or suppliers for resale, and then making a retail sale of the merchandise to the consumer.
If you are a seller making sales for resale to a marketplace operator in this manner, you should obtain a timely and properly completed resale certificate from your customer to support your claimed sales for resale, please see Regulation 1668, Sales for Resale.
Please note: If you are a retailer engaged in business in California, and you ship the merchandise directly to the consumer on behalf of a marketplace operator that is not engaged in business in California, you will be responsible for reporting and paying tax as a drop shipper. For additional information, please see publication 121, Drop Shipments.
Revision April 2024