A marketplace seller is any person or business that lists and sells products on an online platform owned by a separate company, such as Amazon, eBay, or Walmart Marketplace. You own the inventory, set the price, and remain the seller of record; the platform hosts the listing, processes the payment, and takes a commission. That distinction controls who collects sales tax on your orders, who must comply with federal disclosure laws, and who a customer can sue if a product causes harm.
Marketplace Seller vs. the Platform Itself
Regulators generally look at who holds title to the goods. If you source, price, and own a product until a customer buys it, you are the seller regardless of whose website displayed the listing. The platform, known in tax and consumer-protection law as a marketplace facilitator, is closer to a shopping mall landlord: it provides the storefront and the checkout, but the inventory belongs to you.
That three-way relationship among seller, platform, and buyer is the foundation of every marketplace transaction. Knowing which role you occupy tells you which obligations attach to you and which the platform absorbs.
Who Collects the Sales Tax
Before 2018, a state could only require you to collect its sales tax if you had a physical presence there. The Supreme Court’s decision in South Dakota v. Wayfair, Inc. changed that, allowing states to impose collection obligations based on your economic activity in the state alone.1Supreme Court of the United States. South Dakota v. Wayfair, Inc. The trigger, called economic nexus, is commonly $100,000 in gross sales into a state during a calendar year. The original South Dakota law also included a 200-transaction alternative, but more than a dozen states have since dropped the transaction count and rely only on the dollar figure.
For most marketplace sellers, the practical burden is lighter than it sounds. Nearly every state with a sales tax has passed a marketplace facilitator law that shifts collection and remittance from you to the platform. When a customer in one of those states buys your product, the platform calculates the tax at checkout, collects it, and remits it to the state on your behalf.2Streamlined Sales Tax. Marketplace Facilitator State Guidance
That does not eliminate your responsibility to understand your own nexus. If you also sell through your own website, at trade shows, or through wholesale channels, those sales still count toward your thresholds and can create collection obligations the platform is not handling for you. State penalties for missed collection vary, but a common structure is a percentage of the unpaid balance that accrues monthly, often capped at 25 percent of the amount owed. Most platforms provide monthly tax reports; keeping them is the simplest way to prove compliance.
Federal Disclosure Rules Under the INFORM Consumers Act
The INFORM Consumers Act, codified at 15 U.S.C. ยง 45f, imposes verification and disclosure requirements on online marketplaces and their higher-volume sellers. A “high-volume third party seller” under the law is anyone who has completed 200 or more separate sales of new or unused consumer products and generated at least $5,000 in gross revenue during any continuous 12-month period within the past 24 months.3Office of the Law Revision Counsel. United States Code Title 15 – 45f Both conditions must be met, and only transactions processed through the platform count.
If you cross those thresholds, the platform must collect and verify your bank account information, government-issued tax ID, contact information, and a working phone number or email. You are required to certify that information is accurate at least once a year. A platform that cannot verify a seller’s identity, or that receives materially false information, must suspend the account.4Federal Trade Commission. INFORM Consumers Act
Public-facing disclosure kicks in at a higher level. Once your annual gross revenue on a single platform reaches $20,000, the marketplace must display your full name (or business name), physical address, and a way for customers to contact you directly on every product listing page. Sellers who operate exclusively from a home address get a partial exemption: the platform shows only the country and state, plus an email or electronic messaging option, instead of the full street address.5Federal Trade Commission. Informing Businesses about the INFORM Consumers Act
Income Reporting and the 1099-K
Marketplace platforms report your sales to the IRS on Form 1099-K. The current threshold requires the platform to file a 1099-K when your gross payments exceed $20,000 and you have more than 200 transactions in a calendar year.6Internal Revenue Service. Understanding Your Form 1099-K Both conditions must be met. A prior law had attempted to lower the trigger to $600, but that change was reversed before it took effect.7Internal Revenue Service. IRS Issues FAQs on Form 1099-K Threshold Under the One Big Beautiful Bill
Falling under the threshold is not a free pass. You are still required to report all income on your tax return; the threshold only controls whether the platform sends a form to the IRS, not whether the money is taxable. Expenses tied directly to your selling activity, including platform fees, shipping, inventory costs, and storage, are generally deductible against that income.
Insurance and Product Liability
Major marketplaces require commercial liability insurance once your sales volume passes a set point. Amazon’s trigger is $10,000 in monthly gross proceeds, at which point you have 30 days to upload proof of coverage. Walmart’s threshold is $100,000 in gross merchandise value over any 12-month period.8Walmart Marketplace Learn. Liability Insurance Policy The standard minimum is $1 million per occurrence and $2 million in aggregate, and your policy must name the platform and its affiliates as additional insured parties. The insured name on the certificate must match the legal entity on your seller account, or the platform can hold your payouts until the paperwork lines up.
The reason those requirements exist becomes clear when a product injures someone. Under traditional strict liability principles, anyone in the chain of distribution can be held responsible for a defective product. Courts have split on whether marketplace platforms belong in that chain: some have found that when the platform stores, packages, and ships an item, it functions enough like a distributor to face liability, while others have ruled that because the platform never takes title, it is not a “seller” for these purposes.
What is consistent is that the marketplace seller almost always bears primary responsibility. You sourced the product, you owned it, and your name is the seller of record. Your liability policy is the first line of defense if a customer files a claim. Some platforms run buyer-protection programs that reimburse small claims, but those programs exist to protect the buyer’s experience on the platform, not your legal exposure.
What Selling Through a Platform Actually Costs
Three layers of fees come out of your revenue before you see a payout, and pricing without accounting for all three is how sellers lose money on volume.
Subscription fees are the fixed monthly cost of keeping an active seller account. Amazon’s Professional plan runs $39.99 per month.9Amazon. How Much Does It Cost to Sell on Amazon eBay’s store subscriptions range from $4.95 per month for a Starter plan to $299.95 for an Anchor plan on annual billing.10eBay. Subscriptions and Fees Lower-volume sellers can often choose a per-item fee instead of a monthly subscription.
Referral fees are the platform’s commission on each sale, set by product category. On Walmart Marketplace, referral fees run from 5 percent on low-priced apparel to 20 percent on jewelry, with most categories between 8 and 15 percent.11Walmart Marketplace Learn. Referral Fee Schedule for Contract Categories Amazon uses a similar category-based structure.
Fulfillment and storage fees apply only if you use the platform’s warehouses instead of shipping yourself. Fulfillment is priced by item weight and dimensions; storage is charged monthly by cubic feet. Rates climb during the October-through-December peak season, and inventory that sits unsold for more than a year triggers long-term storage surcharges.12Walmart Marketplace Learn. WFS Fees
Between the referral percentage, the monthly subscription, and fulfillment costs, a marketplace seller often pays 15 to 30 percent of gross revenue back to the platform before touching state sales tax, income tax, or the cost of the goods themselves. Building those numbers into your pricing from the first listing is what separates a business from a hobby.