Is a digital auction platform a 'marketplace facilitator' that must collect Tennessee sales tax on auctions run by its customers?
Plain-English summary
A company gives its customers software and an online hosting environment to run their own auctions of real estate and goods — listings, bidding, even custom-branded "white-label" sites — but it never touches the money. It asked Tennessee whether it is a marketplace facilitator that must collect and remit sales tax on everything sold through the platform. The Department said no.
Tennessee makes a marketplace facilitator collect and remit sales tax once it facilitates more than $100,000 of Tennessee sales in a 12-month period. But the definition has two prongs: a business must (1) facilitate the sales and (2) directly or indirectly collect the payment from the buyer and transmit it to the seller. This company meets the first prong but not the second. Its customers choose and contract with their own payment processors; the company never receives, controls, or even sees the buyers' funds. Because it never collects or transmits payment, it is not a marketplace facilitator and does not have to collect Tennessee sales and use tax on auctions run on its platform.
Two follow-up questions came out the same way. Adding an optional feature that lets the company's customers collect sales tax themselves does not make the company a facilitator — the customers are still the ones collecting, through their own processors. And because the company is not the dealer for those sales, it has no duty to keep transaction-level records of them. The sellers who actually run the auctions remain responsible for the tax.
What this means for you
Auction, marketplace, and SaaS platform operators
If your platform only supplies the technology and your customers handle their own payments through processors they choose, Tennessee does not treat you as a marketplace facilitator. The pivotal fact is who collects the money. Merely integrating payment options, or referring customers to payment processors (even for a referral fee), does not make you a facilitator, as long as you never receive or control the buyers' funds. Tennessee law expressly says a role "limited to payment processing services" is not facilitation.
Sellers who run auctions on someone else's platform
Don't assume the platform is collecting Tennessee tax for you. If the platform only provides software and you collect payment through your own processor, you are the dealer: you must register, collect, and remit Tennessee sales and use tax on your taxable sales, and keep the records. A platform that offers a "collect sales tax" feature is handing you a tool, not assuming your tax obligation.
Accountants and advisors
The test in TENN. CODE ANN. § 67-6-102(56)(A) is conjunctive — facilitation plus collecting/transmitting payment. Map a client's actual payment flow before concluding facilitator status; the $100,000 economic-nexus threshold in § 67-6-501(f) only bites once the collection prong is met. The same logic separates a true payment processor (excluded by § 67-6-102(56)(B)(ii)) from a software vendor that merely connects users to processors.
Common questions
Q: Does a platform have to collect Tennessee sales tax just because taxable goods are auctioned on it?
A: No. The site can be a "marketplace," but it is only a marketplace facilitator required to collect tax if it also collects the payment from buyers and transmits it to sellers, directly or through a third party. A platform that never handles the funds is not a facilitator.
Q: We let sellers turn on a "collect sales tax" feature. Does that make us the facilitator?
A: No, under this ruling. The feature only helps your customers collect tax through their own payment mechanisms; you still aren't receiving or remitting the money, so you don't become a marketplace facilitator.
Q: We refer customers to payment processors and earn referral fees. Is that "indirectly" collecting payment?
A: No. The Department said connecting customers to processors — even for a referral fee — is not payment processing and does not indirectly collect payment, because you never receive or control the funds.
Q: Then who owes the Tennessee tax?
A: The sellers running the auctions. They are the dealers, responsible for registering, collecting, remitting, and keeping records for their taxable Tennessee sales.
Q: Can I rely on this ruling for my own platform?
A: Not as binding. A Tennessee revenue ruling is advisory and is not binding on the Department; it is based on the specific facts presented and can be revoked or modified. It shows the Department's reasoning, but your facts — especially how payments flow — may differ.
Citations and references
Statutes (Tennessee Code Annotated):
- § 67-6-102(56)(A) — definition of "marketplace facilitator" (facilitation + collecting/transmitting payment)
- § 67-6-102(56)(B)(ii) — a role limited to payment processing is not a facilitator
- § 67-6-501(f) — marketplace facilitator must collect/remit; $100,000 12-month threshold
- § 67-6-102(55), (57) — definitions of "marketplace" and "marketplace seller"
- § 67-6-102(23)(N) — "dealer" includes a marketplace facilitator
- § 67-6-501(a) — dealer liability to collect and remit
- § 67-6-523(a) — dealer transaction recordkeeping
- § 67-6-102(86)(A) — definition of "sale"
- Tennessee Retailers' Sales Tax Act, §§ 67-6-101 to -907
Source
- Landing page: https://www.tn.gov/revenue/tax-resources/legal-resources/tax-rulings.html
- Original PDF: https://www.tn.gov/content/dam/tn/revenue/documents/rulings/sales/26-04.pdf
Original ruling text
TENNESSEE DEPARTMENT OF REVENUE
REVENUE RULING # 26-04
Revenue rulings are not binding on the Department. This ruling is based on the particular facts
and circumstances presented, and is an interpretation of the law at a specific point in time.
The law may have changed since this ruling was issued, possibly rendering it obsolete. The
presentation of this ruling in a redacted form is provided solely for informational purposes,
and is not intended as a statement of Departmental policy. Taxpayers should consult with a
tax professional before relying on any aspect of this ruling.
SUBJECT
The application of Tennessee sales and use tax to the provider of a digital auction platform.
SCOPE
Revenue Rulings are statements regarding the substantive application of law and statements of
procedure that affect the rights and duties of taxpayers and other members of the public. Revenue
Rulings are advisory in nature and are not binding on the Department.
FACTS
Company provides its customers with a digital infrastructure (the “Platform”) in the form of both
offline, downloaded or remotely accessed software, as well as an online hosting environment to
enable its customers to manage and independently conduct auctions of real and tangible personal
property. The Platform supports multiple auction types (e.g., online-only auctions, pre-bidding
auctions, hybrid live and online auctions, and listings where the bidding occurs off-platform).
Customers maintain full control over their auction events, including setting bidding terms, managing
customer's customer eligibility, and choosing the form of payment. Some customers may opt to list
items exclusively on their white-label websites—i.e., custom-branded sites powered by Company's
technology but fully controlled by the customer. Company does not market or represent individual
auctions as its own. While Company provides the digital environment necessary to conduct these
auctions and to transmit bids electronically, it does not set prices, take title to any items or buy or list
products for sale, participate in the underlying bidding activity between its customers and their
customers (“customers’ customers”), or finalize sales.
Company earns revenue through sales of its technology. It generates platform subscription fees for
providing access to the cloud software solution platform on a recurring basis. It charges listing fees
when Company’s customer creates a selling event/auction. Company also earns revenue from
optional premium features, which include enhanced search functionality, bidder analytics, and
expanded marketing modules, as well as through banner ads, custom websites, and
support/training. 1
Company provides platform/technology support to its customers. Platform support relates exclusively to the functionality and
performance of Company’s software. Examples include: (1) assisting Company’s customers with login or access issues, (2)
troubleshooting slow page loads or connectivity problems, (3) resolving data upload errors, or (4) assistance in configuring
1
1
Company has developed interfaces within its Platform that enable its customers to independently
select from various payment methods. Company’s customers may accept payment directly by cash,
check, bank transfer, or other tender type. Company maintains referral relationships with certain
payment processors. Customers independently maintain direct contractual relationships with their
chosen payment processors. Company provides technology support for certain technical integrations
or referrals limited to ensuring that the technical integration functions properly (e.g., Company’s
customer credentials connect successfully to the third-party service). Company generates referral fees
when its customer contracts with payment processors that have referral arrangements with
Company.
Company does not process payments, handle refunds or chargebacks, nor does it collect or remit
taxes on behalf of customers. In the majority of transactions, Company does not have visibility into
whether a bidder ultimately pays or whether the sale is completed. In limited circumstances, Company
may see that a winning bid was awarded or that a transaction closed, but in no circumstances does it
have access to payment data or confirmation that the buyer fulfilled its payment obligation.
Company does not monitor or manage payment disputes or enforce fulfillment. In the case of nonpayment by a customer’s customer, the Platform’s functionality has the ability to send an automated
notification or allow Company’s customer to select another winning bidder. This is a setting that can
be enabled by Company’s customer, but resolution of that issue is entirely between Company’s
customer and its customer.
RULINGS
1. Is Company a marketplace facilitator as defined by TENN. CODE ANN. § 67-6-102(56)(A) such that
it is required to collect and remit Tennessee sales and use tax on sales made through its
Platform?
Ruling: No, Company is not a marketplace facilitator because it does not meet the necessary
requirements as provided in TENN. CODE ANN. § 67-6-102(56)(A).
2. If Company adds to its Platform a feature allowing its customers to collect sales and use tax,
does this change the result?
Ruling: No. The addition to Company’s product of a feature allowing its customers to collect
and remit sales and use tax does not change the fact that Company is not a marketplace
facilitator and is not required to collect and remit sales and use tax on sales made through
the Platform.
3. Does Company have an obligation to maintain transaction-level records for sales made
through the Platform?
auction settings within the software. Company neither engages in dispute resolution between customers and customer's
customers, nor does it provide auction-specific customer support or assistance with transactions. However, if issues arise, such
as a customer’s customer failing to pay or a customer failing to ship, the Platform may notify the responsible party and expect
that party to resolve the matter. If complaints persist, the Platform may remove the user for noncompliance. Company is not
involved in managing customer/customer's customer interactions and post-auction fulfillment.
2
Ruling: No. Company is not a dealer with respect to sales made through its Platform for
Tennessee sales and use tax purposes and is not required to maintain transaction-level
records with respect to those sales.
ANALYSIS
Under the Retailer’s Sales Tax Act, 2 retail sales in Tennessee of tangible personal property and
specifically enumerated services are subject to the sales tax, unless an exemption applies. “Retail sale”
is defined as “any sale, lease, or rental for any purpose other than for resale, sublease, or subrent.” 3
TENN. CODE ANN. § 67-6-102(86)(A) defines “sale” in pertinent part to include “any transfer of title or
possession, or both, exchange, barter, lease or rental, conditional or otherwise, in any manner or by
any means whatsoever of tangible personal property for a consideration.”
Tennessee’s sales tax liability is imposed on the dealer. “Dealer” is defined under TENN. CODE ANN. § 676-102(23)(C) to include any person “who offers for sale at retail, or who has in such person’s possession
for sale at retail . . . tangible personal property.” TENN. CODE ANN. § 67-6-501(a) provides that “every
dealer making sales, whether within or outside the state, of tangible personal property, for
distribution, storage, use, or other consumption in this state, or furnishing any of the things or services
taxable under this chapter” is liable for the collection and remittance of sales and use tax. 4
Tennessee law requires a marketplace facilitator to collect and remit sales and use tax on sales made
through its marketplace if it made or facilitated total sales to consumers in this state of more than
$100,000 during the previous twelve-month period. 5 The definition of sale includes any sale “made or
facilitated by a marketplace facilitator,” 6 and the definition of dealer includes a person that “acts as a
marketplace facilitator.” 7 Moreover, TENN. CODE ANN. § 67-6-501(f) specifically states that a marketplace
facilitator is responsible for collecting and remitting sales and use tax:
When a marketplace seller uses a marketplace facilitator to facilitate sales of tangible
personal property or any of the things or services taxable under this chapter, the
marketplace facilitator is liable for the taxes imposed by this chapter on the sales price
of the tangible personal property or the things or services taxable under this chapter
regardless of whether the marketplace seller has a sales tax certificate of registration
2
Tennessee Retailers’ Sales Tax Act (codified at TENN. CODE ANN. §§ 67-6-101 to -907) (2022 and Supp. 2023).
3
TENN. CODE ANN. § 67-6-102(84) (Supp. 2023).
4
TENN. CODE ANN. § 67-6-501(a) (2022).
5
TENN. CODE ANN. § 67-6-501(f).
6
TENN. CODE ANN. § 67-6-102(86)(L).
7
TENN. CODE ANN. § 67-6-102(23)(N).
3
or would have been required to collect sales or use taxes had the sale not been
facilitated by the marketplace facilitator. 8
A “marketplace” is “a physical or electronic place, platform, or forum, including, but not limited to, a
store, booth, internet website, catalog, or dedicated sales software application, where tangible
personal property or any of the things or services taxable under this chapter are offered for sale.” 9
And “marketplace seller” is a “person who makes sales through any marketplace operated, owned, or
controlled by a marketplace facilitator.” 10
Moreover, a “marketplace facilitator” is defined as a person who, “[f]or consideration, regardless of
whether characterized as fees from the transaction, contracts, or otherwise agrees to” facilitate sales
subject to sales and use tax through a physical or electronic marketplace and “[e]ither directly or
indirectly through contracts, agreements, or other arrangements with third parties, collects the
payment from the purchaser. . . and transmits payment to the marketplace seller.” 11
Marketplace Facilitator
Company’s Platform is an electronic platform where tangible personal property subject to the
Tennessee sales and use tax is offered for sale, and as such, it is a marketplace. 12 Company, however,
is not a marketplace facilitator. Company’s role is limited to providing the Platform and technical
support for the Platform. In no case does Company collect payment from its customers’ customers
and remit payments to its customers. Moreover, it does not contract with third-party payment
processors to indirectly collect payments. Although Company integrates the ability for its customers
to select payment methods within its Platform and maintains referral relationships with certain
payment processors, in no case does Company receive or have access to funds related to underlying
financial transactions associated with those integrations or referrals. Company’s customers use their
own payment processors who collect payment and transmit payment back to them. Company’s
electronic Platform facilitates sales, but it neither directly nor indirectly collects payments from its
customers’ customers as required to meet the definition of a marketplace facilitator. 13 Accordingly,
Company is not required to collect and remit Tennessee sales and use tax on sales made on the
Platform. 14
Customer Collection Feature
8
TENN. CODE ANN. § 67-6-501(f).
9
TENN. CODE ANN. § 67-6-102(55).
10
TENN. CODE ANN. § 67-6-102(57).
11
TENN. CODE ANN. § 67-6-102(56)(A).
12
See TENN. CODE ANN. § 67-6-102(55).
The requester asks multiple questions about “indirect” payment processing. The definition of marketplace facilitator does not
reference “indirect” payment processing. TENN. CODE ANN. § 67-6-102(56)(B)(ii) specifically states that a marketplace facilitator
does not include a person whose role with respect to a marketplace is “limited to payment processing services between two (2)
or more parties.” Company does not provide payment processing services. Connecting its customers to payment processors
does not render Company a payment processor, directly or indirectly.
13
14
See TENN. CODE ANN. § 67-6-102(56)(A).
4
The addition to the Platform of a feature allowing Company’s customers to collect sales tax on
transactions made through the Platform does not change the fact that Company does not itself collect
payments from its customers’ customers or through its relationship with a third party. 15 Company’s
customers will be collecting the sales tax through existing payment collection mechanisms and
relationships with third parties that do not involve Company. In other words, the customer collection
feature only provides technical integration for Company’s customers to collect sales tax from
purchasers and does not permit the Company to collect payment for its customers for future
remittance to the customers. Therefore, Company will not be considered a marketplace facilitator and
will not be responsible for collecting and remitting sales and use tax for sales made on its Platform
with the addition of a sales tax collection feature to the Platform that only permits Company’s
customers to collect sales tax from purchasers.
Recordkeeping
Transaction-level recordkeeping requirements fall on the dealer for purposes of the Tennessee sales
and use tax. TENN. CODE ANN. § 67-6-523(a) requires dealers to “keep and preserve suitable records of
the sales or purchases” as well as “such other books of account as may be necessary to determine the
amount of tax due.” Because Company is not a marketplace facilitator, it is not the dealer for sales
and use tax purposes for items sold through the Platform. 16 Therefore, Company is not required to
maintain records for transactions involving its customers’ sales occurring through the Platform.
APPROVED:
David Gerregano
Commissioner of Revenue
DATE:
May 13, 2026
15
See Id.
16
See Tenn. Code Ann. § 67-6-102(23)(N).
5