Update, 10.11.2018: Due to the Supreme Court of the United States ruling in South Dakota v. Wayfair, Inc., marketplace providers are requried to register with the state and begin collecting Minnesota sales tax on behalf of remote sellers using their marketplace no later than October 1, 2018.

Update 7.12.2017: "Sales on online marketplaces crossed $1 trillion in 2016," according to an Internet Retailer research report. With this kind of money changing hands, online sellers should expect more states to impose taxes on marketplace providers. Washington has already done so.

Minnesota has enacted the nation’s first tax on marketplace providers and expanded the definition of what it means to do business in the state.

HF 1 requires a company to collect sales and use tax if it has an employee in Minnesota, and expounds an in-state affiliate creates a tax obligation for every company in the controlled group. The measure also declares that selling through a marketplace creates nexus — a tax obligation — for marketplace sellers. Finally, it requires a marketplace provider with a place of business in the state to collect and remit sales and use taxes on behalf of its sellers.

The new requirements will only affect marketplace providers with a physical presence in Minnesota — like Amazon. The country’s largest online seller opened a sorting center in Shakopee in 2015 and a nearby fulfillment center in 2016. Together, they enable Amazon to provide same-day and one-day delivery to the Twin Cities area.

Approximately 50 percent of items sold on Amazon are from “sellers, small businesses and entrepreneurs.” Although Amazon has been collecting and remitting Minnesota sales tax since October 1, 2014, it has only been doing so on sales of its own products; it hasn’t been required to collect tax on sales by its third-party sellers. Currently, if a seller has nexus with Minnesota through its own ties to the state (e.g., goods stored in an Amazon warehouse), the individual seller is liable for any sales and use tax owed — not Amazon.

Once HF 1 takes effect, marketplace providers with nexus in Minnesota must collect and remit tax for all retailers selling in the state through the marketplace, unless the retailer qualifies for the small seller exception. The marketplace isn’t responsible for collecting and remitting tax for sellers making less than $10,000 annually if their only connection to the state is through the marketplace.