Big questions for marketplace facilitators in 2024

Retail e-commerce sales continue to increase, in volume and complexity. These trends further intensify tax compliance risks by interacting with related uncertainties, such as stubborn inflation, state-level revenues and budget instability and regulatory volatility. All of which are creating indirect tax compliance turbulence in the U.S. and other global regions (particularly the European Union). Marketplace facilitators have already experienced the behavioural ripple effects of higher systemic inflation rates: 89% of global consumers report that higher prices have made them look for better value, according to a Mirakl survey. While aggregate inflation continues to decrease, supply chain disruptions (coupled with regional shipping and transportation woes) continue to elevate prices in some commercial sectors.  

This combination of factors makes it imperative for marketplace facilitators to get a firm handle on their indirect tax burdens as well as the tax automation solutions that can help mitigate compliance risks. 

On that count, tax teams within many marketplace facilitators are facing challenges when it comes to: 

• Monitoring and responding to evolving indirect tax compliance requirements as U.S. states continue to revise their nexus requirements as they adjust their tax base to emerging budgetary conditions; 
• Managing tax compliance across multiple jurisdictions (with different requirements); 
• Balancing business growth with tax compliance; and 
• Streamlining the order-to-cash process, enabling a smooth (and customer-centric) onboarding experience, sustaining a unified customer experience across all touchpoints and minimising audit risks; 

How’s that for a varied set of complications? But wait, there’s more.  

From a higher-level economic standpoint, marketplace facilitators should recognise that fiscal uncertainty among U.S. states will drive many jurisdictions to seek new sources of revenue. This search will focus on the continuing taxation of the (global) digital economy, which includes e-commerce and online marketplace transactions. As such, remote sellers and marketplace facilitator can expect tax rules (e.g. nexus standards) and rates to continue to undergo frequent changes. 

In response, marketplace facilitators should ensure that their supporting tax technology is up to the task of addressing compliance complexity and risks effectively. The following questions – related to automation scope, accuracy, reporting, flexibility/scalability, support and more – can help tax teams make an effective determination: 

• Does the solution support automated seller onboarding and management? 
• Does the solution determine line-item tax liabilities? 
• Are tax rates and rules across all relevant jurisdictions updated frequently enough to mitigate compliance risks? 
• How robust are the solution’s reporting capabilities? 
• Are related, or “add-on” services (e.g. registration, tax filing and validation) available? 
• Does the solution quickly and easily scale as a marketplace expands into new geographies?  
• To what extent does the solution enable and support a unified experience across all sales channels? 

The Mirakl research also indicates that 94% of worldwide consumers expect to use marketplaces the same or more in the future. These questions will become more important to address as e-commerce and marketplace transaction volumes continue to rise.