If you've ever wondered why Etsy charges your customers sales tax automatically but your own website doesn't, the answer is a set of rules called marketplace facilitator laws. They decide who is responsible for collecting sales tax when you sell through a platform, and for food sellers the answer changes depending on where you sell. Understanding the difference between selling on a big marketplace and selling through your own storefront can save you from either overpaying or, worse, missing a tax you actually owe. This guide explains marketplace facilitator laws and what they mean for food sellers, in plain terms.
The short version: A marketplace facilitator law makes the platform, not you, collect and remit sales tax on sales it facilitates. So when you sell through a marketplace like Etsy or Amazon, that platform collects the sales tax for those sales. But your own website or storefront is generally not a marketplace facilitator, which means you're the seller of record and responsible for your own sales tax there, if your state and product are taxable. All of this varies by state, so the real rule is to confirm with your state's Department of Revenue.
This guide covers what these laws are, whether the platform collects for you, your own storefront, whether food is even taxable, what you still have to do, and economic nexus. This is general information, not tax advice, so check with a professional or your state Department of Revenue for your situation.
A marketplace facilitator law requires a platform that hosts third-party sellers to collect and remit sales tax on the sales it facilitates, instead of leaving that job to each individual seller. States adopted these laws to make sales-tax collection simpler by putting the duty on a few big platforms rather than thousands of small sellers.
The background in brief:
The takeaway: these laws exist to shift sales-tax collection onto the platform for marketplace sales. The practical questions for you are which of your sales channels counts as a marketplace and whether your product is even taxable, which is what the rest of this guide sorts out.
Yes, when you sell through a qualifying marketplace facilitator, that platform collects and remits the sales tax on those sales, so you generally don't handle sales tax for transactions that run through it. This is the whole point of the laws, and it's genuinely helpful.
What this looks like in practice:
Here's who generally collects on each channel a food vendor uses:
| Sales channel | Who collects the sales tax |
|---|---|
| Etsy, Amazon, other multi-vendor marketplaces | The platform (marketplace facilitator) |
| Your own website or storefront | You, the seller of record |
| In person at a farmers market | You, the seller of record |
The crisp version: for sales made through a qualifying marketplace, the platform is the one collecting sales tax, not you. But this relief applies only to the sales that actually go through that marketplace, which is exactly where food sellers get confused, because most sell through more than one channel. The next section covers the channel that trips people up. For in-person sales specifically, the guide on sales tax at farmers markets has more.
Sales through your own website or storefront are generally your responsibility, because your own store is not a third-party marketplace facilitating other people's sales, it's you selling directly. That makes you the seller of record, and the sales-tax duty stays with you where your state and product are taxable.
This is the distinction that matters most:
The takeaway: don't assume that because Etsy collects your sales tax, your own website does too. On your own storefront you're the seller, so the responsibility is yours, subject to your state's rules. The guide on selling through Etsy versus your own website covers the broader tradeoffs of the two channels, and this tax difference is one of them.
Whether you owe sales tax at all depends heavily on your state and your specific product, because most states exempt groceries but tax prepared food, and the line between them varies. Before worrying about who collects, it's worth knowing whether your product is taxable in the first place.
The general pattern, which you must verify locally:
The rule: your product might be exempt, taxable, or somewhere in between, and only your state's Department of Revenue can tell you which. The crisp version: don't assume your food is taxable or exempt, look up your state's specific definition of taxable versus exempt food before you do anything else, which the guide on reporting your food sales taxes can help you organize.
Even when a marketplace collects sales tax for you, you may still have to register with your state, report those sales, and keep records, because the facilitator handling collection doesn't always erase your own obligations. This is where a food seller most often gets tripped up.
What can still be on you:
The takeaway: a facilitator collecting your sales tax is not always the end of your responsibilities. Check whether your state still wants you registered or reporting, and keep clean records either way. The rule: confirm your own obligations with your state even when a platform is doing the collecting.
Economic nexus is the level of sales or transactions in a state that triggers your own obligation to collect sales tax there, even without a physical presence, and it matters most if you sell into multiple states. For a purely local food vendor, it usually isn't a concern, but it's worth understanding.
The basics:
The rule: if you sell mostly locally, economic nexus in other states probably doesn't reach you, but if you ship across state lines in volume, check each state's threshold. The crisp version: economic nexus is about when your own sales into a state become big enough to create a tax duty there, and for most small local food vendors it stays theoretical.
The single most important thing to get right is which of your channels makes you the seller of record, and your own storefront is one of them. Homegrown is a $10-per-month online storefront, with no percentage fees beyond standard payment processing, where you sell directly to your customers rather than as a third party on someone else's marketplace. That means on your Homegrown sales you are the seller of record, so any sales-tax responsibility, where your state and product are taxable, stays with you, exactly as it would for your own website.
Understanding that is what keeps you compliant. Because a big marketplace collects tax for you doesn't mean your own storefront does, so you handle your direct sales according to your state's rules. What makes that manageable is having clean records, and Homegrown gives you an itemized history of your direct sales in one place, separate from any marketplace channel, which is exactly the by-channel recordkeeping this topic requires. Compare that to reconstructing your direct sales from scattered payment apps at tax time.
To be clear about what Homegrown does not do: it is not tax software, it does not tell you whether your product is taxable in your state, and it is not a substitute for registering with your state or consulting a tax professional. Those are your responsibility and your state Department of Revenue's domain. What it does is keep your direct sales cleanly recorded so that meeting your own obligations is a matter of good records, not guesswork. If you want your direct sales documented and separate from your marketplace channels, set up your Homegrown storefront, and confirm your specific sales-tax duties with your state.
If it's a qualifying marketplace facilitator, yes, for the sales made through it. Large platforms like Etsy and Amazon collect and remit sales tax on the sales they facilitate, so you generally don't handle it for those transactions. Whether a given platform qualifies and has crossed your state's threshold depends on the state, and it only covers sales made on that marketplace, not your other channels.
Generally, the facilitator collects and remits the sales tax on your Etsy sales, so you aren't separately collecting it for those transactions. However, some states still require you to register and report those facilitated sales on your own return, often as exempt sales with the platform's documentation. Check your state's rules, since being relieved of collection isn't always the same as having no filing to do.
Those are generally your responsibility. Your own store is you selling directly, not a marketplace facilitating third-party sales, so facilitator collection typically doesn't apply. You're the seller of record and must handle any sales tax you owe on those direct sales under your state's rules. Don't assume your own storefront works like Etsy, because the collection duty there is yours.
It depends on your state and your specific product. Most states exempt groceries but tax prepared or ready-to-eat food, and where items like baked goods, jams, and meal kits fall varies from state to state. Look up your state Department of Revenue's definition of taxable versus exempt food rather than assuming, since the same product can be treated differently across state lines.
It depends on the state. Some states waive the registration requirement if all of your sales run through a registered marketplace facilitator, while others still require you to register even then. And if you also sell through any other channel, like your own storefront or in person, you'll generally need to be set up to handle sales tax on those sales yourself. Confirm your state's specific rule.
Keep documentation from any marketplace facilitator confirming it collects and remits sales tax on your behalf, along with your own sales records broken out by channel. Separating your marketplace sales from your direct storefront sales is what lets you show which sales the platform handled and which are your own responsibility. Good by-channel records are the foundation for meeting whatever your state requires.
Marketplace facilitator laws are simpler than they sound once you see the core split: the platform collects on marketplace sales, and you're responsible on your own direct sales, all subject to your state and product. Know which channel makes you the seller of record, keep clean records broken out by channel, and always verify the specifics with your own state, since the rules and the taxability of your product both vary from one state to the next. Start your Homegrown storefront so your direct sales are cleanly documented, and confirm your sales-tax duties with your state's Department of Revenue.
