Tax remittance responsibilities for merchants and marketplaces vary based on jurisdiction, business model, and the type of taxes involved (e.g., sales tax, VAT, or GST). Here’s a general breakdown:

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Direct-to-Consumer (DTC) Merchants

Merchants selling directly to consumers (either online or in physical stores) typically have the following tax responsibilities:

• Sales Tax Collection: Must collect and remit sales tax in jurisdictions where they have a nexus (physical presence, economic threshold, or employee presence).
• Value-Added Tax (VAT) or Goods and Services Tax (GST): In many countries, businesses must register for VAT/GST and include it in the sale price.
• Filing and Remittance: Merchants must file periodic tax returns and remit collected taxes to the relevant authorities.

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Marketplaces (Most Channels using Direct Order Submission)

Channels using Direct Order Submission often have different responsibilities due to marketplace facilitator laws:

• Marketplace Facilitator Laws: Many jurisdictions require the marketplace, rather than the individual sellers, to collect and remit sales tax or VAT/GST on transactions made through the platform.
• Seller Exemptions: In some cases, individual sellers may be exempt from collecting tax if the marketplace is handling it.
• Reporting Obligations: Marketplaces may need to provide tax authorities with seller transaction details and issue tax forms (e.g., 1099-K in the U.S.).

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Common Compliance Challenges

• Understanding Nexus Rules: Economic nexus laws require sellers to collect tax even without a physical presence.
• International Sales: VAT/GST obligations vary by country, requiring proper registration in multiple jurisdictions.
• Threshold Considerations: Many tax systems have revenue thresholds that determine when a business must collect and remit taxes.

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Apps Resposible for Tax Remittance by Default

Any apps utilizing Direct Order Submission are automatically set as the party responsible for tax remittance. These apps are required to provide tax totals when creating an order and are therefore the ones calculating the tax amount.

• During external order submission, Violet will attempt to notify the platform that the channel has taken resposibility for tax remittence. This is to help ensure that a merchant does not also remit taxes, though Violet can not guarantee this.
• Apps responsible for tax calculation and remittance will often utilize tools like Avalara or TaxJar to automate this process.

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Apps Not Resposible for Tax Remittance by Default

Any apps utilizing Checkout are currently not automatically set as the party responsible for tax remittance. These apps are not able to calculate their own taxes and instead rely on the merchants tax calculations.

• When checkout is utilized, a cart is built and maintained on the merchants site in realtime. With this, the shopper is interacting directly with the merchants store, with the channel acting as a proxy, when they are populating and submitting a cart.