This standard covers the Company's tax registrations and reporting across four separate regimes, which must be kept separate: (1) sales tax the Company collects from buyers as marketplace facilitator, (2) business tax the Company pays on its own revenue to Tennessee, (3) information reporting on sellers' earnings, and (4) the Company's own income tax. The governing statements of position are cited in each part; this standard states the operating procedure.
Roles and duties
- The Tax Preparer owns registrations, filings, nexus monitoring, and the Company's own information returns and income tax returns.
- The Legal function keeps tax records with the corporate records, places every deadline on the Compliance Calendar, and escalates any notice of deficiency or back-tax exposure.
- Seller Operations confirms that each seller's payment-processor identity verification is complete, because an incomplete verification is also a reporting gap.
- The Managing Member approves voluntary disclosure and back-registration decisions where a threshold was crossed without a registration.
Sales tax collection as marketplace facilitator
The Company's position is stated in Marketplace Facilitator Sales Tax, the Tennessee implementation in Tennessee Sales & Use Tax, and the customer-facing rule in Marketplace Facilitator Tax Policy, which governs.
- Monitor nexus continuously. Tennessee's threshold is $100,000 in gross sales to Tennessee buyers in twelve months; every other state sets its own. Liability runs from the date nexus attached, not the date it was noticed, so a threshold crossed unnoticed means tax owed on sales on which none was collected.
- Register per state. Tennessee registration runs through TN TAP. Each registration produces an account number and a filing cadence: monthly, quarterly, or annual, assigned by the state on volume: and both are placed on the Compliance Calendar in the week they are issued.
- Keep collected tax separate. Tax collected at checkout is held in the tax liability account: not operating funds and not seller funds: and reconciled to filings monthly.
- Do not let sellers collect. On marketplace transactions, sellers do not add tax at checkout. If a seller's exemption certificate is invalid or expired, tax is collected; that is a tax determination, not an enforcement decision open to appeal as one.
- Audit product taxability periodically. Taxability is an attribute of the listing: food against non-food, tangible against digital: read by the checkout against the ship-to jurisdiction. A seller who misclassifies a product to avoid collection breaches the listing accuracy rules, and the Company carries the exposure in the meantime.
Tennessee business tax
Tennessee Business Tax states the posture at $10,000 in platform revenue. This is the Company's own tax on the privilege of doing business in Tennessee, filed annually and paid from operating funds. It has nothing to do with sales tax collected from buyers, and the two sets of records never touch.
Information reporting: Form 1099-K
The Company's position is stated in Tax Information Reporting (Form 1099-K) (Tax Information Reporting (Form 1099-K)), including the $600 threshold posture stated there.
- Sellers' earnings are reported by the payment processor. Under the processor's connected-account arrangement, the processor performs seller identity verification and issues Forms 1099-K to sellers who meet the threshold. The Company does not receive sellers' Social Security numbers or tax identification numbers in this flow, and staff shall not ask a seller to send them.
- Confirm onboarding is complete. A seller whose processor identity verification is unfinished cannot receive transfers, and that seller's tax reporting is incomplete by construction. Seller Operations checks completion before a seller goes live and again at year end.
- The Company's own forms are the Company's. Payments the Company makes to contractors, and any reportable payments it makes outside the processor flow, are the Company's own information-return obligations, due January 31 to recipients. The Tax Preparer prepares them; the calendar reminds the Tax Preparer.
The Company's income tax
The limited liability company's federal and Tennessee franchise and excise obligations are the Tax Preparer's work. Operations has one duty in this area: keep clean books. The accounting records kept under Record Retention are what the return is built from, and books delivered in disorder in March produce extensions, penalties, and cost.
The annual tax cycle
| When | What |
|---|---|
| January | Issue the Company's own information returns (January 31 deadline). Close the prior year's books. Confirm nexus thresholds per state for the new year. |
| Quarterly | Make estimated payments as the Tax Preparer directs. Review nexus: start a registration for any state about to cross its threshold before it crosses. |
| April 1 | Tennessee annual report: an entity filing, not a tax filing, but it shares the season; see Entity Records and Good Standing. |
| Ongoing | File sales tax on each state's cadence. Reconcile the tax liability account monthly. |
| Year end | Planning session with the Tax Preparer: thresholds, rates, and new states expected to change in the coming year. |
Failure modes and the response to each
- Nexus crossed without registration. The most expensive common failure. Back-registration usually means back tax, penalty, and interest. On discovery, the Legal function and the Tax Preparer assess voluntary disclosure at once, and the Managing Member approves the approach.
- A cadence change is missed. The state moves the Company from quarterly to monthly filing and the notice goes unread. Open every revenue department notice on the day it arrives, and update the calendar in the same week.
- The tax liability account is not reconciled. Collected tax drifts from filed tax. Monthly reconciliation catches the drift at one month instead of twelve.
- Seller verification is incomplete at year end. A seller with volume and no completed processor verification is a reporting gap. Treat completion as a condition of going live and enforce it.
Records created and where they are kept
This standard creates registration certificates and account numbers, filed returns and filing confirmations, monthly reconciliations of the tax liability account, and the Company's information returns. Tax filings and workpapers are kept in the Tax Preparer's file and in the corporate book, and tax records are retained for seven years under Record Retention.
Escalation
A notice of deficiency, an assessment of back tax, a threshold crossed without registration, or any inquiry from a revenue authority is escalated to the Legal function at legal@aapawz.com on the day it is received. Operational tax questions go to support@aapawz.com.
Review cadence
The Tax Preparer reviews nexus and filing cadences quarterly, at the review described in Compliance Calendar, and the Legal function reviews this standard once a year.
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