If your tech startup sells digital goods, software, or services through an API or platform, you may be surprised to learn that Texas classifies some API-driven ecosystems as marketplaces. Under Texas law, marketplace facilitators are responsible for sales tax collection. So do API vendors qualify? Let’s break it down.
What Is a Marketplace Facilitator?
According to Texas Tax Code §151.0242, a marketplace facilitator is any entity that:
- Provides a platform (physical or digital) for sales, and
- Processes payments or transmits orders to the seller
This includes online stores, marketplaces, SaaS platforms with billing modules, and app stores.
Do API Vendors Count as Facilitators?
It depends on how your API is used. You may be a marketplace if:
- You allow third-party sellers or developers to use your API for reselling digital goods or services
- You process payments, set terms, or control delivery
- You collect funds on behalf of others and pass them along
If you meet these conditions, you may be required to collect and remit sales tax on behalf of those third-party sellers, even if you’re not the ultimate provider.
Example: API Business Model That Triggers Nexus
Company: StreamBuilder Inc.
Product: API for delivering video storage & encoding services
Users: Indie developers embed the API into their platforms
Revenue Model: Customers pay StreamBuilder, who then pays out to developers
Result:
- StreamBuilder is acting as a marketplace facilitator
- Must collect Texas sales tax if any buyers are in Texas
- Must register, file returns, and remit tax under Texas rules
Who Must Register and Collect?
You must register with the Texas Comptroller and collect sales tax if:
- You facilitate $500,000+ in sales to Texas customers (economic nexus)
- You have control over payment, delivery, or terms
- You’re acting on behalf of Texas-based sellers or buyers
Use Form AP-201 to register. File tax returns using Form 01-117.
Step-by-Step: What API Vendors Should Do in 2025
- Review your business model: Do you collect payments for third-party sellers?
- Evaluate platform usage: Are you enabling commerce via your API?
- If yes, register as a marketplace facilitator with Texas
- Begin charging 6.25% + local tax on Texas transactions
- File periodic returns and keep records of seller payouts
Conclusion
If you’re operating a platform or API that enables third-party transactions, you may be seen as a marketplace facilitator under Texas law , even if your product is code-based. Be sure to check your compliance status and avoid penalties by getting ahead of this growing area of sales tax enforcement.
Call to Action
Schedule a platform review with Anshul Goyal, CPA, EA, FCA to determine if your API-based product qualifies as a marketplace facilitator under Texas law, and what steps you must take to comply.
Disclaimer:
This article is for informational use only. The application of marketplace facilitator laws depends on transaction structure, contractual terms, and payment flow. Always consult a professional before filing.
Top 5 High-Searched FAQs
1. What is a marketplace facilitator in Texas?
An entity that enables third-party sales and processes payment or delivery.
2. Does using an API make me a facilitator?
Only if your API supports third-party sellers and handles payments or order fulfillment.
3. What’s the economic nexus threshold in Texas?
$500,000 in Texas-sourced gross revenue per year.
4. What forms are required to register and file tax?
Form AP-201 to register, Form 01-117 for ongoing reporting.
5. Are all SaaS APIs considered marketplaces?
No. Only APIs that facilitate commerce for others may qualify.
About Our CPA
Anshul Goyal, CPA, EA, FCA specializes in helping tech platforms, API-based SaaS models, and marketplace businesses understand their sales tax obligations. He advises on multi-state economic nexus, facilitator rules, and audit preparation for digital sellers.