DST18100 - Online Marketplace - Overview

Digital Services Tax (DST) is charged on the revenues received in connection with specified digital services activities. The following are digital services activities for the purposes of DST:

  • a social media service

  • an internet search engine

  • an online marketplace

A group will be within the scope of DST if it provides one or more of the three digital services activities.

The online marketplace definition is intended to cover online services which provide an online market for goods, services and other property by connecting users seeking something with other users who are willing to provide it. It therefore tests whether intermediating the exchange of goods and services between third party users is a central purpose of the online service.

There are two parts to the online marketplace definition which must both be satisfied for an online service to fall in scope:

  • the service enables users to sell particular things to other users, or to advertise or otherwise offer to other users particular things for sale, and

  • the main purpose, or one of the main purposes, of the service is to facilitate the sale by users of particular things.

The first condition is a factual test which considers whether the features of the online service enable third party users to sell things to other users. The second then considers whether the facilitation of such transactions is a main purpose of the service.

The legislation does not seek to test the importance of user participation to the online service, instead it simply tests whether the online service is an online marketplace. It would not be possible to reliably measure the value or contribution of user created value to the service. Instead, the revenue thresholds provide an implicit measure of user created value. Marketplaces which generate less than £500m of annual turnover are unlikely to benefit from large scale network effects from having users on both sides of the platform.