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Are eBay Sellers Tax Cheats?

There’s long been a perception that eBay and online sellers are tax cheats, and the call to do something about the problem is gaining steam in the UK. Its version of the IRS, called HM Revenue & Customs (HMRC), wants companies like eBay to hand over seller data, according to a report in ThisIsMoney.co.uk

In the US, the IRS imposed rules on electronic payment processors resulting in Form 1099-Ks that they must send the tax agency. But in the UK, the concern is not limited to the underreporting of income – it also has a Value Added Tax (VAT). The standard VAT on most goods and services is 20%.

HMRC is seeking to get details from eBay, Airbnb, and other such firms to help it with compliance. “The aim is to clamp down on those who fail to declare profits from such activities, and so avoid paying income tax or VAT,” ThisIsMoney.co.uk wrote.

However, it editorialized, “While HMRC faces continued criticism for failing to do enough to get massive corporations such as Google to pay more tax on their UK earnings, it continues to launch aggressive assaults on the self-employed and other workers whom, it believes, are not disclosing their full incomes.”

But the UK government may go further – and much of the reason is due to imports from overseas, particularly Asia.

According to a report in the Guardian, “Top tax officials are exploring whether Amazon and eBay can be forced to foot the bill for ballooning VAT fraud associated with an army of small overseas sellers who are rapidly coming to dominate sales of many popular items on Britain’s leading shopping websites.”

The newspaper said its own investigation found overseas sellers import goods into Britain and arrange for Amazon to fulfill the items from its warehouses. “Many of these VAT-free sellers give virtual office or residential addresses in China, Hong Kong and the US. Little is known about them by HM Revenue & Customs.”

eBay and Amazon told the Guardian they help sellers with VAT compliance.

The issue of tax avoidance is becoming a political issue, as the Guardian makes clear.

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.