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Newegg Changes Seller Status after Supreme Court Sales-Tax Ruling


NeweggNewegg is making changes affecting its third-party marketplace sellers after the Supreme Court changed the rules on sales tax obligations. The state of South Dakota had sued Wayfair, Overstock.com, and Newegg to force them to collect use tax for transactions to its residents, even though the companies had no physical presence (nexus) in South Dakota.

The Supreme Court sent the case back to the state supreme court, but in its ruling, it overturned an earlier ruling it had made – Quill versus North Dakota. In doing so, it gave a greenlight to states who wish to force remote sellers (those who have no physical presence in a state) to collect their sales tax.

Newegg sent a notice to its marketplace sellers on Monday notifying them it would no longer handle the complete sales-tax collection and remittance process on behalf of sellers. Instead, sellers will have to update settings to indicate their sales tax obligations.

Newegg will collect the sales tax based on those settings, and it will send the taxes it collects from buyers to merchants so they can remit it to the states themselves.

Newegg’s Current Instructions on Sales Tax:

Are sellers responsible for collecting sales tax?
Newegg is the seller of record on any sellers’ products* sold on Newegg websites. Newegg will calculate, display, and charge customer sales tax for sellers’ product orders shipped to California, Washington, New Jersey, Tennessee, Indiana and Pennsylvania. Newegg will remit Sales Taxes to the tax authority of those jurisdictions respectively.

What about ISO sellers?

*ISO Sellers – ISO sellers will be collecting Sales Taxes and remitting to tax authority according to their own state Nexus.

Will I receive the 1099 Tax Statement during tax season?
No, since Newegg is the Merchant of Record; we will be sending the sales tax that was collected to the appropriate state for processing. You will not receive a 1099 from us. You may download a copy of each settlement in the Seller Portal for reference. (Please review: “Do I Receive Payment Settlements?” for instructions on “how to download transactions”).

And here is the email Newegg sent to sellers on July 2, 2018:

Dear Seller,
Thanks for being a Newegg Marketplace seller. We are informing you that we plan to upgrade our marketplace model and launch the seller of record change in mid-October in line with industry practices.

What will change:

– With this upgrade, marketplace sellers will become the “Seller of Record”, meaning that sales tax will be charged only as directed by our sellers.

– You will make the determination of where you need to collect and file sales tax. We will collect the sales tax on your behalf based on your tax setting and remit it back to you for tax filing.

What remains unchanged:

– Newegg continues to be the Merchant of Record responsible for processing payments, managing fraud, and distributing the funds to marketplace sellers.

We will share more details and distribute tutorials on how to set up tax selections in the coming months. Please stay tuned.

Meanwhile, if you have any questions, please contact seller support at marketplacesupport@newegg.com or reach out to your designated account manager.

We hope with our joint efforts, we can make the transition as seamless as possible.

You can read more about the Supreme Court ruling that prompted Newegg to make this change in this EcommerceBytes news story.

Ina Steiner on EmailIna Steiner on LinkedinIna Steiner on Twitter
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. See disclosure at EcommerceBytes.com/disclosure/.

One thought on “Newegg Changes Seller Status after Supreme Court Sales-Tax Ruling”

  1. “– You will make the determination of where you need to collect and file sales tax. We will collect the sales tax on your behalf based on your tax setting and remit it back to you for tax filing.”

    Nasty clever ! Throw it right back at the individual seller. What are they going to do? Send each of their sellers information for ALL 50 states? so Seller can pick the one(s) that apply?

    Unfortunately their definition of “your tax setting” apparently means a seller is allowed to specify only ONE number for a % that would be charged statewide. (I do not sell via Newegg so someone please correct me if I’m wrong!? ) One single % amount collected is not “one size fits all” but that will become the Seller’s problem, not Newegg’s (or can Neweggt be held responsible for collecting the CORRECT amount ?)

    In New York there are dozens of jurisdictions and even temporary ones. For example, the City of Rome may charge a 1/4% additional sales tax between May 25 and June 14th. When a Seller personally bills customers there, s/he can invoice Customer for the additional 1/4%, but if Newegg does the billing will they know about this special temporary tax? I think not … so they won’t collect it and it falls on the Seller to do so, i.e., EAT the LOSS.

    By using a flat number across the entire state – likely 8% – this is ripping me off by NOT charging additional tax that should be due (example, New York City which is MORE than 8%). And what happens in the jurisdictions that sales tax is LESS than 8% ???

    Newegg is thinking it has figured a way out of having to comply with the Quill decision by foisting everything back on its sellers and I am sure others will follow.

    What do Sellers do when THEY make a mistake collecting the taxes that they are going to force Sellers to correctly remit ??

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