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Kenneth Corbin on Linkedin
Kenneth Corbin
Kenneth Corbin
Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn.

9 thoughts on “Online Sales Tax in 2020: Fear, Anxiety, and Noncompliance”

  1. It is worse for sellers who travel out-of-state to sell at shows or conventions and may already have tax accounts in multiple states. Washington state, for example, extends the Business and Occupation tax to cover online sales to Washington from the seller’s home state if the seller also has a physical nexus. Some states have set low dollar or transaction thresholds. More than a year ago the Wall Street Journal pointed out that the Wayfair criteria should have been adjusted for population. California has 45 times the population of South Dakota, but initially they imposed and then retroactively dropped the 200 transaction criteria. Vendors of sales tax software is not affordable for smaller sellers, but that may not matter, because states are unlikely to be able to find them while they remain in business.

  2. Could you address the retroactive application of the sales tax laws that e-commerce sellers fear? Is this only for the two-year period since the Wayfair decision (or when states changed the laws)? What is the current status of Florida & Missouri? What states do not have marketplace facilitator laws?

  3. There is a whole other layer to this mess that I am dealing with as a Canadian seller.
    When I sell to a US buyer in a state that has sales tax and has “signed up” or however it works with ebay, the buyer gets charged the tax – shows on the invoice I send but I don’t get the funds – thank goodness, but Paypal gets it and sends it to ebay. Sounds fine on the surface but I have several issues that I cannot get addressed……..surprise surprise!
    I know it is the same for US sellers, but I am furious that I have to pay the Paypal money transaction fee on the sales tax – that should be paid by ebay! They charge it and they remit it – this is nothing more than offloading their obligation onto the seller.
    Another issue is a actually much more serious. I recently had to make an adjustment on a customer’s already paid for order. I removed one item and because they purchased another item I was calculating the cost of the second order – minimal additional postage once I packed up together and one piece from 1st order was removed. When I was playing with the numbers something didn’t look right. The buyer was in NC and the original ebay invoice showed state tax of 5%. GUESS WHAT – when I did the calculation I found that the amount of tax charged was in excess of 8%.
    Is it possible that ebay is scamming the sales tax collection ????
    I have contacted ebay c/s and been told they will send this to the tax department who will contact me. Not holding my breath!
    The explanation I received from c/s when I questioned the incorrect calculation is that 5% is the base sales tax in NC but local taxes can increase the amount up to 7.something percent…..all well and good but still not up to the over 8% the customer was charged AND if that is true, why does the percentage number on the invoice not show as the actual amount of tax being charged.
    I have had many emails from customers questioning the “miscalculation” of their tax and can only tell them to contact ebay for clarification. I know that most won’t bother for a buck or 2 here or there – and cynically, I’m sure ebay knows the same thing.

    1. Several issues here: #1 as a seller you don’t know the rules per state. I’m seeing some Etsy sales collecting tax on shipping, others not. If I search that State’s rules I can’t determine which it’s supposed to be.
      #2 The 1099K issued by Etsy & PayPal(and others) to the Feds includes everything. It’s up to the seller to subtract the sales tax that has been collected by the marketplace. For Etsy, this means going through all invoices to list what was collected as sales tax. Etsy does not list sales tax on any of their (many) reports. The “Tax” column is left blank.
      #3 Etsy does not issue any confirmation to the seller of the amount of tax collected or statement that those taxes have been paid. Should the IRS demand confirmation–what are you supposed to use? All you have is your invoice. There is no proof or confirmation.

  4. And how many States are screaming about how budget shortfalls are destroying them and blaming the Federal Government for not giving them more money — but nowhere do we hear anything about how much OUT OF STATE sales tax revenue has been (and is being) collected from all these post-Wayfair transactions, that have created an unanticipated WINDFALL for states ?

    How much has revenue that has been generated by out-of-state sales taxes could be used to offset the deficits caused by poor management in states with budget shortfalls? Is anybody saying? (At the beginning of this year New York was about $3Billion in the red, which amount of course has ballooned out of sight due to Covid.)

    I live in New York and nobody has even heard a whisper about this new (since last June) source of $-MILLIONS! Guess we will have to wait (at least) until after the election? Isn’t it great to have millions coming in that you can slip into the General Fund (or wherever) and not say anything about this WINDFALL to the public ?

  5. Even worse, ebay’s MP collect sales tax AND charges 11.5% interest on it plus from what I hear they get a discount from states they collect for, little double dipping. On top of that, I can’t get a straight answer to whether or not sales tax will be reported on the 1099K, reps on ebay’s board said they get back to us, call in(which took 4 hrs to call me back) said yes but ebay’s tax page say yes and no.

  6. Sales tax collected by eBay will not be reported on the 1099-K:

    See the eBay help page article titled “eBay and Form 1099-K”

    “Starting in 2019, any sales tax collected by eBay on sales made by you in the various marketplace states will not be on your Form 1099-K. This is because eBay automatically collects and remits such sales tax directly to the state (i.e. the sales tax for these states isn’t paid to you).”

    1. But in the paragraph above it states:
      Form 1099-K includes the gross amount of payments made to you within a calendar year, so refunds, shipping costs, sales tax, etc. aren’t subtracted from the total amount. This means that the amount reported on your Form 1099-K may not be fully reportable on your tax return. You should consult with your tax advisor to determine how best to use the information on your Form 1099-K
      So both paragraphs contradict each other, even ebay reps can’t comfirm

  7. They shouldn’t be able to go after back taxes because they didn’t have those laws in place. How is a business supposed to comply with laws that didn’t exist?

    There’s no need for a third-party service to do taxes because there’s no reason states should be doing things the way they are. Each state should be collecting from its own sellers alone, just expanding their collection to all of their customers rather than just those who reside in their state.

    I really have to question the intelligence (or at least the integrity) of these lawmakers. Either they’re too stupid to see they’ve got it all backwards or they’re too unscrupulous that they intentionally did it this way so their buddies (third party services) could cash in, too.

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